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CG Power & Industrial Solutions Ltd.

BSE: 500093 Sector: Engineering
BSE 00:00 | 12 May 83.65 -1.80






NSE 00:00 | 12 May 83.75 -1.75






OPEN 89.10
VOLUME 433321
52-Week high 92.00
52-Week low 5.46
P/E 54.32
Mkt Cap.(Rs cr) 11,192
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 89.10
CLOSE 85.45
VOLUME 433321
52-Week high 92.00
52-Week low 5.46
P/E 54.32
Mkt Cap.(Rs cr) 11,192
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

CG Power & Industrial Solutions Ltd. (CGPOWER) - Director Report

Company director report

Significant Matters Relevant to the Year under Review


Shareholders and other stakeholders should note that your Company is currently insevere financial stress and certain payment defaults have already occurred under the termsof the loan documentation entered into by your Company.

With a view to resolving such financial stress caused by the siphoning of funds by thepromoters of your Company as disclosed to the stock exchanges by disclosure dated19_August_2019 and to maximize recovery of the debt repayable to the lenders of theCompany (‘Lenders') your Board had in-principle decided to work jointly with theLenders for equity fund raising as part of the Resolution Plan in accordance with theReserve Bank of India's circular dated 7_June_2019 on Prudential Framework for Resolutionof Stressed Assets (as amended or modified) (‘Prudential Framework'). To facilitatethis process your Company appointed Arpwood Capital Private Limited as its financialadvisor. SBI Capital Markets Limited was appointed by the Lenders as process advisors forthe Resolution Process.

Your Board was in discussions with the Lenders for fund raising and for resolution ofthe debt of the Company following which the Lenders and the Company received a bindingoffer dated 7_August_2020 (as modified on 11_August_2020) (‘Primary Proposal') fromTube Investments of India Limited (‘Prospective Investor' / ‘Primary Bidder' /‘Subscriber') a member of the Murugappa group for resolving the debts of the Companyand to infuse capital in the Company by subscribing to equity shares worth I 550 Crore(Rupees Five Hundred and Fifty Crore Only) (approximately) and warrants worth I 150 Crore(Rupees One Hundred Fifty Crore Only) (approximately) on a preferential basis to meet itsbusiness requirement subject to certain conditions as specifically detailed in thePrimary Proposal.

Tube Investments of India Limited is a public limited company incorporated under theCompanies Act 1956 with its equity shares listed on the National Stock Exchange of IndiaLimited (‘NSE') and BSE Limited (‘BSE'). It is a company which specializes inengineering bicycles metal formed products and chains. It is a member of the MurugappaGroup (‘Murugappa Group') which is one of India's leading business conglomeratesfounded in 1900 having 28 (twenty eight) businesses including 9 (nine) listed companiestraded at NSE and BSE and is headquartered in Chennai.

The Primary Proposal inter-alia required the Company to offer issue and allot equityshares and warrants on a preferential basis to the Prospective Investor entitling them tosubscribe to and be allotted the equity shares and warrants of the Company (‘ProposedTransaction').

In terms of the Primary Proposal a Securities Subscription Agreement (‘SSA') wasexecuted between the Company and the Prospective Investor on 7_August_2020. Thestakeholders should note that the completion of the Proposed Transaction was subject tothe fulfillment of all the conditions precedent set out under the SSA which inter-aliainclude: (i) The Subscriber completing the due diligence in terms of the SSA to itssatisfaction on a reasonable basis within three weeks from 7_August_2020 or any earlierdate as determined by the Subscriber (ii) The Subscriber being declared as thewinner of the swiss challenge process by the lenders of the Company by 28_August_2020 (iii)The lenders of the Company agreeing inter-alia to restructure all the debts of theCompany in accordance with the terms of the offer made by the Subscriber to the lendersand consenting to the issue and allotment of the equity shares and the warrants by theCompany in terms of the SSA (iv) The Subscriber having received the approval fromthe Competition Commission of India for its investment into the Company.

Basis the Primary Proposal (including modifications thereto) received from the PrimaryBidder which was accepted and recommended to the Lenders by your Board subject tonecessary approvals the Lenders jointly with the Company launched the Swiss ChallengeProcess using the Primary Proposal as an anchor bid / base offer under the auspices of theReserve Bank of India's Prudential Framework by making a public notice to this effectthrough newspaper advertisement on 12_August_2020 (‘Advertisement') invitingexpression of interest cum resolution plans from eligible bidders having adequatetechnical and financial capability as acceptable to the Lenders to restructure / resolvethe outstanding debt of the Company and undertaking a change of management of the Company.The last date for submission of expression of interest cum resolution plan was26_August_2020. Upon conclusion of the Swiss Challenge Process since no other biddersubmitted any bid by the due date i.e. 26 August 2020 the Lenders based on therepresentation made by Primary Bidder voted upon the resolution for approving the PrimaryBidder as the successful bidder and declaring the Primary Proposal as the successfuloffer. Further all the lenders of the Company entered into an inter-creditor agreementin accordance with the Prudential Framework.

State Bank of India vide their Letter of Intent dated 28_August_2020 communicated tothe Primary Bidder that their Primary Proposal had been declared as successful offer andthey had been declared as successful bidder subject to compliances with all theconditions stated in the said Letter of Intent to the satisfaction of the Lenders. TheLetter of Intent is under discussion by the Prospective Investor with the Lenders and yetto be executed.

In terms of Regulation 164A of SEBI (Issue of Capital and Disclosure Requirements)Regulations 2018 (‘SEBI ICDR Regulations') after availing the relaxations inpricing methodology and exemptions from open offer obligations in terms of the saidregulations an extra-ordinary general meeting of the Members on 2_September_2020 wasconvened through Video Conferencing / Other Audio Visual Means where the Company obtainedapproval of the shareholders by way of a special resolution to issue equity shares andwarrants on a preferential allotment / private placement basis to Tube Investments ofIndia Limited.

The number of votes cast in favour of the said special resolution were three times morethan the number of votes cast against it. Further the votes cast by the shareholders inthe ‘public' category in favour of the proposal were more than the number of votescast against it. Accordingly the resolution was passed with requisite majority.

The stakeholders should note that pursuant to the SSA after issuance and allotment ofsecurities as per the Primary Proposal to Tube

Investments of India Limited they will acquire control and management of the Companyand will have the right to appoint a majority of the directors on the board of theCompany subject to compliance with applicable laws.

The Subscriber is in the process of seeking approval from the Competition Commission ofIndia (‘CCI') and has made an application to CCI which is awaiting approval.

The stakeholders should also note that subsequent to the date of the SSA and furtherassessment of financial liabilities and outlook of the Company by Tube Investments ofIndia Limited the Company received a letter from them to infuse additional capital in theCompany aggregating up to I 100 Crore (Rupees One Hundred Crore Only) by way ofsubscribing to additional equity shares of the Company on a preferential allotment basis(‘Additional Offer') to meet the funding requirements of the Company subject tonecessary corporate authorizations obtained by the Company. Your Board after consideringthe merits of the Additional Offer and considering that it would be in the best interestof the Company approved the proposal to offer and issue equity shares to Tube Investmentsof India Limited in terms of the Additional Offer and also approved the amendment to theSSA to such effect. Availing the relaxations and exemptions under Regulation 164A of SEBIICDR Regulations your Board had convened an extra-ordinary general meeting of the Memberson 24_September_2020 through Video Conferencing / Other Audio Visual Mode to seek approvalof the Members in this regard.

It should be noted that as per the amended terms of the SSA the offer issuance andallotment of equity shares pursuant to the Additional Offer will be subject to completionof conditions precedent set out in the SSA.


The Avantha group which is promoted by Mr Gautam Thapar is currently classified asPromoter and Promoter Group of the Company ("Promoters") and holds 8574 equityshares of your Company (i.e. <0.002% shareholding) as of 31_March_2020.

Your Company had made an application to SEBI seeking certain relaxations / exemptionsfrom the strict enforcement of the requirements under Regulation 31A of the SEBI LODR forre-classification of the status of the current Promoters of the Company to Public.

In this regard SEBI has vide its letter no. SEBI/HO/CFD/CMD1/OW/2020/14436/1 dated4_September_2020 granted the said relaxations sought by the Company. Accordingly yourBoard has approved the proposed re-classification subject to the requisite approvals andrecommended the same for the approval of the shareholders at the ensuing Annual GeneralMeeting.


