Your Directors are pleased to present their 45th Annual Report together with theAudited Statement of Accounts of Dynamatic Technologies Limited ("DynamaticTechnologies" or "the Company") for the year ended 31st March 2020.
The Financial Results of the Company for the year ended 31st March 2020 were asfollows:
( Rs in Lakhs)
| || |
|Particulars ||Year Ended 31 March 2020 ||Year Ended 31 March 2019 ||Year Ended 31 March 2020 ||Year Ended 31 March 2019 |
|Continuing Operations: || || || || |
|Net Revenue ||132121 ||150030 ||56963 ||59215 |
|Less: Cost of material and increase/decrease in stock ||63877 ||76741 ||24494 ||27806 |
|Less: Employee benefit expenses ||25027 ||25388 ||8379 ||7247 |
|Less: Other Expenses ||24231 ||30377 ||9834 ||10821 |
|EBITDA* ||18986 ||17524 ||14256 ||13341 |
|EBITDA Margin ||14.4% ||11.7% ||25.0% ||22.5% |
|Add: Other Income ||1304 ||724 ||1636 ||892 |
|Less: Finance Charges ||8298 ||7950 ||7026 ||6832 |
|Less: Depreciation and Amortisation Expense ||9017 ||4925 ||3389 ||1865 |
|Less: Exceptional item ||- ||- ||27108 ||- |
|Profit/(Loss) from Continuing Operations before ||2975 ||5373 ||(21631) ||5536 |
|Tax || || || || |
|Profit/(Loss) before tax margin ||2.3% ||3.6% ||(38.0%) ||9.3% |
|Less: Tax expense/ (income) ||(2531) ||2257 ||(2457) ||1937 |
|Profit/(Loss) after Tax from Continuing Operations ||5506 ||3116 ||(19174) ||3599 |
|Profit/(Loss) after Tax margin ||4.2% ||2.1% ||(33.7%) ||6.1% |
|Discontinued Operations: || || || || |
|Add: Loss from Discontinued Operations ||(1600) ||(369) ||(1600) ||(369) |
|Add: Other Comprehensive Income/(Loss) ||921 ||(706) ||(70) ||15 |
|Total Comprehensive Income carried to Balance Sheet ||4827 ||2041 ||(20844) ||3245 |
*Due to adoption of IND AS 116 effective April 1 2019 the results for the FY2020 isnot comparable with previous year. Adjusted EBITDA for FY2020 decreased by 21.5% to Rs13750 lakhs and adjusted EBITDA margin stood at 10.4%.
FY2020 was a year of macroeconomic volatility along with geopolitical uncertaintyglobally. The Indian economy also grew at a slower pace than earlier predicted. There weresluggish conditions across industries and the unprecedented situation caused by COVID-19.Consolidated net sales for FY2020 was Rs 132121 lakhs reduced by 12% as compared to Rs150030 lakhs in FY2019.
Consolidated EBITDA for FY2020 increased by 8.3% to Rs 18986 lakhs as compared to Rs17524 lakhs during the same period last year driven by facilities ramp up and resourceoptimization. EBITDA margin for the year under review was 15.1% compared to 11.7% inFY2019. Adjusted EBITDA for FY2020 decreased by 21.5% to Rs 13750 lakhs and adjustedEBITDA margin stood at 10.4%.
The Aerospace & Defence segment recorded a revenue growth of 6.1% to reach Rs49760 lakhs compared to Rs 46885 lakhs in FY2019. Order book execution and delivery ledto this revenue growth in FY2020. Revenue was partially impacted towards the end of theyear due to the lockdown and subsequent postponement of deliveries. Segment EBITDA for theyear was Rs 15252 lakhs while adjusted EBITDA stood at Rs 12316 lakhs compared with Rs11684 lakhs in FY2019. During the year the Aerospace & Defence segment continued itsfocus on product innovation and advanced technology platform. Dynamatic Technologies as asingle source supplier with Bell Helicopter has seen a significant increase in volume forthe Bell 407 model. The Company has also won orders from the Indian Defence Public SectorUndertaking (PSUs) and this is expected to help mitigate the slowdown in the CivilAviation sector.
