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Commercial Engineers & Body Builders Company Ltd.

BSE: 533272 Sector: Engineering
NSE: CEBBCO ISIN Code: INE209L01016
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VOLUME 262
52-Week high 30.05
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Mkt Cap.(Rs cr) 173
Buy Price 18.40
Buy Qty 500.00
Sell Price 19.35
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OPEN 18.80
CLOSE 19.00
VOLUME 262
52-Week high 30.05
52-Week low 11.07
P/E
Mkt Cap.(Rs cr) 173
Buy Price 18.40
Buy Qty 500.00
Sell Price 19.35
Sell Qty 250.00

Commercial Engineers & Body Builders Company Ltd. (CEBBCO) - Director Report

Company director report

To

The Members of

Commercial Engineers & Body Builders Co. Ltd

The Directors take pleasure in presenting the 38th Annual Report of theCompany together

with the Audited Accounts for the year ended 31st March 2018.

Financial Highlights in Lakhs

For the Year ended on

Particulars

March 31 2018

March 31 2017

Revenue From Operations

9936.96

15051.79

Less - Excise Duty

247.46

4518.09

Net Sales

9716.50

10533.70

Other Income

116.43

44.38

Total Income

9832.93

10578.08

Operating Expenses

9711.01

10372.22

Depreciation and Amortisation

1035.23

1035.80

Finance Cost

2777.96

2730.34

Profit / (Loss) for the Year

(3691.27)

(3560.28)

Other Comprehensive Income / (Loss)

5.32

(0.18)

Total Comprehensive Income / (Loss) for the year

(3685.95)

(3560.46)

Performance at glance

The Company continued under severe liquidity pressure during this yearseverely affecting the orders from the major OEM customer of the Company.

The Company's fortunes mainly depend on Medium and Heavy DutyCommercial vehicle (M & HCV) industry. Consequent to change in emission norms witheffect from April 1 2017 the demand for M & HCV segment was impacted during thefirst quarter.The second quarter of the year witnessed the transition to GST regime of theentire economy. The new tax system created some challenges on the overall business andeconomic front. On accounts of these factors during the first two quarters of the fiscal2018 the major commercial vehicle OEMs witnessed marginal change in demand in the M &HCV segment. This factor and the working capital constraints faced by the companysignificantly affected the sale of tippers and load bodies.

The underlying demand for commercial vehicles had been very strongmainly driven by investment in construction of roads / metro and other infrastructure andgrowth in GDP. Thus M & HCV segment has been recording robust growth since beginningof quarter 3 of fiscal 2018.

Further there has been shift of business from unorganized sector tothe organized sector post GST. This has resulted in sizeable demand for load bodies(mainly tippers and trailers) from the dealers of commercial vehicle OEMs.

While the liquidity and cash flow situation of the Company continues tobe grim the management pursued vigorously with major OEM and could obtain funding supportto fulfill the orders from these OEMs. Similarly it focused on demand from dealers ofOEMs and direct customers where the payment terms facilitate the funding need to procurematerial.

It is heartening to note that the efforts of the management asexplained above have yielded positive results. The Company has clocked the revenue fromoperations of Rs. 2958 lakhs and Rs. 3699 lakhs in quarter 3 and quarter 4 respectivelyof fiscal 2018. The revenue for quarter ended June 30 2018 was Rs 4584 lakhs.

However as explained in the later part of our report there is needfor systematic funding support mechanism and other steps to address the working capitalneeds so that the Company could take advantage of growing demand.

The management continued to focus on cost optimization on all fronts.

Despite the positive development on operational front the Companyreported a net loss of Rs 3586 lakhs mainly attributable to lower operating marginsignificant finance cost and depreciation.

Cash flow situation debt restructuring and revival of operations

The Company continued to operate under severe liquidity pressure duringthe year. As reported last year one of the lending bank curtailed the working capitalfacility from September 2017 impacting the rotation of funds required for purchase ofmaterial for fulfilment of customer orders. Since then working capital funding needs havenot been met by the lenders.

The Joint Lenders Forum invoked Strategic Debt Restructuring("SDR") on 11 January 2017 in compliance with the guidelines effective on thatdate by the Reserve Bank of India ("RBI"). On 12 October 2017 the lead bankcommunicated that SDR could not be completed within the timeframe prescribed by RBI andloan given by the lenders to the Company has been classified Non-Performing Assets in thebooks of lenders.