As stated in the Annual Report for financial year 2018-19 the Audit Committee(‘AC') of the Board based on the recommendations made by the Operations Committeeappointed an independent law firm (‘Legal Firm') to make further assessments inrelation to certain unauthorized transactions by some employees and certain directors ofyour Company. The Legal Firm submitted its Phase I Investigation Report dated5_August_2019 (‘Report') to the AC in its meeting held on 6_August_2019. Basis theInvestigative Report inputs from the Operations Committee and recommendations from theAC your Board made disclosures as set out in the stock exchange intimation issued by theCompany dated 19_August 2019 (‘19_August Disclosures'). After the 19_AugustDisclosures your Company mandated a detailed independent forensic investigation into theaffairs of the Company (‘Phase II Investigation') which is currently under process.Given the current ongoing investigation and the order of National Company Law TribunalMumbai Bench (‘NCLT') allowing re-opening of the books of accounts and recasting offinancial statements of your Company and its subsidiary companies for five years ended on31_March_2019 the financial statements as given in this Annual Report may not include allthe impact and all such information as may be required to be included and disclosedrelating to past transactions. Hence the standalone and consolidated financial statementsfor the financial year ended 31_March_2020 could be materially misstated to that extentand undergo change and thus do not represent true and fair view.


a) B ankruptcy of Belgium entities

The Belgium Group comprises (i) CG Holdings Belgium NV together with CG Power SystemsBelgium NV and its subsidiaries namely (ii) PT CG Power Systems Indonesia (iii) CGPower Systems Ireland Limited (iv) CG Sales Network France SA and (v) CG Power SolutionsSaudi Arabia Limited. On 3_February_2020 the Commercial Court in Belgium declared both CGHoldings Belgium NV and CG Power Systems Belgium NV as bankrupt and appointed Receivers.Consequently Receivers have proceeded to auction assets of CG Holdings Belgium NV and CGPower Systems Belgium NV including their investments in PT CG Power Systems Indonesia CGPower Systems Ireland Limited CG Power Solutions Saudi Arabia Limited and CG SalesNetwork France SA. b) Liquidation of CG PSOL UK and DAFZA entities

CG Power Solutions UK Limited United Kingdom (‘CG PSOL UK') and CG Power &Industrial Solutions Middle East FZCO Dubai UAE (‘DAFZA') wholly owned subsidiariesof CG International BV and step down subsidiaries of the Company are in the process ofbeing liquidated subject to statutory and regulatory approvals. c) Divestment of stakein CG Service Systems France SAS

During the year under review CG International BV has divested its entire shareholdingin CG Service Systems France SAS (‘SEFR') along with its liabilities for a netconsideration of €30000 to AK Group France pursuant to a Share Purchase Agreementdated 23_June_2020. Upon completion of the divestment SEFR has ceased to be a subsidiaryof the Company with effect from 20_July_2020.

d) Bankruptcy of CG Electric Systems Hungary Zrt. (ESHU)

On 7_July_2020 the Metropolitan Court in Budapest Hungary declared CG ElectricSystems Hungary Zrt. (‘ESHU') a wholly owned subsidiary of CG International BV and astep-down subsidiary of the Company in Hungary as bankrupt and commenced liquidationproceedings. The Court has appointed a liquidator who has now taken control of ESHU.

Company's Performance

The standalone and consolidated financial statements of your Company represent thecontinuing operations for the year ended 31_March_2020. Your Company's standalone netrevenue from operations was I 3169 crore during the year under review compared to I5356 crore in the previous year representing a decline of 40.8%. Your Company'sconsolidated net revenue from operations during the year under review was I 5110 croreversus I 7998 crore in the previous year a decline of 36.1%.

Details of consolidated segment-wise revenue and profit before interest and tax (PBIT)of the two key business units — Power Systems and Industrial Systems — and howthese compare with the previous financial year are given in Table 1. Your Company'sfinancial performance for the year ended 31_March_2020 as compared to the previous year isgiven in

Table 2.

A detailed review of the operations and financial performance of your Company and eachof its business units is contained in the ‘Management Discussion and Analysis' Reportforming part of this Annual Report.


In view of losses the directors do not recommend any dividend for the financial yearended 31_March_2020.


The reserves on standalone basis at the beginning of the year amounted to

I 2388_crore and at the end of the year stood at I 589_crore.

Subsidiaries Joint Ventures and Associate Companies

As on 31_March_2020 your Company had 3 Indian and 17 foreign subsidiaries (afterexcluding Belgium entities under bankruptcy proceedings). Details are provided in Annexure5 to this Report in Form MGT-9 (Extract of Annual Return). During the year under reviewyour Company has not incorporated or acquired any company.

01 and Tax (PBIT) of the Business UnitsConsolidated Net Sales and Profit BeforeInterest

(in Rs_crores)

2019-20 2018-19
Consolidated Net Sales
Power Systems 2736 4610
Industrial Systems 2361 3373
Consolidated PBIT
Power Systems (222) (23)
Industrial Systems 247 372

Shareholders should note that CG Holdings Americas LLC and CG Solutions AmericasLLC merged with CG Power Americas LLC with effect from 1_April_2019.

Further CG International BV TR. & Cont. Pvt. Co. LLC (formerly known as PauwelsMiddle East Trading & Contracting (Pvt.) Co. LLC) an associate company wasliquidated with effect from 18_June_2019.

In February_2019 your Board had considered and in-principle approved the Scheme ofAmalgamation ("Scheme") pursuant to Sections 230 to 232 and other applicableprovisions of the Act for the amalgamation of CG Power Solutions Limited (‘CGPSOL')a wholly owned subsidiary with the Company subject to the requisite statutory andregulatory approvals. However on account of the findings of the Phase I InvestigationReport (disclosures in relation to which were made by the Company pursuant to its19_August Disclosures) which refers to certain unauthorized/ undisclosed transactionsundertaken in CGPSOL your Board decided to withdraw the Scheme which was pending beforethe Hon'ble National Company Law Tribunal Mumbai (‘NCLT'). The NCLT vide its orderdated 5_December 2019 approved the withdrawal of the Scheme.

Moreover as mentioned earlier during the year under review the two Belgium entities— CG Holdings Belgium NV (HBE) and CG Power Systems Belgium NV (PSBE) have beendeclared as bankrupt on 3 February 2020 by the Commercial Court in Belgium. Having lostcontrol on these entities your Company has de-consolidated these two Belgium entities andfour step-down subsidiaries of the Company with effect from 1_January_2020 (assumed datefor de-consolidation) in the financial statements.

Pursuant to the Companies (Indian Accounting Standards) Rules 2015 and

Regulation 33 of the SEBI LODR the financial statements reflect the consolidation ofaccounts of your Company its subsidiaries associates and joint venture companies with asignificant caveat which is stated below.

The consolidated financial statements in this Annual Report include unaudited financialstatements and other unaudited financial information with respect to 11 subsidiaries thatform part of the continuing operations of your Company. The financial statements and otherfinancial information of these subsidiaries reflect total assets of I 2315.68 crore as at31_March_2020 and total revenues of I 1576.75 crore for the year ended on that date.These unaudited financial statements and other unaudited financial information werefurnished by management (as received from the subsidiaries) to the statutory auditors ofyour Company. The auditors were unable to comment on the impact on total assets and totalrevenues since these subsidiaries had not been subjected to an audit. Pursuant to Section136 of the Act the audited financial statements including the consolidated financialstatements and related information of your Company and audited/ unaudited annual accountsof each of its subsidiaries are placed on the website of your Company and not enclosed inthis Annual Report. In terms of Section 129 of the Act statement containing salientfeatures of the financial statements of your Company's subsidiaries/ associates/ jointventures companies in Form AOC-1 is given in the notes to the financial statements in thisAnnual Report.

Pursuant to Regulation 16 of the SEBI LODR a policy for determining materialsubsidiary of your Company as approved by the Board of Directors is available on thewebsite under:

02 Financial Highlights (in Rs_crores)

2019-20 2018-19 2019-20 2018-19
Net Sales and Services 3169 5356 5110 7998
EBIDTA 160 575 45 316
Less: Finance cost 281 337 324 383
Less: Depreciation 91 104 211 225
Profit / (loss) before Exceptional Items & Tax (212) 134 (490) (292)
Exceptional items (net) (1698) (1518) (1788) (167)
Loss Before Tax (1910) (1384) (2278) (459)
Less: Tax Expense / (Credit) (111) 11 (118) 33
Loss from continuing operations (1799) (1395) (2160) (492)
Less: Minority Interest NA NA 8 4
Share of profit/(loss) in Associates and Joint Venture NA NA - -
Loss after minority interest and share of Associate and Joint Venture (1799) (1395) (2152) (488)
Loss before tax from discontinued operations - (34) (7) (27)
Tax expenses / (Credit) from discontinued operations - (12) 0 (11)
Net Loss from discontinued operations - (22) (7) (16)
Total Loss for the year (1799) (1417) (2159) (504)

Material Changes and Commitments affecting the Financial Position of your Company


As the global COVID-19 pandemic rapidly developed into an Indian health crisis theGovernment of India announced a nationwide lockdown with effect from 25_March_2020. Inview of the Government directive and considering the health and safety of employees yourCompany suspended operations in all its factories and offices in India till 28_April_2020.However non-operational activities relating to the factories sales offices and thecorporate office of the Company continued to be performed by such employees who wereprovided work from home facility.

