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Cummins India Ltd.

BSE: 500480 Sector: Engineering
NSE: CUMMINSIND ISIN Code: INE298A01020
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OPEN 850.00
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VOLUME 94308
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P/E 44.59
Mkt Cap.(Rs cr) 24,685
Buy Price 888.50
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OPEN 850.00
CLOSE 864.35
VOLUME 94308
52-Week high 895.55
52-Week low 281.60
P/E 44.59
Mkt Cap.(Rs cr) 24,685
Buy Price 888.50
Buy Qty 45.00
Sell Price 889.15
Sell Qty 8.00

Cummins India Ltd. (CUMMINSIND) - Director Report

Company director report

The Directors take pleasure in presenting the Fifty-Ninth Annual Report together with inter-aliathe audited financial statements for the year ended March 312020. The consolidatedperformance of the Company and its subsidiaries has been referred to wherever required.

1. FINANCIAL RESULTS:

On Standalone basis:-

During the Financial Year 2019-20 revenue from operations was Rs 515773 Lacs ascompared to Rs 565900 Lacs during the previous year (8.86% lower). Profit after taxdecreased to Rs 62934 Lacs from Rs 72257 Lacs recorded for the previous year (12.90%lower).

On Consolidated basis:-

During the Financial Year 2019-20 revenue from operations was Rs 519145 Lacs ascompared to Rs 569731 Lacs during the previous year (8.88% lower). Profit after taxdecreased to Rs 70561 Lacs from Rs 74261 Lacs recorded for the previous year (4.98%lower).

Financial summary

Standalone

Consolidated

2019-20 2018-19 2019-20 2018-19
(f in Lacs) (f in Lacs) (f in Lacs) (f in Lacs)
APPROPRIATION OF PROFIT:
Profit before taxation 75906 103035 80748 106889
Net Profit for the year after tax 62934 72257 70561 74261
Tax on dividend 9687 9687 9687 9687
Dividend 47124 47124 47124 47124

2. RESERVES:

The closing balance of reserves including retained earnings of the Company as atMarch 31 2020 was f 411952 Lacs.

3. COVID-19:

The outbreak of COVID-19 turned into global pandemic in March 2020 and held the worldat its standstill. Consequent lockdown announced across India resulted in temporarysuspension of operations and temporary closure of offices branch offices andplants/manufacturing facilities of the Company in line with the government/localauthorities' directions. During the lockdown your Company continued to provide support tocustomers who were providing essential services. Your Company as a part of its safetypolicies ensured that its employees are working from home and necessary facilities asfeasible were provided. As the restrictions were eased out your Company while closelymonitoring the situation and following safety guideline started staggered manufacturingat its plants.

4. BUSINESS UPDATE AND STATE OF COMPANY'S AFFAIRS:

The information on Company's affairs and related aspects is provided under ManagementDiscussion and Analysis report which has been prepared inter-alia in compliancewith Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) regulations2015 and forms part of this Report.

5. DIVIDEND:

Your Directors have recommended a final dividend of Rs 7/- per equity share of Rs 2/-each fully paid-up share in addition to the interim dividend of Rs 7/- per equity shareof Rs 2/- each fully paid-up share declared on January 28 2020 aggregating to Rs 14/-(i.e. 700%) per equity share of Rs 2/- each fully paid-up share for the year ended March312020 (last year Rs 17/- per equity share i.e. 850%). The final dividend payout issubject to approval of the Members at the ensuing Annual General Meeting.

6. SHARE CAPITAL:

The paid-up share capital of the Company is Rs 554400000/- divided into 277200000equity shares of Rs 2/- each as on March 312020. Your Company has not come out with anyissue (public rights or preferential) during the year.