Further conversion of the Aerospace Division into an Export-Oriented Unit (EOU) hascontributed to the overall efficiency of this division. This will also result in loweradministrative requirement and faster processing for export.
The Hydraulics segment was affected by the global slowdown and the lockdowns thatensued due to the pandemic. Q4 FY2020 was impacted due to the reduction in aftermarketsales and the liquidity crunch that customers faced. Revenue for the year decreased by18.8% to Rs 29500 lakhs compared to Rs 36310 lakhs in the same period last year. EBITDAfor FY2020 was Rs 2286 lakhs and adjusted EBITDA was Rs 1493 lakhs from Rs 4155 lakhslast year. Normal monsoon expectations and the increased demand for after sales servicesis anticipated to drive growth for the Company in the tractor industry. The Company hasshifted from outsourcing to in-house production which will help reduce dependency onthird party vendors increase utilisation levels minimise wastages and improve costcontrol efficiencies.
The Automotive and Metallurgy segment's top line growth was subdued due to the slowdownin the global and domestic auto industry. However with a focus on margin expansion lowmargin products rationalization continued during FY2020. Revenue for the year was Rs52613 lakhs representing a decrease of 21.3% compared to same period last year. SegmentEBITDA was Rs 2884 lakhs and adjusted EBITDA was Rs 1370 lakhs compared to Rs 2509lakhs in FY2019. Increased shift in production facilities from China to Europe is expectedto help improve the Company's product base.
STATE OF THE COMPANY'S AFFAIRS
Over the years Dynamatic Technologies has created its own brand image and has foundits niche presence in the industry. Dynamatic Technologies supplies products to theworld's renowned Original Equipment Manufacturers (OEM's) such as Airbus Boeing BellHelicopters Textron Hyundai Daimler BMW Honeywell John Deere and Mahindra &Mahindra. The Company is focused on expanding the size of business with existing customersand expanding its customer base with addition of new customers. However all our businesssegments were adversely impacted at different degrees by the global slowdown and theCOVID-19 pandemic. To reduce the financial impact of the pandemic the Company hasundertaken various cost control measures including alternative raw material sourcing andrenegotiation of vendor contracts. Going forward we are closely monitoring segments wherewe operate globally and are taking appropriate steps to minimize the impact on ourbusiness. With a strong business foundation technological excellence and industryrecognition for products we are confident of creating utmost value for all of ourstakeholders.
The World Health Organization declared a global pandemic of the Novel Coronavirusdisease (COVID-19) on 11th February 2020 and the pandemic developed rapidly into a globalcrisis forcing governments to enforce lockdowns on all economic activities. The focus ofyour Company immediately shifted to ensuring the health and well-being of its employees.Continuous communication on the latest updates played a key role in enabling our employeesto stay on top of the evolving situation.
As a responsible member of the communities that it operates in the Company hascontributed to various COVID-19 relief and monitoring programs within the locality whereit operates Viz. Supply of Sanitisers Face Masks Personal Protective Equipment (PPE) andSupply of Food. Apart from this the Company took proactive measures and held awarenessprogrammes through handouts and posters deployed across the Company/Supply chainresidential areas schools and in our worker's native places. The Company also conductedstreet plays and town hall meetings with adequate social distancing measures in earlyMarch 2020. As a part of business continuity plan your Company through approved labs isregularly conducting diagnostic testing of its employees for COVID-19 before beinginducted into the work place and these tests are being repeated on a monthly basis toensure our offices and training centers are safe to operate. During the COVID-19 pandemicyour Company's Defence and Aerospace operations was categorised as essential industries bythe Principle Secretary to Government Commerce and Industries Department Government ofKarnataka and was allowed to function with minimal capacity subject to following safetymeasures and guidelines laid out by the Ministry of Home affairs and the State Government.Wherever feasible our teams reacted with speed and efficiency and quickly leveragedtechnology to shift the workforce to a work-from-home' model thus ensuring clientcommitments were not materially compromised.
The Board of Directors of your Company after considering holistically the relevantcircumstances and keeping in view the current economic conditions has decided that itwould be prudent not to recommend any dividend for the year under review.