All manufacturing plants resumed limited and restricted operations on 29_April_2020 interms of approvals received from respective authorities and after implementing StandardOperating Practices in the interest of health and safety of the employees. Graduallyoperations at the factories are being scaled up. Moreover based on the relaxationsallowed your Company has commenced operations at its sales regional and corporateoffices while strictly adhering to the terms and conditions of such relaxations andtaking all necessary precautions for the health and safety of its employees.

In view of the suspension of operations on account of COVID-19 the financialperformance of the Company for the first two quarters of the FY2021 is expected to beimpacted.

MATERIAL ORDERS OF REGULATORS / COURTS / TRIBUNALS a) S ecurities & Exchange Boardof India

Consequent to the Phase I Investigation Report submitted by the Legal Firm SEBI hadpassed an interim order dated 17_September_2019 ("Interim Order"). After hearingall parties SEBI has vide its confirmatory order dated 11_March_2020 ("ConfirmatoryOrder") confirmed its interim order with certain exceptions and has passedrestraining orders against the Promoters certain former Directors and certain KMPs. Interms of the Interim Order and the Confirmatory Order your Company has filed certainsuits for recovery of amounts wrongfully transferred to the Promoter Group entities andis in the process of filing further suits. In terms of the Interim Order BSE Limited hadappointed M/s MSA Probe Consulting Private Limited ("MSA Probe") for conductinga forensic audit of the Company ("Forensic

Audit"). The Forensic Audit report issued by MSA Probe on 18 March 2020 has beensubmitted to SEBI and also has been received by the Company.

b) Re-opening of the books of accounts by the Ministry of Corporate Affairs

Pursuant to a petition filed by the Ministry of Corporate Affairs ("MCA")under Section 130 of the Act the National Company Law Tribunal Mumbai bench has throughits order dated 5_March_2020 allowed the re-opening of books of accounts of your Companyand its subsidiary companies for the past five financial years up to 31_March_2019. TheMCA had vide its letter dated 27_July_2020 asked your Company to select the requisitefirm(s) of Chartered Accountants out of a list of ten firms recommended by the Comptrollerand Auditor General of India (CAG) and to seek their willingness and eligibility to acceptthe said assignment of re-opening and recasting of books of accounts of the Company andits subsidiaries. Accordingly your Company has written to the said chartered accountantfirms for seeking their willingness and have also asked certain clarifications from MCA inrelation to this.

c) Investigation by the Serious Fraud Investigation Office (SFIO)

Based on a recommendation of the MCA the SFIO has initiated the investigation into theaffairs of your Company and its two subsidiaries. Full co-operation is being extended toSFIO and such information and documents as sought are being provided expeditiously.

d) Company Initiated Forensic Investigation

The Board had appointed Hon'ble Justice Mr. T. S. Thakur (Retd.) former Chief Justiceof the Supreme Court as Head of Investigation to monitor the ongoing Phase II forensicinvestigation initiated by your Company. The forensic investigation is currently inprogress and report will be released after it is reviewed by Hon'ble Justice Mr. T. S.Thakur (Retd.).

e) Assessment order under Section 143(3) of the Income Tax Act 1961

During the year your Company received an assessment order under Section 143(3) of theIncome Tax Act 1961 for the financial year 2016-17 (Assessment Year 2017-18). Along withthe order your Company received notice of demand under Section 156 of the Income Tax Act1961 for I 606.30 crore of taxes including interest. It further received show causenotice under Section 274 read with Section 270A of the Income Tax Act 1961 for levy ofpenalty. In response to the notice of demand and show cause your Company had filed a stayapplication on 3_January_2020 and a supplementary letter on 7_January_2020 to stay thedemand until disposal of appeal by Commissioner of Income Tax (Appeals) i.e. CIT(A). Italso filed an appeal before CIT(A) on 15_January_2020 against the demand raised by theassessing officer as it believes that the demand is not tenable. Your Company also filed aletter on 24_January_2020 to CIT(A) requesting for early disposal of the appeal. Theassessing officer issued a letter on 6_February_2020 in response to your Company's stayapplication and rejected it. After careful consideration of all facts your Company hasfiled a writ petition before Bombay High Court contesting the demand raised by theassessing officer on grounds of this being untenable. The Bombay High Court in its orderdated 13_March_2020 granted an interim stay until admission of appeal which was scheduledto be heard on 12_June_2020. In response to Company's prayer the CIT(A) scheduled ahearing on 16_June_2020. However given the COVID-19 situation the office of CIT(A) hasnot been functioning and your Company awaits further communication from CIT(A) office onthe next hearing date. Moreover also on account of COVID-19 the hearing scheduled on12_June_2020 before the Bombay High Court was postponed. Your Company awaits the nexthearing date for admission of appeal from the Bombay High Court.

Auditors and Audit Reports


At the 81st Annual General Meeting of your Company M/s S R B C & CO LLPChartered Accountants (Firm Registration No. 324982E/ E300003) ("SRBC") and M/sK K Mankeshwar & Co. Chartered Accountants (Firm Registration No.106009W)("KKM") were appointed as Joint Statutory Auditors of the Company for a term offive years up to the conclusion of 86th Annual General Meeting of your Company.


While reviewing payments made in the past years your Company came across certainunexplained payments from your Company and its subsidiaries made to KKM as well asassociation of its partner with certain identified entities named in the Phase Iinvestigation report. The Audit Committee issued a show cause notice to KKM under Section140(1) of the Act and provided KKM with an opportunity of being heard. However nosubmissions were made by KKM on the show cause notice.

After due consideration your Board determined that KKM cannot be considered to beindependent. Accordingly your Board decided to seek approval of the Central Governmentfor removal of KKM as Joint Statutory Auditor of your Company and subject to suchapproval being granted seek approval of the shareholders under Section 140(1) of theCompanies Act 2013. Upon communication of this decision of the Board KKM on25_January_2020 resigned as the Joint Statutory Auditors of the Company with immediateeffect. However since the resignation was not tendered in accordance with applicable lawsand was after the decision of your Board to seek approval of the Central Government forremoval of KKM your

Company filed an application with the MCA. The Regional Director MCA Western Regionhas heard both the parties in the matter and the order in this regard is awaited.

In view of KKM not being considered independent and the process for removal of KKMhaving been initiated your Company has been advised that KKM will not be required tocontinue to sign and give report on the financials of the Company. Accordingly SRBCbeing the other Joint Statutory Auditor has conducted the audit of financial statementsof your Company for the financial year ended on 31_March_2020 and submitted its auditreport.


The audited financial statements does not contain an opinion of the Statutory Auditorsbecause of matters described in the "Basis for Disclaimer of Opinion" in theAuditors' Reports which are included in this Annual Report.

Moreover given the nature and financial magnitude of the observations that areoutlined below the standalone and consolidated financial statements for the financialyear ended 31_March_2020 could be materially misstated to that extent and undergo changeand thus do not represent a true and fair view of the financials of your Company.

We urge upon the Members to carefully read the Auditors' Reports including the"Basis for Disclaimer of Opinion" as well as the Notes to Accounts of both thestandalone and consolidated financial statements of your Company for the financial yearended 31_March_2020.

For convenience of the Members a synopsis of the "Basis for Disclaimer ofOpinion" of certain matters as set out in the Auditors' Report of your Company'sconsolidated annual accounts for the financial year ended 31_March_2020 is given below.Your Board's response to each of these observations is given in italics.