7. SUBSIDIARIES JOINT VENTURES AND ASSOCIATES:

Your Board is pleased to provide details of the following subsidiary joint venturesand associates as on March 312020 : -

a) Cummins Sales & Service Private Limited (CSSPL):

CSSPL a wholly-owned subsidiary of the Company focuses on sales of Cummins enginesparts accessories and providing service support to engines and generators in parts ofNorthern India close to the National Capital Region (NCR). CSSPL generated a revenue of Rs10549 Lacs from its operations for the year ended March 31 2020 as compared to Rs10143 Lacs during the previous year (4.01% higher).

b) Cummins Research and Technology India Private Limited (CRTI):

CRTI is a 50:50 joint venture between Cummins Inc. USA and your Company which wasformed in 2003 with an intent to provide Information Technology enabled MechanicalEngineering development services primarily to Cummins Inc. USA its subsidiaries andjoint ventures in all parts of the world. Since April 012016 CRTI closed its operationsand your Board of Directors decided that the activity carried out by CRTI for yourCompany shall be undertaken in-house by absorbing the appropriate number of employeesfrom CRTI in your Company. The revenue from operations for the year ended March 312020and for the previous year was Nil.

c) Valvoline Cummins Private Limited (VCPL):

VCPL a 50:50 joint venture between Valvoline International Inc. USA a global leaderin lubricants and engine oils and your Company generated a revenue of Rs 129544 Lacsfrom its operations for the year ended March 31 2020 as compared to Rs 133276 Lacsduring the previous year.

d) Cummins Generator Technologies India Private Limited (CGT):

Your Company owns 48.54% shareholding in the Associate Company namely CGT which is inthe business of design manufacturing marketing sales and service of alternators andrelated spare parts. CGT generated revenue of Rs 79089 Lacs from its operations for theyear ended March 312020 as compared to Rs 74361 Lacs during the previous year (6.36%higher).

As required under the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 consolidated financial statements of the Company its subsidiary jointventures and associate companies prepared in accordance with the applicable IndianAccounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards)Rules 2015 as amended form part of the Annual Report and are reflected in theconsolidated financial statements of the Company.

Further a statement containing the salient features of the financial statements ofsubsidiaries associate companies and joint ventures in the prescribed Form AOC-1 isappended as Annexure ‘1' which forms part of this Report.

The Company will make the said financial statements and related detailed information ofCSSPL available upon the request by any Member of the Company. These financial statementswill also be kept open for inspection by any Member at the Registered Office of theCompany and of CSSPL. Pursuant to the provisions of Section 136 of the Companies Act2013 the financial statements of the Company consolidated financial statements alongwith relevant documents and separate financial statements in respect of CSSPL areavailable on the website of the Company.

8. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS:

No loan or guarantee was given or investment was made by your Company during theFinancial Year 2019-20.

9. DEPOSITS:

Your Company has not accepted any Public Deposits under Chapter V of the Companies Act2013 during the Financial Year 2019-20.

10. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:

Particulars of contracts or arrangements with related parties referred to in Section188(1) of the Companies Act 2013 in the prescribed Form AOC-2 is appended as Annexure‘2' which forms part of this Report.

The Policy on materiality of related party transactions as approved by the Board may beaccessed on the Company's website at the link: https://www.cummins.com/en/in/investors/india-corporate-governance

As required under SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 related party transactions have been disclosed under significant accounting policiesand notes forming part of the Financial Statements in accordance with relevant accountingstandards.

11. CONSERVATION OF ENERGY:

During the Financial Year 2019-20 your Company strived to imbibe energy conservationprinciples and initiatives across all its facilities.

A 1000 kWp grid connected solar power plant was installed and made operational at theKothrud Engine Plant at Pune in Financial Year 2019-20. The installation of solar powerplant has helped us save approx. 3.7 lac units of purchased electricity and a financialsaving of approx Rs 37.15 lacs from December 2019 to March 2020.

The other key initiatives across multiple areas are highlighted below -

HVAC - Your Company has undertaken initiatives such as Installation of VFD withsolenoid valves for Compressor cooling water system AC optimum utilization throughinstallation of timer control units etc.

Lighting - Similar to last year your Company has continued the initiative toreplace old lighting fittings with new-age energy efficient LED fittings within andoutside some of our facilities. The installation of motion sensors at various locationshas helped us to reduce the energy consumption at various sites.

Awareness Generation - This included improving awareness amongst employees toswitch off major energy consuming equipment or units when idle as well as employing anenergy review tool and energy balance tool to identify projects.