As at 31st March 2020 the Company had an authorized share capital of Rs 2500 lakhsdivided into 20000000 equity shares of Rs 10/- each and Rs 500 lakhs divided into500000 redeemable cumulative preference shares of Rs 100/- each. During the year underreview there is no change in the Company's issued subscribed and paid-up equity sharecapital. As at 31st March 2020 the Company had issued subscribed and paid-up equityshare capital of Rs 634.14 lakhs divided into 6341443 equity shares of Rs 10/- each.
TRANSFER TO RESERVES
During the year under review the Board of Directors do not propose to transfer anyamount to General Reserve.
During the year under review the Company incurred capital expenditure of Rs 5666lakhs for physical infrastructure and Rs 139 lakhs for procurement of intangible assets.Significant investments have been made in building infrastructure state-of-the-artmachinery design software data security information systems and design and developmentactivities for the future benefits of the Company.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements prepared by the Company is in accordance with theapplicable Indian Accounting Standards issued by the Institute of Chartered Accountants ofIndia form part of the Annual Report.
The Company has ten subsidiaries. The structure of Dynamatic Technologies Limited andits subsidiaries as on 31st March 2020 is appended hereunder
JKM Research Farm Limited India (JRFL) is a wholly owned subsidiary of theCompany. It continues to be the Research & Development facilitator to the Company. Itoperates a unique facility for testing and analysing complete tractor aggregates andsystems.
JKM Erla Automotive Limited India (JEAL) continues to be a wholly owned subsidiaryof the Company and is a non-operating company.
JKM Ferrotech Limited India (JFTL) is engaged in the manufacturing of ferrousalloy and castings having its operations in Gummidipoondi Tamil Nadu. This subsidiaryhas expertise in producing High Si-Mo automotive components and is certified to thehighest quality standards specified by the automotive industry. The expertise in producingintricately shaped castings as well as the skill in handling ferrous alloys particularlyHigh Si-Mo and Ni-Resis makes JFTL a strong development partner for prototypes in ferrousalloy castings.
On 11th February 2020 the members of JFTL (WOS) subject to confirmation by NationalCompany Law Tribunal Bengaluru Branch ("NCLT") has approved a capitalreduction resolution under section 66 of Companies Act 2013 ("Act") and isawaiting confirmation from NCLT. JKM Automotive Limited (JAL) is a wholly ownedsubsidiary of JEAL.
OVERSEAS WHOLLY OWNED SUBSIDIARIES
JKM Global Pte. Limited Singapore continues to be an investment hub for overseasbusinesses.
Dynamatic Limited Swindon UK (DLUK) is a wholly owned subsidiary and heldthrough JKM Global Pte. Limited Singapore.
Yew Tree Investments Limited Bristol UK is a wholly owned subsidiary of DynamaticLimited UK.
Originally Yew Tree Investments Limited and Dynamatic Limited are thesubsidiaries of JKM Global Pte. Limited. Post merger DLUK has its Hydraulics unit inSwindon and its Aerospace unit Dynamatic-Oldland Aerospace in Bristol and Swindon.
Dynamatic Hydraulics a division of DLUK located in Swindon UK produces highperformance engineered hydraulic products. The plant has over 50 years of experience ingear pump design and manufactures and caters to agriculture construction and highwayvehicle manufacturers. Products include combined variable and fixed displacement pumppackages temperature controlled fan drive systems and fixed displacement pumps inaluminium and cast iron with a range of additional integrated valve options.
Dynamatic-Oldland Aerospace a division of Dynamatic Limited UK is located inBristol and Swindon and is a leader in Aeronautical Precision Engineering and iscurrently working on components for most of the Airbus family of aircraft. DynamaticLLC US is a subsidiary of Dynamatic Limited UK.
JKM Erla Holdings GmbH Germany (JKM Erla) is engaged in the business of setting upautomotive components processing/manufacturing units.