Since then the lead bank has been in the process of identifyingrevival measures including debt restructuring and other structural changes.

As explained above the Company has been able to get and execute thecustomer orders mainly on account of funding support/advances from customers. In theabsence of assured long term working capital support the Company is unable to targethigher volumes which in turn affects the generation of free cash flow. Thus the Company iscaught in viscous circle.

Future Outlook

The Company is working with certain customers who give assistance forfulfillment of their orders. However current state of cash flow and working capitalsignificantly limits the ability of the Company to target higher sales and to plan entryinto railway or similar new opportunities for long term profitable growth.

The need for restructuring and revival measures is critical for longterm profitable growth. The Board of Directors is confident about the positive outcomepursuant to the restructuring exercise currently undertaken by the lenders.

Details of Subsidiary Joint Venture or Associates

The Company does not have any subsidiary company associates company orjoint venture. Accordingly a statement of the subsidiary Companies/ AssociateCompanies/Joint Ventures as per Form AOC-1 is not required to be filed with MCA/ROC.

Extract of the Annual Return

The extract of Annual Return in Form MGT -9 for the Financial Year2017-18 has been enclosed with this report as Annexure III.

Meetings of the Board of Directors

The Board of Directors met five times during the year 2017-18 i.e. on29th May 2017 22nd August 2017 14th September 2017 14th December 2017 and 2nd February2018. For further details please refer Report on Corporate Governance of this AnnualReport.

Directors Responsibility Statement

Your Directors state that:

a) in the preparation of the annual accounts for the year ended March31 2018 the applicable accounting standards have been followed along with properexplanation relating to material departures.;

b) The Directors have selected such accounting policies and appliedthem consistently and made judgments and estimates that are reasonable and prudent so asto give a true and fair view of the state of affairs of the Company as at March 31 2018and of the profit or loss of the Company for the year ended on that date;

c) The Directors have taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; d) The Directors have prepared the Annual Accounts on a 'goingconcern' basis;

e) The Directors have laid down internal financial controls to befollowed by the Company and that such internal financial controls are adequate and areoperating effectively; and

f) The Directors have devised proper systems to ensure compliance withthe provisions of all applicable laws and that such systems are adequate and operatingeffectively.

Corporate Governance

The Company is committed to maintain the highest standards of CorporateGovernance and adhere to the Corporate Governance Requirements set out by SEBI. Pursuantto Regulation 27 of the Listing of Debt Regulation 2015 a separate Report on CorporateGovernance and a certificate from the Auditors of the Company regarding compliance of theconditions of Corporate Governance forms part of the Annual Report.

Change in the Nature of Business If any

There was no change in the nature of business of the Company during theFinancial Year ended 31st March 2018

Particulars of Loans given Investments made Guarantees given

Particulars of loans given investments made guarantees given andsecurities provided along with the purpose for which the loan or guarantee or security isproposed to be utilized by the recipient are provided in the financial statements.

Contracts and Arrangements with Related Parties

All related party transactions that were entered into during thefinancial year 2017-18 were on an arm's length basis and were in the ordinary course ofthe business. No materially significant related party transactions were entered into bythe company with Promoters Key Managerial Personnel or other designated persons whichmay have potential conflict with interest of the company at large.

The Policy on materiality of related party transactions and dealingwith related party transactions as approved by the Board may be accessed on the Company'swebsite at the linkhttp://www.cebbco.com/docs/profile_for_investors.html.

Members are requested to refer to Note No. 41 forming part of theAudited Financial Statements which sets out related party disclosures.

Particulars of Conservation of Energy Technology Absorption andForeign Exchange Earnings and Out Go in terms of section 134 (3)(m) of the act read withrule 8 of the Companies (Accounts) Rules 2014 forming part of the Director report for theyear ended March 31st 2018.

Conservation of Energy:

1. Company ensures that the manufacturing operations are conducted inthe manner whereby optimum utilization and maximum possible savings of energy is achieved.

2. No specific investment has been made in reduction in energyconsumption.

3. As the impact of measures taken for conservation and optimumutilization of energy are not quantitative its impact on cost cannot be statedaccurately.

Since the Company does not fall under the list of industries which arerequired to furnish this information in Form A annexed to the aforesaid Rules theinformation has not been given.

Technology Absorption

The Company's products are manufactured by using in-house know how andno outside technology is being used for manufacturing activities. Therefore no technologyabsorption is required. The Company persistently endeavors towards improvement in qualityof its products.