These key initiatives resulted in annual energy savings of approximately 18.47 Lacsunits of electricity and Rs 166.86 Lacs of saving in energy costs.

12. RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION:

Your Company is committed to introducing new products and improving existing productsto have better performance levels lower life cycle costs excellent safety recyclabilitycharacteristics and meet stringent emission norms tailored for the specific needs of theIndian market.

Your Company continues this endeavour by developing the next generation of systems incollaboration with the parent company - Cummins Inc. USA.

Improved technical productivity through new methodologies and technologies is beingcontinuously pursued to reduce the costs associated with new product development andcustomer support. An example of this is the further enhanced use of analysis-led designthrough computer models that help minimize hardware testing and therefore accelerateproduct development cycle times with reduced product testing.

A. New Product Development: -

The following new Products were developed as part of the above initiatives during theyear: -

1. Rail engine product families to support the growing Rail Business;

2. Marine engine product families to support the increasing commercial Marine Business;

3. Further enhancements of non-diesel product development capability such as use ofalternative fuels are being explored in India;

4. Telematics and Analytics capabilities have been developed to improve uptime and fuelefficiency performance of our products;

5. To enhance the position of Cummins in the Low kVA market your Company hasintroduced a new 40 kVA genset with X2.7 litre engine; and

6. Your Company continues to strengthen its channel presence in the market through itsGOEM partners who have added 12 number of additional sales dealers across variousgeographies.

B. Benefits derived as a result of the above activities are:-

1. Enhanced product and service capabilities through use of electronic tools andsimulation software to deliver improved engine performance;

2. Enhanced capability to tailor engine designs to improve value proposition forcustomers through delivering superior power output fuel economy transient response andreduced emissions;

3 . Enhanced product and service capabilities through use of electronic tools andsimulation software to control the engine performance and combustion process;

4. Enhanced capability to tailor engine designs to improve the value proposition forcustomers through delivering superior power output fuel economy transient response andreduced emissions;

5. Product and component availability to meet the new emission norms ahead ofimplementation;

6. Safer recyclable reliable durable and performance-efficient products and criticalcomponents;

7. Component indigenization capability was improved through enhanced test capabilityrig test and flow bench development and availability; and

8. Significant enhancements in measurement capability were made to pursue businessopportunities in nondiesel markets to serve both the rural and international communities.

C. Future plans include:-

1. Developing local ‘fit-for-market' solutions to meet upcoming emissionregulations and market needs on commercial off-highway and power generation segments;

2. Technological innovation to add value to products in the areas of alternate fuelsfuel cells power electronics hybrid engines and recycle / re-use;

3. Continued expansion of the product range to serve the needs of both local and globalmarket;

4. Continued focus on indigenization and partnering with suppliers for wasteelimination initiatives; and

5. Focused engine development for the Power Generation market for the upcomingemissions norms.

D. Your Company continues to draw benefits from Cummins Inc.'s technology advancedengineering and research. With this support your Company is committed to develop advancedfuel-efficient and emission-compliant products that use a variety of energy sources andcomply with future domestic emissions and carbon dioxide targets. These help to reduceGreenhouse Gas emissions and improve Air Quality whilst also enabling the products todeliver superior performance reliability durability and recyclability.

E. Expenditure on Research & Development (R&D):-

The total expenditure on R & D was as follows:-

2019-20 2018-19
(Rs. Lacs) (Rs. Lacs)
Capital 14534 83
Recurring 4470 3329
Total 19004 3412
Total R&D expenditure as a percentage of total sales turnover 3.68% 0.6%

13. FOREIGN EXCHANGE EARNINGS AND OUTGO:

Your Company continues to be Net Foreign Exchange Earner. During the year under reviewyour Company exported 6176 engines and 4027 generator sets. Foreign exchange earned interms of actual inflows during the year 2019-20 and foreign exchange outgo in terms ofactual outflows during the year 2019-20 were as follows:-

Particulars FY 2019-20 FY 2018-19
(Rs. Lacs) (Rs. Lacs)
Foreign exchange earnings* 155025 200745
Foreign exchange outgo* 103391 102425

* Equivalent value of various currencies

14. MANAGEMENT DISCUSSION & ANALYSIS AND CORPORATE GOVERNANCE REPORT:

The Management Discussion and Analysis Report and the Corporate Governance Report whichforms part of this Report are appended as Annexure ‘3' and ‘4' respectively.