01 Note 3A(b) note 3A(j) note 3A(l) of the Consolidated Financial Statementsdescribe certain outstanding identified receivables and identified liabilities as at31_March_2019 which were dues from / dues to promoter af_liate companies and connectedparties and the transactions that resulted in such identified receivables and identifiedliabilities were approved by erstwhile Certain Identified Personnel (CIP). Out of theabove receivables during the year ended 31_March_2020 the Group has made provision inrelation to receivables from a promoter af_liate company since that is subjected toinsolvency process. Further note 3A(m) describes that during the year ended31_March_2020 the Group had extended loans and advances to promoter af_liate companiesrelated parties and unrelated parties which were approved by the CIP and were in relationto the earlier year transactions. These balances were either provided or settledsubsequently during the year and are not carried forward as at year end. As of the date ofthis report investigations are ongoing and not yet concluded by the Board of Directorsand thus the Auditors are unable to quantify the adjustments to the Consolidated FinancialStatements in relation to such outstanding identified receivables and identifiedliabilities and provisions in relation to unrelated parties' balances as at year end.

Board's Response: Your Company has issued recovery notices and also filed legalsuit for recovery of some of the significant amount of sum owed to the Company by variousparties. However based on the ongoing regulatory / company initiated investigations andre-opening of books of accounts of the Company for the past 5 years till 31st_March_2019as undertaken by the Ministry of Corporate Affairs and the outcome of such legal actionsthese balances may need to be restated by your Company.

02 Note 2.2 50 and note 53 of the Consolidated Financial Statements describes thatduring February_2020 the Court of Belgium has ordered bankruptcy proceedings against CGHoldings Belgium NV and CG Power Systems Belgium NV subsidiaries located in Belgium whichin turn hold investments in four downstream wholly owned subsidiary companies(‘Belgium Group'). As the Holding Company does not have access to the financialinformation of the Belgium Group from 1_January_2020 the Group has consolidated thefinancial information for the period from 1_April_2019 to 31_December_2019. Further theGroup has not accounted corporate guarantees extended to Belgium Group as stated in note2.2 of Consolidated Financial Statements.

Board's Response: As stated in Note 53 rationale it was considered feasible tode-consolidate from the assumed date as the Company believes that it is the date as ofwhich reliable financial information is available for deconsolidation. Further balancereceivables and payable from Belgium Group are shown on gross basis and accounting forfinal settlement will be evaluated upon conclusion of bankruptcy proceedings. Your Boardof Directors believes that the recoverable value of assets in the Belgium Group will besufficient to meet the obligations of the Belgium Group and as a consequence the liabilityin relation to corporate guarantees extended to Belgium Group lenders may not arise.

03 Note 3A(k) and note 50(e) of the Consolidated Financial Statements describesabout the impairment losses accounted by the Group towards the net asset (includingGoodwill) balances of certain overseas entities other than the Belgium Group. Without anyunderlying documentation to justify the basis of such impairment loss the auditors areunable to comment on the completeness appropriateness of the impairment provisionrecorded in the Consolidated Financial Statements.

Board's Response: Your Board has considered it prudent to recognize provisiontowards the net asset (including Goodwill) balances of certain overseas entities based onassumption that such balances may not be recovered.

04 Note 3A(j) and note 3A(l) of the Consolidated Financial Statements describes thetransactions entered by the Group with certain identified connected parties wherein someof the Holding Company's employees owned beneficial ownership in such connected partiesand further certain senior management personnel of the Holding Company were directors ofthese connected parties. Pending ongoing investigation the Holding Company has notconcluded whether these parties should be consolidated at 31_March_2020. Auditors areunable to obtain sufficient appropriate audit evidence with respect of completeness of thelist of related parties disclosure of related party transactions and potential impact onconsolidated financial statements as disclosed in note 3A(l) of these ConsolidatedFinancial Statements.

Board's Response: Your Board upon completion of the ongoing regulatory / companyinitiated investigations and re-opening of books of accounts of the Company for the past 5years till 31_March_2019 as undertaken by the Ministry of Corporate Affairs would be ableto have a more accurate assessment of the nature of the relationship if any with theseconnected parties.

05 Independent balance confirmations as at 31_March_2020 were sent by the Auditorsto banks/financial institutions customers and legal counsels for borrowings details ofsecurities lien collaterals guarantees tax matters etc. and bank balances of theHolding Company and certain identified subsidiaries. Other than responses from the banks/financial institution in relation to balances the auditors have not received responses inrespect of the details of securities lien collaterals guarantees tax matters etc. dueto which the auditors are unable to determine whether any adjustments are required to thesaid balances as on 31_March_2020 and related disclosures in these Consolidated FinancialStatements.

Board's Response: The Company has provided all available audit evidence documentsin respect of the details of securities lien collaterals and guarantees etc. relatedto borrowings. Similarly all available audit evidence documents have been provided toauditors in relation to legal and tax related disputes. Further the auditors were alsoprovided audit evidence documents and details in respect of customer balances in order tocomplete alternate audit procedures by auditors.

06 Note 3A(b) 3A(g) 3A(h) 3A(i) 40(vi) 45(c) 54 and note 55 of theConsolidated Financial Statements describes the identified litigations and contingencieswhich are pending to be evaluated by the management of the Holding Company and themanagement has not ascertained the legal position of the Group the possible cash outflowand its consequential impact on these Consolidated Financial Statements.

Board's Response: The Company has rescinded the new royalty agreement with AvanthaHoldings Limited (‘AHL') and hence it stands null and void. Consequently your Companyhas not accrued any royalty. However the Company has received a notice from AHL invokingarbitration which has been refuted by the Company. In respect of income tax demand yourCompany believes that the grounds in the demand are not tenable and further consideredappropriate available judicial forum to contest the demand. In respect of litigationsaround non-payment of dues appropriate legal measures and where necessary discussionsfor mutual settlement are being considered. Your Company is taking appropriate legalcourse of action required in respect of other claims. Your Company has provided allavailable audit evidences to auditors to conclude on classification of litigations andcontingencies into actual and contingent liabilities.

07 Note 3A(o) to the Consolidated Financial Statements describes instruction by theBoard of Directors of the Holding Company to the management to undertake a detailedinvestigation in relation to the matters of possible non-compliance with respect tovarious regulations and laws applicable to the Group. Further as stated in note 3A(a) tothe Consolidated Financial Statements there are investigations and enquiries beenconducted for reasons explained in the notes to the Consolidated Financial Results bySecurities and Exchange Board of India Serious Fraud Investigation Office and EnforcementDirectorate. Further the Department of Income Tax has also issued notices and seekingexplanations by the Holding Company.

The Holding Company is engaging and providing details and responses to all suchinvestigations enquiries and demands as raised on the Holding Company. Pending outcomeof the investigation initiated by the Holding Company and conducted on the Group byregulators and Holding Company's management assessment thereon auditors are unable todetermine the potential impact of non-compliances with applicable laws and determineoutcome of such enquiries and any further adjustments that may be necessary to theseConsolidated Financial Statements

Board's Response: As stated in note 3A(o) of the Consolidated Financial Statementsyour Board of Directors has instructed your Company's management to undertake detailedinvestigation relating to matters of possible non-compliance with respect to Sections 129134 166 180 185 186 188 197 and other related provisions of the Companies Act 2013;the Income Tax Act 1961; the Foreign Exchange Management Act 1999; the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 (as amended) and otherapplicable laws and regulations. In doing so your Board has authorised the Company toengage external consultants lawyers forensic experts and other specialists as requiredfor this investigation.

08 Basis of Preparation of the Consolidated Financial Statements indicates that theaccompanying Consolidated Financial Statements include unaudited financial statements andother unaudited financial information in respect of 11 subsidiaries. Auditor's report inso far as it relates to amounts and disclosures included in respect of these subsidiariesis based solely on such financial statements and other financial information as availableand considered by the management. The Auditors are unable to determine the impact on totalrevenues assets and loss for the year had these entities been subjected to an audit.

Board's Response: Refer response in 9 below.

09 Note 2.2 of these Consolidated Financial Statements indicates non-compliancewith the Regulation 33(3)(h) of the SEBI LODR which requires the Group to ensure audit ofat-least 80% of its operations with effect from 1_April_2019. Pending audit of identifiedsubsidiaries and subject to the possible adjustments on account of ongoing investigationsthe auditors are unable to determine the potential impact of non-compliances with respectof Regulation 33(3)(h) and determine any further adjustment that may be necessary to theseConsolidated Financial Statements.

Board's Response: As provided in Note 2.2 certain Group entities financialinformation was unaudited / not approved by local management due to either removal orresignation of officers or directors or due to loss of control or on account ofbankruptcy. Your Directors have accordingly considered appropriate financial informationfor the purpose of preparation of consolidated financial statements to comply withrelevant applicable Accounting Standards.