Foreign exchange outgo and earning

During the year under the review the Company had Foreign ExchangeEarnings Nil and Foreign Exchange Outgo ofRs. 272.86 lakhs.

Risk Management

Pursuant to section 134 (3) (n) of the Companies Act 2013 &Regulation 21 of the listing of Debt Regulation a Risk Management committee is mandatoryfor the company having net worth of Rs. 500 Cr. or more or turnover of Rs. 1000 Cr. ormore or net profit of Rs. 5 Cr. or more during any financial year hence the company hasnot constituted risk management committee. (Section 135 of the Companies Act 2013)

The Company is facing severe issues on liquidity and working capitalfront. The Company continue to monitor the cash flows and working capital situation andsuitable actions are initiated. A reference may be made to discussion on strategic debtrestructuring in this report.

Corporate Social Responsibility (CSR)

A Corporate Social Responsibility Policy (CSR Policy) demonstrating theactivities to be undertaken by the Company has been formulated by the Corporate SocialResponsibility Committee (CSR Committee)and recommended to the Board which has beenapproved by the Board.

The CSR Policy may be accessed on the Company's website at the link:

http://www.cebbco.com/docs/profile_for_investors.html.

The Annual Report on CSR activities has been annexed herewith as ANNEXURE- I

Internal Financial Controls

The Company has adequate internal financial controls with reference tofinancial statements. During the year such controls were tested and no reportablematerial weaknesses were observed.

Directors and KMP

The Board of Directors comprises

Particulars Designation
1. Dr. Kailash Gupta Non-Executive Promoter Director(till 27.09.2017)
2. Mr. Prakash Y Gurav Independent Director
3. Mr. Prabhakar Dalal Independent Director(till 01.09.2017)
4. Mr. M Venkat Rajarao Independent Director
5. Mr. Abhishek Jaiswal Executive Director (w.e.f. 14.09.2017)
6. Ms. Vineeta Shriwani Independent Director (w.e.f. 26.03.2018)

During the year following changes have been in board of directors dueto resignation /

cessation:

Mr. Prabhakar Dalal Independent Director resigned w.e.f. 1stSeptember 2017. The Board takes on record its appreciation of the services rendered byMr. Prabhakar Dalal in various capacities during his association with the Company.

Mrs.Nandini Malpani Non-Executive Director resigned from Directorshipwith effect from 20th May 2016.The Company initiated steps to induct 'woman director'.However on account of deteriorating performance of the Company it has been difficult toattract suitable candidate.

Ms. Vineeta Shriwani was inducted on the Board as Non-ExecutiveIndependent Director w.e.f 26th Day of March 2018. She is a Company Secretary and anadvocate by profession and is presently working with Maharashtra State ElectricityTransmission Company Limited Mumbai (A Govt. of Maharashtra Undertaking).

In accordance with the provisions of the Act and the Articles ofAssociation of the Company Mr. Kailash Chand Gupta Promoter Director of the Companyretired by rotation at the 37th Annual General Meeting. Mr. Gupta did not offer himselffor re-appointment and consequently the board vide in its meeting on August 22 2017 didnot to propose to re-appoint him as director

in the 37th Annual General Meeting.

Mr. Abhishek Jaiswal was re-designated as Executive Director(Additional) and Chief Executive Officer w.e.f. 14 Day of October 2017 on same terms andconditions as recommended at the time of his elevation as Chief Executive Officer by theNomination and Remuneration

Committee in its meeting held on 13 Day of February 2017

We confirm that the Company has received declarations from all theIndependent Directors confirming that they meet the criteria of independence as prescribedunder Section 149(6) of the Companies Act 2013 as well as SEBI (Listing Obligations andDisclosure Requirements)Regulations 2015 ("SEBI LODR"). The Company has deviseda Policy for performance evaluation of Independent Directors Board Committees and otherindividual Directors which include criteria for performance evaluation of theNon-Executive Directors and Executive Directors.

On the basis of recommendations of the Policy for performanceevaluation of Independent Directors Board Committees and other individual Directors anevaluation process was followed by the Board for its own performance and that of itsCommittees and individual

Directors. During the year a meeting of independent directors was heldon February 2 2018 to undertake performance evaluation of independent directors Boardof director as a whole and Committees of Board.