The Company has obtained a Certificate from Practicing Company Secretary confirmingcompliance with conditions of the Code of Corporate Governance as stipulated in Schedule Vof the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (includingamendments thereof) and the same is appended as Annexure ‘5' which forms partof this Report.

The Company has obtained a Certificate from Practicing Company Secretary confirmingthat none of the Directors on the Board of the Company have been debarred or disqualifiedby MCA or SEBI or any such statutory authority from being appointed / continuing asDirector and the same is appended as Annexure ‘6' which forms part of thisReport.

15. EXTRACT OF THE ANNUAL RETURN:

Extract of the annual return as prescribed under Section 92(3) of the Companies Act2013 is appended as Annexure ‘7' which forms part of this Report.

16. RISK MANAGEMENT:

Business Risk Evaluation and Management is an ongoing process within the Organization.The Company has a robust risk management framework to identify monitor and minimize risksand also to identify business opportunities. As a process the risks associated with thebusiness are identified and prioritized based on severity likelihood and effectiveness ofcurrent detection. Such risks are reviewed by the senior management on a quarterly basis.Process owners are

identified for each risk and metrics are developed for monitoring and reviewing therisk mitigation through Six Sigma Projects.

Risk Management Committee of the Board of Directors of your Company assists the Boardin (a) overseeing and approving the Company's enterprise wide risk management framework;and (b) overseeing that all the risks that the organization faces such as strategicfinancial credit market liquidity security property IT legal regulatoryreputational other risks have been identified and assessed and there is an adequate riskmanagement infrastructure in place capable of addressing those risks. The development andimplementation of risk management policy has been covered in the Management Discussion andAnalysis which forms part of this Report.

17. INTERNAL FINANCIAL CONTROL:

Details of internal financial control and its adequacy are included in the ManagementDiscussion and Analysis Report which is appended as Annexure ‘3' and formspart of this Report.

18. VIGIL MECHANISM/ WHISTLE BLOWER POLICY:

Your Company's leadership culture is to inspire and encourage all employees to reachtheir full potential. A great leadership culture begins with outstanding leaders whocreate an outstanding place to work inspiring and encouraging all employees to achievetheir full potential. Leaders connect people and their work to the vision missionvalues brand promise and strategies of the company motivating them and giving them ahigher sense of purpose. Leaders build trust in our teams and in our organizations andalign on key goals and priorities.

Your Company has a ‘Vigil Mechanism Policy' which inter-alia providesadequate safeguards against victimization of persons who may blow the whistle. VigilMechanism Policy may be accessed on the Company's website at the link: https://www.cummins.com/en/in/investors/india-corporate-governance.

In addition your Company has complied with provisions relating to constitution of anInternal Committee under the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 and has a stabilized well governed ethicsinvestigations process. During the year under review one complaint pertaining to sexualharassment of woman employee was reported to the Committee and the same was investigatedin accordance with the procedures prescribed and adequate steps were taken to resolve itand no complaints were pending as on March 31 2020.

The Company is committed to the highest possible standards of openness integrity andaccountability in all its affairs and to providing a workplace conducive to opendiscussion of its business practices. Your Company has laid out infrastructures and policythrough which the employees can voice their concerns about suspected unethical or improperpractice or violation of Cummins Code of Conduct or complaints regarding accountingauditing internal controls or disclosure practices of the Company. Protected disclosurescan be made by a whistle blower through an email or dedicated telephone line or letter tothe Managing Director of the Company or Letter to the Chairman of Audit Committee or viathe Ethics helpline /Webpage details of which are available on websitewww.cumminsindia.com.

19. CODE OF CONDUCT COMPLIANCE:

All Members of the Board and Senior Management have affirmed compliance to the Code ofConduct for the Financial Year 2019-20. A declaration signed by the Managing Directoraffirming compliance with the Company's Code of Conduct by the Board of Directors andSenior Management for the Financial Year 2019-20 as required under Regulation 26(3) of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 is included inthe Corporate Governance Report which is appended as Annexure ‘4' and formspart of this Report.