10 Going Concern Assessment

Note 56 in the Consolidated Financial Statements indicate that (a) the Group hasincurred a net loss during the current and previous years and has negative net worth as atyear end; (b) the Group's current liabilities exceeded its current assets as at thebalance sheet date; (c) Certain lenders of the Holding Company are yet to conclude theInter Creditor Agreement (‘ICA') till the date of adoption of these ConsolidatedFinancial Statements. Pending the outcome of the matters described above as observationsand the matters disclosed in (a) to (c) above and possible impact thereof the auditorsare unable to comment on whether the Group will be able to continue as Going Concern.

Board's Response: Based on the strength of the business of the Company and based onprogress made in the debt resolution process and the assessment of the outcome of thesame these financial statements have been prepared by your Directors on a going concernbasis.

Attention of the members is also drawn to other matters stated in the StatutoryAuditor's Reports both on standalone and consolidated financial statements which arementioned in the respective Statutory Audit Report forming part of this Annual Report.


As per the requirement of Section 148(1) of the Act your Company is required tomaintain cost accounts and records. Accordingly it has maintained cost accounts andrecords for FY2020 as applicable for its product range.

M/s Ashwin Solanki & Associates Cost Accountants Mumbai (Firm RegistrationNo.100392) who was appointed as Cost Auditor of the Company for the FY2019 have submittedtheir cost audit report which was filed with the Registrar of Companies Mumbai(‘ROC') within the prescribed statutory deadline.

Your Company had appointed M/s R. Nanabhoy & Co. Cost Accountants Mumbai (FirmRegistration No.000010) to audit the cost records related to its products for FY2020. Theyalso conducted their audit and submitted their cost audit report which has been filed withROC. Upon recommendation of the Audit Committee the Board has re-appointed M/s R.Nanabhoy & Co as Cost Auditor of your Company for FY2021 at a remuneration of I700000/- (Rupees seven lakhs only) per annum plus out-of-pocket expenses and taxes asapplicable. This remuneration payable for FY2021 is recommended for rati_cation by theMembers at the ensuing Annual General Meeting.


Your Company had appointed M/s Parikh & Associates Practising Company SecretariesMumbai (Firm Registration Number: P1988MH009800) to undertake the Secretarial Audit of theCompany for FY2020. Your Company has generally complied with the Secretarial Standards andthe Secretarial Audit Report is annexed in Form MR-3 for FY2020 as Annexure 4 tothis Report.

Subsequent to the 19_August Disclosures your Company has mandated a forensic Phase IIInvestigation to determine the complete and accurate financial position of the Company andthe legal implications of the issues involved. The said investigation which is currentlyongoing shall also review matters in relation to potential non-compliances with Section185 Section 186 and other applicable provisions of the Act and SEBI LODR and otherstatutes and regulations as applicable. Your Company shall be evaluating the implicationsof these potential non-compliances and the remedies available. With respect to theobservation of the Secretarial Auditor relating to adequacy of systems and processes tomonitor and ensure compliances the Board noted that systems devised to ensure compliancewith the provisions of all applicable laws which were adequate had been breached due tooverride by some members of management. The Board has instituted corrective overhaul ofsuch systems.

The Board's response in relation to the observations made by the Secretarial Auditor inthe Secretarial Audit Report is provided below:

01 The Company is yet to appoint a Chief Financial Officer as required underSection 203 of the Companies Act 2013 read with rules made thereunder.

Board's Response: Though the Company has been making efforts a suitable candidatewilling to take up the position of Chief Financial Officer is yet to be identified. Inthe interim the Board has authorised and delegated the relevant powers for thepreparation and signing of the financial statements to Mr. Susheel Todi Vice Presidentand Group Financial Controller of the Company

02 Submission of the financial results to the stock exchanges for the quarter andyear ended 31_March_2019 as well as for the quarter ended 30_June_2019 and quarter ended30_September_2019 were delayed beyond the statutory timelines under Regulation 33 of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

Board's Response: There were delays in finalization of Financial Results for the4th quarter and year ended 31_March_2019 as well as for 1st and 2nd quarter ended30_June_2019 and 30_September_2019 on account of re-classification exercise and alsoconsequent to investigations initiated by the Company.

03 Submission of the outcome of meetings of the board of directors held on30_August_2019 and 28_January_2020 has been delayed beyond the statutory timelines underRegulation 30 read with Part A of Schedule III of SEBI (Listing Obligation and DisclosureRequirements) Regulations 2015.

Board's Response:In view of the significant disclosures in the notes required to beincorporated pursuant to discussions and suggestions at the respective Board meetingsconsequent to the investigations carried out the submission of the Financial Results forthe financial year ended 31_March_2019 and for the 1st quarter and 2nd quarter ended30_June_2019 and 30_September_2019 respectively was delayed beyond 30 minutes from thetime of conclusion of Board meeting.

04 Submission of disclosure of Related Party Transactions for full financial Year2018-19 instead of transactions pertaining to the half year ended 31_March_2019 asrequired under Regulation 23(9) of SEBI (Listing

Obligation and Disclosure Requirements) Regulations 2015.

Board's Response: Consequent to the investigations carried out there had been arestatement of accounts of the Company as per the stock exchange disclosure of the Companydated 30_August_2019 hence the Company was unable to specifically make the disclosure ofrelated party transactions pertaining to half year ended 31_March_2019 and the informationwas submitted for the full financial year 2018-19.

05 As per Regulation 33(3)(h) of SEBI (Listing Obligation and DisclosureRequirements) Regulations 2015 the quarterly financial results (At least eighty percentof each of the consolidated revenue assets and profits respectively) have not beensubjected to limited review by the Auditors.

Board's Response: As provided in Note 2.2 of the consolidated financial statementsfor the financial year ended 31_March_2020 certain Group entities financial informationwas unaudited / not approved by local management due to either removal or resignation ofofficers or directors or due to loss of control or on account of bankruptcy. YourDirectors have accordingly considered appropriate financial information for the purpose ofpreparation of consolidated financial statements to comply with relevant applicableAccounting Standards.

Internal Financial Controls

The Statutory Auditors have in their report to your Board of Directors on the InternalFinancial Controls Over Financial Reporting (ICOFR) under clause (i) of sub-section 3 ofSection 143 of the Act have made certain observations and disclaimed their ICOFR opinion.The auditors' disclaimed ICOFR opinion is summarized below for both the standalone andconsolidated financial statements.

The Board of Directors of the Holding Company and of its subsidiaries incorporated inIndia are responsible for establishing and maintaining internal financial controls basedon the internal control over financial reporting criteria established by the HoldingCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls over Financial Reporting issued by theInstitute of Chartered Accountants of India.

These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to the respective company'spolicies safeguarding of its assets prevention and detection of frauds and errorsaccuracy and completeness of the accounting records and timely preparation of reliablefinancial information as required under sub-Section 3 of Section 143 of the CompaniesAct 2013.

Regarding the standalone Ind AS financial statements the statutory auditor has stated:"Due to the possible effects of the matters described in the Basis for Disclaimer ofOpinion paragraph in our main audit report we are unable to obtain sufficient appropriateaudit evidence to provide a basis for our opinion on whether the Company had adequateinternal financial controls over financial reporting with reference to these StandaloneInd AS financial statements as at 31_March_2020 and whether such internal financialcontrols were operating effectively. Accordingly we do not express an opinion on InternalFinancial Controls over Financial Reporting with reference to these Standalone Ind ASfinancial statements." Similarly regarding the consolidated Ind AS financialstatements the statutory auditor has stated: "Due to the possible effects of thematters described in the Basis for Disclaimer of Opinion paragraph in our main auditreport we are unable to obtain sufficient appropriate audit evidence to provide a basisfor our opinion on whether the Holding Company and Subsidiaries incorporated in India hadadequate internal financial controls over financial reporting with reference to theseConsolidated Financial Statements as at 31_March_2020 and whether such internal financialcontrols were operating effectively. Accordingly we do not express an opinion on InternalFinancial Controls over Financial Reporting with reference to these Consolidated Ind ASFinancial Statements."


Your Company's management both independently as well as in light of the observationsof the Statutory Auditors summarized immediately above has taken stringent measures toprotect interest of Company and Stakeholders. The internal controls testing and monitoringsystem are constantly under review. Your Board has ensured that the systems are designedto provide reasonable assurance with regard to maintaining of proper internal controlsmonitoring of operations protecting assets from unauthorized use or losses complianceswith regulations and the reliability of financial reporting.