Eisenwerk Erla GmbH Germany (Eisenwerk) became a subsidiary of the Companysubsequent to its holding company JKM Erla becoming a subsidiary of the Company.Eisenwerk has been in business for over 630 years and is a preferred supplier to leadingglobal OEMs including Audi BMW and Volkswagen. The manufacturing capabilities of thissubsidiary include high precision machining of complex metallurgical products forautomotive engines and turbochargers.
PERFORMANCE OF SUBSDIARIES
Pursuant to the provisions of Section 129(3) of the Act a statement containing thesalient features of financial statements of the Company's subsidiaries in Form No.AOC-1 is attached to the financial statements of the Company as
There are no associate or joint venture companies within the meaning of Section 2(6) ofthe Act . There has been no material change in the nature of the business of thesubsidiaries.
Further pursuant to the provisions of Section 136 of the Act the financial statementsof the Company consolidated financial statements along with relevant documents andseparate audited financial statements in respect of subsidiaries are available on thewebsite of the Company
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the section 134 (5) of the Act the Board of Directors to the best ofknowledge and belief and according to the information and explanations obtained by themhereby confirm that:
i. in the preparation of the annual accounts the applicable accounting standards havebeen followed and there are no material departures;
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 at the end of the financial year and of the profitof the Company for that period;
iii. they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
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 andsuch internal financial controls are adequate and operating effectively;
vi. they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively. Based on theframework of internal financial controls and compliance systems established and maintainedby the Company the work performed by the internal statutory and secretarial auditors andexternal consultants including the audit of internal financial controls over financialreporting by the statutory auditors and the reviews performed by management and therelevant board committees including the audit committee the Board is of the opinion thatthe Company's internal financial controls were adequate and effective during FY2020.
DISCLOSURE ON COMPLIANCE WITH SECRETARIAL STANDARDS
Your Directors confirm that the Secretarial Standards issued by the Institute ofCompany Secretaries of India have been complied with.
DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)
Inductions Re-appointments Retirements & Resignations
Based on performance evaluation and recommendation of Nomination and RemunerationCommittee the Board of Directors at their Meeting held on 11th February 2020 approvedthe re-appointment of Mr. Udayant Malhoutra (DIN: 00053714) CEO & MD Mr. P S Ramesh(DIN: 05205364) and Mr. Arvind Mishra (DIN: 07892275) Executive Directors and (hereaftercalled as "Directors") for a period of 3 years. A resolution seekingshareholders' approval for their reappointment forms part of the notice.
Pursuant to the provision of Section 152 of the Act Mr. PS Ramesh (DIN 05205364)Executive Director of the Company retires by rotation at the ensuing Annual GeneralMeeting and being eligible offers himself for re-appointment. A resolution seekingshareholders' approval for his re-appointment forms part of the Notice. The Boardrecommends his re-appointment. During the year Mr. Nalini Ranjan Mohanty ceased to be theDirector with effect from 14th August 2019 upon completion of his term as IndependentDirector. The Board places on record its appreciation for his invaluable contributions andguidance.
Pursuant to the provisions of Section 149 of the Act the independent directors havesubmitted declarations that each of them meet the criteria of independence as provided inSection 149(6) of the Act along with Rules framed thereunder and Regulation 16(1)(b) ofthe Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 (the SEBI Listing Regulations'). There has been nochange in the circumstances affecting their status as independent directors of theCompany.
During the year under review the non-executive directors of the Company had nopecuniary relationship or transactions with the Company other than reimbursement ofexpenses incurred by them for the purpose of attending meetings of the Board / Committeeof the Company. The independent Directors had no pecuniary relationship or transactionswith the Company other than sitting fee and reimbursement of expenses incurred by themfor the purpose of attending meetings of the Board / Committee of the Company None of theDirectors of the Company are disqualified from being appointed as Directors as specifiedunder Section 164 of the Act.
Pursuant to the provisions of Section 203 of the Act the Key Managerial Personnel ofthe Company as on 31st March 2020 are:
Mr. Udayant Malhoutra CEO & Managing Director
Mr. P S Ramesh Executive Director Group Technical Services and Human Resources
Mr. Arvind Mishra Executive Director Global COO Hydraulics and Head of HomelandSecurity
Mr. Chalapathi P Chief Financial Officer
Mr. Shivaram V Head Legal Compliance & Company Secretary.