20. DIRECTORS' RESPONSIBILITY STATEMENT:

Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the internal statutory costand secretarial auditors and external consultant(s) including audit of internal financialcontrols over financial reporting by the statutory auditors and the reviews performed byManagement and the relevant Board Committees including the Audit Committee the Board isof the opinion that the Company's internal financial controls were adequate and effectiveduring the Financial Year 2019-20.

Accordingly pursuant to Section 134(5) of the Companies Act 2013 the Board ofDirectors to the best of their knowledge and ability confirm that:

(i) in the preparation of the annual accounts for the year ended March 312020 theapplicable accounting standards have been followed and there was no material departurefrom the same;

(ii) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as on March 312020 and of the profit for theperiod April 012019 to March 312020;

(iii) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

(iv) they have prepared the annual accounts on a going concern basis;

(v) they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively duringthe year; and

(vi) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

21. DIRECTORS:

a) Changes in the composition of the Board of Directors:

Appointments and Re-appointments

Mr. P. S. Dasgupta (DIN: 00012552) Mr. Venu Srinivasan (DIN: 00051523) Mr. RajeevBakshi (DIN: 00044621) Mr. Nasser Munjee (DIN: 00010180) and Mr. Prakash Telang (DIN:00012562) were appointed as Non-Executive Independent Directors of the Company for asecond term of five consecutive years at the 58th Annual General Meetingeffective August 012019.

Mr. Ashwath Ram (DIN: 00149501) was appointed as an Additional Director designated asManaging Director of the Company with effect from August 17 2019. On recommendation ofthe Nomination and Remuneration Committee the Board of Directors have proposedappointment of Mr. Ashwath Ram as Director and Managing Director not liable to retire byrotation for a period of three (3) years from August 17 2019. The resolution seekingshareholder's approval for his appointment forms part of the Notice.

Ms. Lorraine Meyer (DIN: 08567527) was appointed as an Additional (Non-ExecutiveNon-Independent) Director of the Company with effect from October 01 2019. Onrecommendation of the Nomination and Remuneration Committee the Board of Directors haveproposed appointment of Ms. Lorraine Meyer as a Non-Executive and Non-IndependentDirector liable to retire by rotation. A resolution seeking shareholder's approval forher appointment forms part of the Notice.

Ms. Rama Bijapurkar (DIN: 00001835) was appointed as an Additional (Non-ExecutiveIndependent) Director of the Company with effect from June 17 2020. On recommendation ofthe Nomination and Remuneration Committee the Board of Directors have proposedappointment of Ms. Rama Bijapurkar as a Non-Executive and Independent Director not liableto retire by rotation for a period of five (5) years from June 17 2020. The resolutionseeking shareholder's approval for her appointment forms part of the Notice.

In accordance with the Companies Act 2013 and Articles of Association of the CompanyMr. Antonio Leitao (DIN: 05336740) Director (Non-Executive Non-Independent) of theCompany retires by rotation and is eligible for re-appointment. The proposal seekingshareholder's approval for his re-appointment forms part of the Notice.

During the year the Board at its meetings held on May 25 2019 August 07 2019October 24 2019 and January 28 2020 noted the presence of Mr. Norbert Nusterer in Indiaand consequent cessation of Mr. J. M. Barrowman as Alternate Director to Mr. Nusterer. TheBoard further confirmed appointment of Mr. Barrowman as an Alternate Director to Mr.Nusterer upon the return of original Director Mr. Nusterer to U.S.A except on theconclusion of meeting of January 28 2020.

As required under Regulation 36(3) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and Secretarial Standard 2 particulars of Directorsseeking appointment/re-appointment at this Annual General Meeting are given in theAnnexure to the Notice and the Board recommends the respective resolutions to the Membersfor approval.

Cessation

During the year Mr. Sandeep Sinha (DIN: 02400175) resigned as Managing Director of theCompany with effect from August 16 2019 Ms. Suzanne Wells (DIN: 06954891) resigned asDirector (Non-Executive Non-Independent) of the Company with effect from September 302019 and Mr. J. M. Barrowman (DIN: 00668324) ceased to be Alternate Director(Non-Executive Non-Independent) to Mr. Norbert Nusterer Director of the Company witheffect from January 27 2020.