Directors and Key Managerial Personnel (KMP)



As on the date of this report your Company's Board of Directors consists of eightDirectors comprising of (i) a Whole-Time Executive Director and (ii) seven IndependentNon-Executive Directors.

Mr. Ashish Kumar Guha Independent Non-Executive Director is the Chairman of your Boardand Mr. Sudhir Mathur is the Whole-Time Executive Director.

Mr. Ashish Kumar Guha Ms. Ramni Nirula Mr. Jitender Balakrishnan Mr. Narayan K.Seshadri Mr. Pradeep Mathur Dr. Aditi Raja and Dr. Rathin Roy are independent in termsof Regulation 16 of the SEBI LODR and Section 149 of the Act. Your Board consists ofprofessionals with diverse functional expertise industry experience educationalqualifications ethnicity and gender mix relevant to fulfilling your Company's objectivesand strategic goals.



During the year under review Mr. Sudhir Mathur was appointed as a Whole-TimeExecutive Director of the Company by the Members at the Annual General Meeting held on14_December_2019 for a period of five years with effect from 10_May_2019 to 9_May_2024.Mr. Mathur does not receive any remuneration or commission from any of Company'ssubsidiaries.

Based on the recommendations of the Nomination and Remuneration Committee your Boardhas appointed Mr. Pradeep Mathur Dr. Aditi Raja and Dr. Rathin Roy as AdditionalDirectors in the capacity of Non-Executive Independent Directors of the Company witheffect from 30_December_2019 24_January_2020 and 24_January_2020 respectively. Inaccordance with Section 161 of the Act they hold office up to the date of the ensuingAnnual General Meeting and are eligible for being appointed as Independent Directors.

Notices under Section 160 of the Act from a Member proposing the candidatures of Mr.Pradeep Mathur Dr. Aditi Raja and Dr. Rathin Roy for their appointment as Directors wasreceived by your Company Accordingly your Directors recommend appointment of Mr PradeepMathur Dr. Aditi Raja and Dr. Rathin Roy as Non-Executive Independent Directors in theensuing Annual General Meeting. Attention of Members is invited to relevant disclosuresmade in the Notice of the ensuing Annual General Meeting and the Explanatory Statementthereto with respect to their appointments.


Dr. Valentin Von Massow (Independent Non-Executive Director) Mr. K N Neelkant(Managing Director & Chief Executive Officer) and Dr. Omkar Goswami (Non-ExecutiveDirector) ceased to be Directors of your Company with effect from 5_August_201930_September_2019 and 14_December_2019 respectively.

Members may recall that as stated in the previous Annual Report of the Company theBoard of Directors through a circular resolution dated 29_August_2019 passed by majorityconsent resolved to remove Mr. Gautam Thapar as the Chairman of the Board withimmediate effect. This decision had been taken in the interests of your Company and itsstakeholders in discharge of the fiduciary responsibilities of your Board. Mr Thaparceased to be a director on the Board of Directors of the Company with effect from9_October_2019.


In terms of the provisions of Section 152 of the Act and the Rules made thereunder andArticle 114 of the Articles of Association of the Company Mr. Sudhir Mathur retires byrotation at the ensuing Annual General Meeting of the Company and is eligible forre-appointment. As per Regulation 36 of the SEBI LODR and Secretarial Standard-2 onGeneral Meetings issued by the Institute of Company Secretaries of India (SS-2) a briefprofile and other relevant details regarding re-appointment of Mr. Sudhir Mathur arecontained in the Annexure accompanying the explanatory statement to the Notice of theensuing Annual General Meeting.


Your Company has received declarations from all its Independent Directors confirmingthat they meet the criteria of independence as laid down under Section 149 of the Act andRegulation 16 of the SEBI LODR.

In the opinion of the Board Independent Directors of your Company fulfill theconditions of independence as specified in the Act and SEBI LODR and are independent ofthe management.

The Company has received a certificate from M/s Parikh & Associates PractisingCompany Secretaries confirming that none of the Directors on the Board of the Company hasbeen debarred or disqualified from being appointed or continuing as Directors of companiesby SEBI Ministry of Corporate Affairs or any such other statutory authority.


It should be brought to the attention of shareholders that the Board of Directors metseveral times during the year to review ongoing developments.

During the FY2020 your Board of Directors met 17 times to discuss and decide businessstrategies and performance in addition to items reported to the Board in accordance withthe provisions of the Act SEBI LODR and other statutory provisions. The intervening gapbetween the meetings was within the period prescribed under the Act SEBI LODR andSecretarial Standard-1 on Board Meetings issued by the Institute of Company Secretaries ofIndia (SS-1). Details of Board Meetings held and the attendance of Directors are given inthe Section titled "Report on Corporate Governance" which forms part of thisAnnual Report.


Your Board has established statutory and non-statutory Committees in compliance withthe requirements of the Act and SEBI LODR. The Statutory Committees are: (i) the AuditCommittee (ii) the Nomination and Remuneration Committee (iii) the Corporate SocialResponsibility Committee (iv) the Risk Committee and (v) the Stakeholders' RelationshipCommittee. Details of composition of the statutory committees number of meetings held andattendance of Committee members thereof during the financial year is given in the Sectiontitled "Report on Corporate Governance" forming part of this Annual Report.

During the year under review your Board at a meeting held on 24_January_2020 changedthe composition of the Committees of the Board so as to leverage the expertise andexperience of the newly appointed Independent Directors viz. Mr. Pradeep Mathur Dr.Aditi Raja and Dr. Rathin Roy and to further strengthen the process of decision making inthe Committees.

Further the Risk and Audit Committee of the Company was demerged into two separatecommittees with effect from 24_January_2020 namely Risk Committee and Audit Committee foreffective functioning of these committees. The change in composition of the committees isgiven in the Section titled "Report on Corporate Governance" forming part ofthis Annual Report.

All recommendations of the Audit Committee have been accepted by the Board.

Apart from the above during the year under review the Board has also constitutedfollowing committees:

Special Situation Committee to focus on operational improvement strategic review ofinternational businesses and nomination of directors on the boards of subsidiaries andassociates of your Company.

Capital Restructuring Committee to oversee / evaluate the overall bid evaluationprocess/ resolution process jointly with the consortium of lenders / banks and tofacilitate the bidding / resolution process along with the advisors / legal consultants.


Mr. Sudhir Mathur was appointed as a Whole-Time Executive Director and a KMP of theCompany with effect from 10_May_2019.

During the year under review the Board at its meeting held on 30_August_2019terminated the employment of Mr V R Venkatesh the erstwhile Chief Financial Officer ofyour Company for cause with immediate effect. This termination of employment was due tothe grave nature of the misconduct and breach of trust on Mr. Venkatesh's part includinghis having knowingly undertaken actions which were detrimental to the interests of yourCompany and its stakeholders. Your Board is taking efforts to fill the vacancy caused bytermination of employment of Mr. Venkatesh.

At the Board meeting held on 30_September_2019 Mr K N Neelkant

Managing Director and Chief Executive Officer of the Company tendered his resignationwith immediate effect.

Ms. Shikha Kapadia Company Secretary & Compliance Officer of the Company resignedfrom her office with effect from 31_December_2019. Mr. Nimesh Shah who was appointed as aCompany Secretary & Compliance Officer of the Company with effect from 1_January_2020subsequently resigned with effect from 31_January_2020. Thereafter your Board hasappointed Mr. Alen Ferns as the Company Secretary & Compliance Officer of the Companywith effect from 18_March_2020.

Remuneration Policy and Criteria for Determining the Attributes QualificationIndependence and Appointment of Directors

Your Company has formulated a Remuneration Policy governing the appointment andremuneration of Directors KMP Senior Management and other employees. The policy containscriteria for determining qualifications positive attributes independence of Directorsand provisions relating to loans and advances to employees of the Company. It aims toattract and retain high caliber personnel from diverse educational fields and variedexperiences to serve on the Board of your Company. The Remuneration Policy is provided as Annexure6 to this Report. Your Company believes that diversity at Board level is critical tomaintain competitive advantage to understand customers and stakeholders from differentperspectives and to reap the benefits of a broader experience in decision making. Withthis in mind your Company has adopted a Board Diversity Policy.