The details of Programmes for familiarization of Independent Directorswith the Company their roles rights responsibilities in the Company nature of theindustry in which the Company operates business model of the Company and related mattersare put up on the website of the Company at the link:http://www.cebbco.com/docs/profile_for_investors.html

AUDITORS REPORT

Statutory Auditors

M/s BSR and Co. LLP Chartered Accountants (Registration No. 101247 W /W - 100022) who are the Statutory Auditors of the Company will retire at the conclusionof the forthcoming Annual General Meeting and are eligible for reappointment subject tothe approval of shareholders. The Company has received letter from them to the effect thattheir reappointment if made would be within the prescribed limits and that they are notdisqualified for reappointment. Members are requested to consider their reappointment ona remuneration to be decided by the Board or Committee thereof for the ensuring FinancialYear i.e. 2018-19. The Auditors' Report for the financial year ended 31st March 2018does not contain any qualification reservation or adverse remark.

The Notes on financial statement referred to in the Auditor's Reportare self- explanatory and do

not require any further comments and explanations.

Secretarial Audit

The Board has appointed Mr. S.K. Gupta Practicing Company Secretaryto conduct Secretarial Audit for the financial year 2017-18. The Secretarial Audit Reportfor the financial year ended March 31 2018 is annexed herewith marked as ANNEXURE II tothis Report. The Secretarial Audit Report does not contain any qualification reservationor adverse remark. The Secretarial Audit Report is self-explanatory and do not call forany further clarification.

DISCLOSURES:

CSR Committee

The CSR Committee comprises Mr. Manchi Venkat Raja Rao (Chairman) Mr.Prakash

Yashwant Gurav (Member) and Mr. Abhishek Jaiswal (Member) as othermembers.

Audit Committee

The Audit Committee comprises Mr. Prakash Yashwant Gurav (Chairman)Mr. Manchi Venkat Raja Rao (Member) Mr. Abhishek Jaiswal (Member) and Ms. VineetaShriwani as other members. All the recommendations made by the Audit Committee wereaccepted by the Board.

Vigil Mechanism

The Vigil Mechanism of the Company which also incorporates a WhistleBlower Policy in terms of the Listing Agreement includes an Ethics Officer and otherForce comprising senior executives of the Company. Protected disclosures can be made by awhistle blower through an e-mail or dedicated telephone line or a letter to the EthicsOfficer and other Force or to the Chairman of the Audit Committee. The Policy on vigilmechanism and whistle blower policy may be accessed on the Company's website at the linkhttp://www.cebbco.com/docs/profile_for_investors.html.

Employee

There is no employee in the company whose particulars are required tobe disclosed under the provisions of Section 197(12) of the Act read with Rules 5 (2) and5 (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014and amendment thereto.

GENERAL

1) Public Deposit - Your Company has not accepted anydeposits within the meaning of Section 73 of the Companies Act 2013 and the Companies(Acceptance of Deposits) Rules 2014.

2) No significant or material orders were passed by the Regulatorsor Courts or Tribunals which impact the going concern status and Company's operation infuture.

3) Material changes affecting the financial position of the Companywhich have occurred between the end of the financial year of the Company to which thefinancial statement relates and the date of this report -

4) Share Capital - The paid up equity capital as on March31 2018 was Rs. 549429640.00.

The Company has issued in FY 2014-15 2000000 UnlistedNon-Convertibles Cumulative Redeemable Preference Shares of the Company of the face valueof Rs. 100/- each for an aggregate value of Rs. 20 Crores at par on a private placementbasis jointly to the promoters i.e. Mr. Kailash Chand Gupta and Mrs. Rekha Gupta. Up toMarch 31 2018 Rs. 13.00 Crores has been paid up.

The company has not issued shares with differential voting rights norgranted stock options nor sweat equity.

Prevention of Sexual Harassment at Workplace under Sexual Harassment ofWomen & Workplace (Prevention Prohibition & Redressal) Act 2013

The Company has zero tolerance towards sexual harassment at theworkplace and has adopted a policy on prevention prohibition and redressal of sexualharassment at workplace in line with the provisions of the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013 and the Rules thereunder.During the year under review there were no complaints pertaining to sexual harassment.

Acknowledgement

Your Directors take this opportunity to express their gratitude to thecustomers employees bankers /financial institutions and vendors for their continuedsupport and guidance.

For on behalf of the Board

COMMERCIAL ENGINEERS & BODY BUILDERS CO. LTD.

P.Y. Gurav

Abhishek Jaiswal

Director

Executive Director &

DIN : 02004317

Cheif Executive Officer

DIN : 07936627

Place : Pune

Date: 03.08.2018