Further Ms. Anjuly Chib Duggal (DIN: 05264033) resigned as Non-Executive IndependentDirector of the Company with effect from April 06 2020 on account of personal reasons.She had confirmed that there were no other material reasons for her resignation.

The Board places on record its appreciation for their invaluable contribution andguidance.

The details of Board composition number of meetings held details of directorships ofDirectors etc. are provided in the Corporate Governance Report which is appended as Annexure‘4' and forms part of this Report.

b) Committees of the Board:

The Board of Directors have constituted following Committees in order to effectivelycater its duties towards diversified role under the Companies Act 2013 and the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015:-

• Audit Committee;

• Stakeholders Relationship Committee;

• Nomination and Remuneration Committee;

• Corporate Social Responsibility Committee; and

• Risk Management Committee

Details of the constitution broad terms of references of each Committee and number ofmeetings attended by individual Director etc. are provided in the Corporate GovernanceReport which is appended as Annexure ‘4' and forms part of this Report.

c) Policy on Director's Appointment and Remuneration:

The Policy of the Company on Director's Appointment and Remuneration includingcriteria for determining qualifications positive attributes independence of theDirectors and other matters provided under Section 178(3) of the Companies Act 2013adopted by the Board is appended as Annexure ‘8' which forms part of thisReport. Details of the remuneration paid to the Board of Directors are provided in theCorporate Governance Report. We affirm that the remuneration paid to the Directors is asper the terms laid down in the Nomination and Remuneration Policy of the Company.

d) Board Performance Evaluation Mechanism:

Pursuant to the provisions of the Companies Act 2013 and Regulation 17 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the Board has carriedout the annual performance evaluation of its own performance and the Directorsindividually as well as the evaluation of the working of its Committees. Details of theevaluation mechanism is provided in the Corporate Governance Report which is appended as Annexure‘4' and forms part of this Report.

e) Familiarization Programme for Independent Directors:

During the year the Management provided various documents background notes etc. toIndependent Directors to have a better insight of the Company. The Chairman and theManaging Director also has a one-to-one discussion with the newly appointed Directors toprovide details of initiatives for the Director to understand the Company its businessand the regulatory framework in which the Company operates and equip him/ her toeffectively fulfil his/ her role as a Director of the Company. The details offamiliarization programmes imparted are available at https://www.cummins.com/en/in/investors/india-corporate-governance.

f) Declarations from the Independent Directors:

Pursuant to the provisions of Section 149 of the Companies Act 2013 the IndependentDirectors have submitted declarations that each of them meets the criteria of independenceas provided in Section 149(6) of the Companies Act 2013 along with Rules framedthereunder and Regulation 16(1)(b) and 25 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and adherence to Schedule IV of the Companies Act 2013.There has been no change in the circumstances affecting their status as IndependentDirectors of the Company. The said Certificate(s) were taken on record by the Board afterrequisite assessment.

22. NUMBER OF MEETINGS OF THE BOARD:

Four meetings of the Board of Directors were held during the year. The details of themeetings held and attendance by Directors are provided in the Corporate Governance Reportwhich is appended as Annexure ‘4' and forms part of this Report. The maximuminterval between any two meetings did not exceed 120 days as prescribed by the CompaniesAct 201 3.

23. KEY MANAGERIAL PERSONNEL:

During the year Mr. Sandeep Sinha (DIN: 02400175) resigned as the Managing Directorand Key Managerial Personnel of the Company with effect from August 16 2019. Consequentto the resignation of Mr. Sinha Mr. Ashwath Ram (DIN: 00149501) was appointed asAdditional Director designated as Managing Director and Key Managerial Personnel of theCompany with effect from August 17 2019.

Mr. Rajiv Batra retired as the Chief Financial Officer and Key Managerial Personnel ofthe Company with effect from March 312020. Consequent to retirement of Mr. Batra Mr.Ajay S. Patil was appointed as the Chief Financial Officer and Key Managerial Personnel ofthe Company with effect from April 012020.