Performance Evaluation of the Board of Directors

In line with the requirements of the Act and SEBI LODR an annual evaluation ofperformance of the Board its Committees and individual Directors was carried out duringthe year under review. Pursuant to the provisions of Schedule IV of the Act and Regulation25 of SEBI LODR the Independent Directors of your Company at a meeting held on16_March_2020 evaluated the performance of Non-Independent Directors and the Board as awhole; performance of the Chairman; and also assessed the quality quantity and timelineof flow of information between the Management and the Board. However it should be notedthat there has been change in the Board Management after

August_2019. Hence the evaluation of the Board as a whole has been done based on thecurrent Board members.

Familiarisation Programme for Independent Directors

Pursuant to Regulation 25 of the SEBI LODR your Company familiarizes its IndependentDirectors with their roles rights responsibilities as well as the Company's business andoperations. Moreover Directors are regularly updated on the business strategies andperformance management structure and key initiatives of businesses at every Boardmeeting. Details of the programme can be viewed under the following link available on theCompany's website:

Related Party Transactions

Related party transactions during the year are disclosed in the financial statements inthis Annual Report (refer note no. 45 and note no. 41 of standalone and consolidatedfinancial statement forming part of this Annual Report respectively).

The Company's Related Party Transactions Policy is available on the website of theCompany under: India%20Related%20Party%20Transactions%20Policy.pdf

It should be understood that the nature of related party transactions undertaken duringthe year are under review as part of the forensic Phase II investigations. Thereforepending the findings of the investigations and the forensic audit your Company is unableto confirm the completeness of all related party transactions — and whether some ofthese were undertaken at an arm's length basis and/or in the ordinary course of business.Hence disclosure of particulars of contracts / arrangements entered into by your Companywith related parties referred to in sub-Section (1) of Section 188 of the Act have notbeen included for the year under review.

Based on the criteria determined and approved by the Board of Directors as well as bythe Audit Committee (AC) for transactions that are of repetitive nature with relatedparties an omnibus approval has been granted by the AC in respect of transactions withone of the subsidiaries of the Company CG PPI Adhesive Products Limited. Such omnibusapprovals are subjected to renewal by the AC every year and are monitored by the AC on aquarterly basis. In case of transactions with other related parties specific approval isobtained from the AC.

Particulars of Loans Guarantees and Investments

Pursuant to the provisions of Section 186 of the Act and Schedule V of the SEBI LODRparticulars of loans guarantees given and investments made by your Company during FY2020are given in the notes to the financial statements in this Annual Report.

Business Responsibility Report

Pursuant to Regulation 34 of the SEBI LODR the Business Responsibility Reporthighlighting the initiatives taken by the Company in the areas of environment socialeconomic and governance is available on the website of your Company under: finalnonproduct.aspx?cnl2=Nu/tTrrPlMI=

Enterprise Risk Management (ERM) Framework

Your Company has an ERM framework to identify risks conduct risk assessment andsuggest mitigation procedure to the Board of Directors to ensure that management controlsmeasurable risks through properly defined procedures. These risks cover business strategytechnology financial operations systems IT legal regulatory and human resources.

The Risk Committee of the Board reviews the key risks associated with the businesses ofyour Company and their mitigation measures.

In light of the ongoing investigations and significant financial restatements that haveoccurred both at the standalone and consolidated levels your Company has decided toconduct a thorough review of your Company's existing ERM framework and where necessarysuggest changes to improve the system.

Research and Development (R&D)

During the year under review your Company's R&D activities continued to focus ondevelopment of indigenous and energy efficient products.

Your Company's Traction Machines and System Division at Mandideep developed a highefficiency brushless single bearing Traction Alternator C1019TA1 for SMH Rail Malaysia.It made inroads to the market in Asia Pacific by supplying the first 700 HP 445kW 1800RPM Traction Alternator also to SMH Rail Malaysia. The locomotive manufacturing worksare being carried out under direct supervision of key engineering personnel from SMH Railand your Company for design understanding assembly and integration with the dieselengine. The supplied traction alternator fully complies with IEC 60349-1 regarding safetyemissions and environmental protection and has been designed with a high degree ofreliability increasing the availability of the shunting locomotives. The design has beensuccessfully developed in-house and locomotives with your Company's alternators have beenput in commercial service.

Your Company's Railway Transportation and Traction Electronics Division at Mandideepindigenously developed a 120kW Auxiliary Power Convertor (APC) for 1600HP Diesel ElectricMultiple Unit (DEMU). It consists of chopper technology (DC-DC conversion) Inverter(DC-AC conversion) phase shifted DC-DC converter and battery charger. This APCtechnology replaces the conventional auxiliary alternator and takes care of auxiliaryloads of ventilation compressor coach lights and fans battery charger etc. for selfpropelled vehicle used in inter-city passenger transport in non-electri_ed routes.

Your Company's Railway Signaling Division at Pithampur developed a Switch BoardCabinet the ETDC–355 panel which is being used in Indian Railways coachapplications. The Division received a type test approval from Research Design andStandards Organization (RDSO) Lucknow. These cabinets are used for controlling anddelivering power supply as well as providing electrical protection for all the loads andconverters connected in Linke Hofmann Busch type LHB coaches.

The Switchgear Division developed 550kV Current Transformers 550kV Capacitor VoltageTransformers 40.5kV SF6 Gas Circuit Breaker 27.5kV Vacuum Interrupters for Railwayapplications 52-145kV Instrument Transformers for Railways and Double Bus 33kV GIS withBus bar in gas. These developments should open up opportunities in new market segments inIndia and in Europe Latin America South-East Asia and Africa. These products aretypically deployed by power utilities in electrical power transmission and distributionsubstations. These are meant to regulate the switching protection and control function ofthe power system.

Towards making products more intelligent and improving the control and protectionfeatures the Switchgear Division developed a Controlled Switching Device for circuitbreakers. A special feature is its compatibility with any make of circuit breakers andthus has widespread application potential. Switchgear also developed Numerical ProtectionRelays with high availability seamless redundancy (HSR) protocol and parallel redundancyprotocol with cyber security features. These protocols are used in SCADA and substationautomation.

The LT Motors Division concentrated on developing super premium energy efficient motors(IE4) as per international and Indian standards for the complete range start from 0.12 kWto 350 kW (80 frame to 355 frame). Your Company is the first Indian company to develop IE4motors in induction technology with in-house R&D. These motors developed with specialgrade low watt loss electrical steel and increased cross Section of copper in a new framewith engineered aero dynamic fans reduce the overall losses of the motor and hence cutdown on energy consumption.

Your Company developed an on-board alternator of 562.5 kVA 750 V for Indian Railwaysfor their power car as a range extension with dual voltage regulation.

We developed Next Gen Micro Drives VSX/ VSM loaded with advanced features like LCDdisplay oscilloscope compact size high starting torque that can deal with up to 50Cambient temperature. Also developed a new generation four-line Portable Presentation Unit(PPU) with Bluetooth support. Now user can interface with the drive through phone usingBluetooth. Also introduced automation products using programmable logic controllers andhuman-machine interface in the product portfolio.

Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo

Details as required under Section 134 of the Act read with the Companies (Accounts)Rules 2014 are given in the prescribed format as Annexure 1 to this Report.

Environment Health and Safety (EHS)

In view of the COVID-19 pandemic the Company has issued SOPs to all its employees inaccordance with the guidelines of the Central Government State Government and localauthorities and keeping in mind the health and safety of employees. This includesproviding Company arranged transport from home to work place and return regularsanitization of work place and transport vehicles providing masks and other protectivegears thermal scanning providing hand sanitizers advising regular hand washingmaintain social distancing at work in canteens in the offices and amongst others.

Your Company's EHS strategies are directed towards achieving the greenest and safestoperations across all its units at various locations. All units are encouraged toconsistently improve on operational efficiencies minimize consumption of naturalresources and reduce water energy and carbon emissions while maximizing productionvolumes.

Your Company propagates ‘Zero Harm Culture' towards employees environment andother stakeholders. This is reflected in our Corporate EHS Policy and Cardinal Rules.Through our Corporate EHS Policy we aim not only to comply with legal requisites ofsafeguarding our employees environment and the society at large but also to set highinternal standards for compliance. To monitor compliances and sharing best practices inEHS a Corporate EHS Review is conducted on monthly basis through GoTo meeting with unitheads and EHS coordinators of all entities.

All CG units in India are certified for quality systems with ISO 9001:2015Certification/ ISO 14001:2015 Environmental Management System Certification. All the unitsare upgraded for ISO 45001:2018 (Occupational Health and Safety Standard) except (i)Stampings division Ahmednagar and (ii) Drives & Automation (‘D&A') and RailTransportation and Traction Electronics (‘RTTE') Mandideep.