Ms. Hemiksha Bhojwani (ACS 22170) resigned as the Company Secretary and Key ManagerialPersonnel of the Company with effect from May 11 2020. Consequent to resignation of Ms.Bhojwani Ms. Vinaya A. Joshi (ACS 25096) was appointed as the Company Secretary and KeyManagerial Personnel of the Company with effect from June 17 2020.

24. PARTICULARS OF EMPLOYEES:

The details in accordance with the provisions of Section 197(12) of the Companies Act2013 read with Rule 5 of the Companies (Appointment and Remuneration of ManagerialPersonnel) Amendment Rules 2016 is appended as Annexure ‘10' which formspart of this Report. Any shareholder interested in obtaining a copy of the statement maywrite to the Company Secretary at the Registered Office of the Company.

25. INDUSTRIAL RELATIONS:

Industrial relations at all the plants of the Company continue to be cordial. Multipleinitiatives have been rolled out for shop office and field technician employees under‘Advancing our workforce Strategy' (AWS) for its establishments across the globe. Keypurpose of AWS is to inspire and encourage ‘All Employees' to reach their fullpotential by implementing similar talent management policies and processes for all theshop office and field technician employees similar to that implemented for our managerialemployees. Implementation of different initiatives under this strategy are in progress.

During the Financial Year 2019-20 your Company had announced a Voluntary RetirementProgram (VRP) for its professional / exempt employees who have completed minimum 10 yearsof service and are above 45 years of age. The objective was to reduce headcount to managethe cost structure based on the business cycles. 73 employees of the Company opted for VRPand the overall pay-out cost for Company was Rs. 1604.92 Lacs. The Company had submittedrelevant stock exchange disclosures in this behalf.

26. AUDITORS:

STATUTORY AUDITORS:

At the 55th Annual General Meeting held on August 04 2016 M/s. S R B C& Co. LLP (Firm Registration No. 324982E) were appointed as Statutory Auditors of theCompany to hold office till the conclusion of Sixtieth Annual General Meeting. In terms ofthe Section 139(1) of the Companies Act 2013 the appointment of statutory auditors doesnot require ratification by the shareholders in Annual General Meeting Accordingly theBoard noted the continued appointment of M/s. S. R. B. C. & Co. LLP as the StatutoryAuditors of the Company for the Financial Year 2020-21.

M/s. S R B C & Co. LLP have informed the Company vide letter dated June 04 2020that their appointment is within the limits prescribed under Section 141 of the CompaniesAct 2013.

There are no qualifications reservations adverse remarks or disclaimers made by theauditors in the Audit Report for the year 2019-20. There was one instance of delay intransfer of interim dividend declared for the FY 2011-12 to the Investor Education andProtection Fund by an associate company during the year ended March 312020 and it had nofinancial implication.

SECRETARIAL AUDITOR:

M/s Pramod Shah & Associates (FCS 334) was appointed to conduct the secretarialaudit of the Company for the Financial Year 2019-20 as required under Section 204 of theCompanies Act 2013 and the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014. The Secretarial Audit Report in Form MR-3 and Secretarial AuditReport pursuant to Regulation 24A of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 for Financial Year 2019-20 is appended as Annexure‘11' which forms part of this Report. Both the reports do not contain anyqualification reservation or adverse remark.

The Annual Secretarial Compliance Report has been submitted to the stock exchanges asrequired under Regulation 24A of SEBI (Listing Obligation and Disclosure Requirements)Regulations 2015.

The Board has re-appointed M/s Pramod Shah & Associates to conduct the secretarialaudit of the Company for the Financial Year 2020-21.

COST AUDITORS:

Pursuant to Section 148 of the Companies Act 2013 read with the Companies (CostRecords and Audit) Rules 2014 as amended from time to time the cost audit recordsmaintained by the Company in respect of its manufacturing activity is required to beaudited. Your Directors on the recommendation of the Audit Committee appointed M/s. AjayJoshi & Associates (Firm Registration No. 101542) Pune to audit the cost accounts ofthe Company for the Financial Year 2019-20 at a remuneration of Rs 950000 plus taxes asapplicable and re-imbursement of out of pocket expenses. The remuneration was ratified byshareholders in the 58th Annual General Meeting held on August 07 2019.

The Board has re-appointed M/s. Ajay Joshi & Associates to audit the cost accountsof the Company for the Financial Year 2020-21 at a remuneration of Rs 950000 plus taxesas applicable and re-imbursement of out of pocket expenses. As required under theCompanies Act 2013 the shareholders ratification for the remuneration payable to M/s.Ajay Joshi & Associates Cost Auditors is being sought at the ensuing Annual GeneralMeeting.

M/s. Ajay Joshi & Associates Cost Auditors under Section 139(1) of the CompaniesAct 2013 and the Rules framed thereunder have furnished a certificate of theireligibility and consent for appointment.

27. CORPORATE SOCIAL RESPONSIBILITY POLICY AND ITS REPORT:

Your Company is an early adopter of the Corporate Social Responsibility (CSR)initiatives. Corporate Social Responsibility continues to be the core value of yourCompany embedded in the core value of caring which focuses on ‘serving and improvingthe communities in which we live'. Your Company works with ‘Cummins India Foundation'towards three broad focus areas viz. Higher Education Energy and Environment and Equalityof Opportunity.

Details about the CSR Policy and initiatives taken by the Company during the year areavailable on our website https://www.cummins.com/en/in/investors/india-corporate-governance.The Annual Report on our CSR Activities is appended as Annexure ‘12' whichforms part of this Report.

28. BUSINESS RESPONSIBILITY REPORT:

As stipulated under the Regulation 34 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Business Responsibility Report describes theinitiatives taken by the Company from environmental social and governance perspectivewhich forms part of the Annual Report.

29. SECRETARIAL STANDARDS:

The Company is in compliance with the Secretarial Standards on Meetings of the Board ofDirectors (SS-1) and Secretarial Standards on General Meetings (SS-2) issued by theInstitute of Company Secretaries of India.

30. DIVIDEND DISTRIBUTION POLICY:

The Board of Directors of the Company have formulated a Dividend Distribution Policywhich is appended as Annexure ‘9' and forms part of this Report. The policy isalso available on our website https://www.cummins.com/en/in/investors/india-corporate-governance

31. INVESTOR EDUCATION AND PROTECTION FUND (IEPF):

Pursuant to Section 124 and Section 125 of Companies Act 2013 and IEPF Authority(Accounting Audit Transfer and Refund) Rules 2016 during the year under review theCompany has transferred the following unclaimed and unpaid dividend and correspondingshares to IEPF upon completion of period of seven years:

Date of Declaration Type of Dividend Amount transferred (f) No of shares transferred
August 02 2012 Final Equity Dividend 6889866 27398
January 31 2013 Interim Equity Dividend 5654110 10952

32. GENERAL:

Further your Directors state that no disclosure or reporting is required in respect ofthe following items as there were

no transactions on these items during the year under review:

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

b. Issue of shares (including sweat equity shares) by the Company to its employees;

c. Neither the Managing Director nor the Whole-time Directors of the Company receivedany remuneration or commission from any of its subsidiaries;

d. No frauds were reported by auditors under Section 143(12) of the Companies Act2013;

e. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company's operations. However Membersattention is drawn to the Statement on Contingent Liabilities commitments in the notesforming part of the Financial Statement; and

f. No material changes and commitments occurred during April 012020 till the date ofthis Report which would affect the financial position of your Company.

ACKNOWLEDGEMENT:

Your Directors would like to express their sincere appreciation for the assistance andco-operation received from the financial institutions banks government authoritiescustomers vendors and members during the year under review. Your Directors also wish toplace on record their deep sense of appreciation for the committed services by theCompany's executives staff and associates.

On behalf of the Board of Directors

Mark Levett Ashwath Ram
Place : Pune Chairman Managing Director
Date : June 17 2020 DIN: 00368287 DIN: 00149501

Note: All the Annexures referred in the Directors' Report form an integral part of thesame. The entire Annual Report along with the Notice convening the AGM and FinancialStatements (Standalone and consolidated) shall be read together.

   

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