Stamping D&A and RTTE currently have OHSAS 18001:2007 which is expected to getupgraded to ISO 45001:2018 by 2021. All units in India have clearance to operate fromState Pollution Control Board Authorities and are complying with the conditions laid downin such consent to operate.

Regular trainings on EHS awareness and sustainable growth are conducted at allmanufacturing locations and regional sales offices. National Safety Week and WorldEnvironment Day campaigns are conducted under guidance of Directorate of Industrial Safetyand Health and State Pollution Control Board. Fire safety weeks are also observed in Indiaunder the guidance of the Fire Adviser Ministry of Home Affairs and the Government ofIndia.

EHS Key Performance Indicators (KPIs) are linked with SMART goals of all units andindividuals for their Annual Performance Management process. Quarterly audits areconducted to review the EHS implementation and process compliances across all locations ofyour Company. Corrective actions generated from these audits and various EHS events arecaptured and tracked for closure in an online Event Reporting System portal.

Your Company shall continue its efforts towards conservation of natural resources andfocus on achieving highest level of employee health and well-being for an injury-freeworkplace.

Management Discussion and Analysis

A detailed review of the operations performance and future outlook of your Company andits businesses is given in the Section titled "Management Discussion andAnalysis" which forms part of this Report.

Corporate Governance

A Section on Corporate Governance standards followed by your Company as stipulatedunder Schedule V of SEBI LODR is enclosed separately. A Certificate from M/s Parikh &Associates Practising Company Secretaries regarding compliance with the conditions ofCorporate Governance as stipulated under SEBI LODR is annexed to the Report on CorporateGovernance.

Corporate Social Responsibility (CSR)

Your Company is committed towards inclusive growth and has implemented various CSRactivities in education skill development and upliftment of underserved communitiesduring the year under review. Based on the recommendation of the Board-level CSRCommittee your Company will be identifying a single focus area / CSR initiative to becarried out in the next financial year in order to have a maximum impact.

Details of the composition of the CSR Committee CSR Policy and projects undertaken bythe Company during FY2020 are given in the Section titled ‘Annual Report on CSRinitiatives' in Annexure 2 of this Report.

Registrar and Share Transfer Agent

Your Company has appointed Datamatics Business Solutions Limited (DBSL) (formerlyDatamatics Financial Services Ltd) as its Registrar and Share Transfer Agent an entitywhich is registered with SEBI. Contact details of DBSL are mentioned in the Report onCorporate Governance of this Annual Report.

Particulars of Employees

Disclosures pertaining to remuneration and other details as required under Section 197of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are given in Annexure 3 to this Report. Inaccordance with the provisions of Section 197(12) of the Act read with Rule 5(2) ofCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the namesand other particulars of the employees covered under the said rule shall be made availableto any Member on a specific request made by him or her in writing.

Dividend Distribution Policy

Pursuant to Regulation 43A of the SEBI LODR your Company has formulated a DividendDistribution Policy as provided in Annexure_7 of this Report. It is also availableon the website of the Company under:

Public Deposits

Your Company has not accepted any deposits from public or its members during the yearunder review as per Sections 73 and 76 of the Act and no deposits exist as on date.

Complaints Relating to Sexual Harassment

Your Company has adopted a Prevention of Sexual Harassment Policy and has alsoconstituted an Internal Complaint Committee in compliance with the Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013 The InternalComplaint Committee has been constituted region-wise presided by a woman employee andcomprising five to seven Company employees with an external member to whom employees canaddress their complaints.

During the year under review no incident of sexual harassment was reported.

Vigil Mechanism

Your Company has set up a vigil mechanism viz. a Whistle Blower Policy as per theprovisions of Section 177 of the Act and Regulation 18 of the SEBI LODR to enable itsemployees to report violations genuine concerns unethical behaviour and irregularitiesif any which could adversely affect the Company's operations. None of the Whistle Blowerswas denied access to the Audit Committee of the Board.

The Head of Internal Audit submits a report to the Chairman of the Audit Committee on aquarterly basis with the status of investigations and actions taken by the ManagementCommittee.

Share Capital

As on 31_March_2020:

The authorised share capital of your Company was I 4076000000/- (Rupees Four HundredSeven Crore And Sixty Lakh) divided into 2038000000 equity shares of I 2/-(Rupees two)each.

The subscribed and paid-up share capital of your Company stood at I1253492284/-(Rupees One Hundred And Twenty Five Crore Thirty Four Lakh Ninety TwoThousand Two Hundred And Eighty Four) consisting of 626746142 equity shares of I 2/-(Rupees two) each.

Your Company's equity shares are listed and traded on BSE Limited and National StockExchange of India Limited.

Your Company issued Global Depository Receipts (GDRs) in 1996 and the underlying sharesfor each GDR were issued in the name of The Bank of New York or the Depository. Each GDRis equivalent to five equity shares. As on 31_March_2020 137447 GDRs were outstandingwhich represent 687234 underlying equity shares of your Company.

Extract of Annual Return

Pursuant to sub-Section 3(a) of Section 134 and sub-Section (3) of Section 92 of theAct read with Rule 12 of the Companies (Management and Administration) Rules 2014extract of the Annual Return in Form MGT-9 as on 31 March 2020 forms part of this reportand is attached as Annexure-5.

A copy of the Annual Return for the financial year 2018-19 and extract of Annual Returnin Form MGT-9 for the financial year 2019-20 is available on the website of the Companyunder finalnonproduct.aspx?cnl2=Nu/tTrrPlMI=

Other Disclosures / Reporting

Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions pertaining to these items during the yearunder review:

Issue of equity shares with differential rights as to dividend voting or otherwise.

Issue of shares (including sweat equity shares) to employees of your Company under anyscheme.

Directors' Responsibility Statement

To the best of their knowledge and belief and according to the information andexplanations available with them the Directors make the following statements in terms ofSection 134(3)(c) of the Companies Act 2013 subject to the qualifications mentionedherein for the period up to 19_August_2019 that:

Subject to the outcome of the ongoing investigations the Annual Accounts have beenprepared in conformity with the applicable Accounting Standards along with properexplanations relating to material departures. However considering the significantmonetary diversions that have occurred the restatements that were made in the recent pastin the financial results and the possible outcomes of various ongoing investigationsthese Annual Accounts could undergo change and may not be complete to include the impactand disclosures required to be included as per the applicable laws and hence cannot besaid to represent a true and fair view.

The Accounting Policies selected and applied on a standalone and a consolidated basisincluding for requisite accounting of all transactions identified and disclosed by theCompany vide the 19_August Disclosures and subject to outcomes of the forensicinvestigation no provisioning is being made against certain assets and non-inclusion ofcertain liability non-adoption of accounts in certain subsidiaries basis of preparationas stated in Note No. 2.1 of the consolidated financial statements and Note No. 2.1 of thestandalone financial statements judgements exercised and estimates provided may need tobe revised for establishing reasonableness and prudence to provide a true and fair viewof the state of affairs of the Company at the end of the financial year and of the profit/ loss of the Company for the financial year.

Established rules of procedure of your Company requirements of maintenance ofaccounting records measures put in place for safeguarding its assets appear to have beenbreached by some members of the management resulting in potentially fraudulent transfer ofassets consequent to which forensic investigation has been initiated and new measures tostrengthen the system are being carried out.

Given the substantial stress arising out of siphoning of Company's funds that affectedkey businesses and possible impact of transaction identified and disclosed by the Companyin its financial statements for the year ended 31_March_2019 and 31_March_2020 the goingconcern basis of preparation of the financial statements as at 31_March_2020 could bematerially affected. However based on the strength of the business of the Company andsubject to debt resolution process (including fund infusion by potential investor) beingcompleted these financial statements have been prepared on a going concern basis.

Post August 2019 laid down internal financial controls to be followed by your Companyare adequate and robust.

Post August 2019 the Board has instituted corrective overhaul of systems devised toensure compliances with the provisions of all applicable laws.


The Board of Directors wishes to convey its gratitude and appreciation to all employeesfor their tremendous efforts as well as their exemplary dedication and contribution toyour Company's performance. The Directors would also like to thank the CENTRAL & STATEGOVERNMENTS SHAREHOLDERS BANKERS CUSTOMERS SUPPLIERS DEALERS EMPLOYEES and EMPLOYEEUNIONS and all other business associates for their continued support extended to yourCompany.

On behalf of the Board of Directors
Ashish Kumar Guha
(DIN: 00004364)
Mumbai 16 September 2020