Declaration by Independent Directors
All the Independent Directors of the Company have provided their declarations to theCompany under Section 149(7) of the Act that they meet the criteria of independence asprovided under Section 149(6) of the Act and Regulation 16(1)(b) of the SEBI ListingRegulations. In the opinion of the Board they fulfil the conditions of independence asspecified in the Act and the Listing Regulations and are independent of the management.
Four meetings of the Board were held during the year under review. For details ofmeetings of the Board please refer to the Corporate Governance Report which is a part ofthis report
COMMITTEES OF BOARD OF DIRECTORS
The Board has seven committees:
1. Audit and Risk Management Committee
2. Nomination and Remuneration Committee
3. Stakeholders' Relationship Committee
4. Technology & Strategy Development Committee
5. Finance Committee
6. Corporate Social Responsibility Committee and
7. Independent Directors' Committee.
Details of all the Committees of Board of Directors as per the Secretarial Standard -1 as issued by the Institute of Company Secretaries of India have been disclosed in theCorporate Governance Report. The Board has accepted the recommendations made by theCommittees of Board of Directors during the year under review with no instances whererecommendations of the Audit Committee were not accepted by the Board.
The philosophy for remuneration of directors Key Managerial Personnel and all otheremployees of the Company is based on the commitment of fostering a culture of leadershipwith trust. Dynamatic Technologies believes in providing an opportunity that is stronglylinked to and constantly reinforces the performance culture of the Company. DynamaticTechnologies has laid down remuneration policy in line with globally accepted governancepractices. The remuneration policy is designed with the objective to attract motivateretain human capital and improve productivity by creating a congenial work environmentencouraging initiative personal growth and teamwork while simultaneously offeringappropriate remuneration packages. The remuneration policy is also market-led and takesinto account the competitive circumstance of each business so as to attract and retainquality talent and leverage performance significantly. Remuneration Policy is annexed as Annexure2.
Members can download the complete remuneration policy on the Company's website(www.dynamatics.com/investor. html).
DIVERSITY IN THE BOARD
In line with the core strategy the Company understands the importance of maintainingboard diversity. Ensuring optimal mix of varied perspectives skills expertise industryexperience age gender race ethnicity and cultural background is critical to fosterinnovation and helps us to retain our competitive advantage. The Board has adopted thepolicy on appointment continuation and cessation of Directors which sets out the approachto diversity in the composition of the Board. The Company has an optimum mix of executiveand non-executive independent directors and woman director.
FAMILIARIZATION PROGRAMME FOR THE INDEPENDENT DIRECTORS
An appropriate induction for new directors and ongoing training for all directorsensure high corporate governance in the Company. Dynamatic Technologies conducts aninduction programme for every new independent director. The induction program has beendeveloped with the objective to provide them with comprehensive understanding about theCompany its businesses markets and the regulatory environment in which it operates. Theprogramme also aims to familiarize the independent directors with the management and itsoperations to gain a clear understanding of their roles and responsibilities andcontribute significantly towards the growth of the Company. They have full opportunity tointeract with Senior Management Personnel and are provided all the documents required andsought by them to enhance their understanding as mentioned above. Dynamatic Technologiesfirmly believes that a Board which is well informed / familiarised with the Company cancontribute significantly to effectively discharge its role of trusteeship in a manner thatfulfils stakeholders' expectations. In pursuit of this objective the Directors areupdated on a continuous basis on developments in the corporate and industry scenarioincluding those pertaining to the regulatory and economic environment to enable them totake well informed and timely decisions. The details of the familiarisation programme areuploaded on the Company's corporate website (www. dynamatics.com/investor.html).
CRITERIA FOR DETERMINING QUALIFICATIONS POSITIVE ATTRIBUTES AND INDEPENDENCE OF ADIRECTOR
In terms of the provisions of Section 178(3) of the Act and Regulation 19 of the SEBIListing Regulations the Nomination & Remuneration Committee has formulated thecriteria for determining qualifications positive attributes and independence ofDirectors the key features of which are as follows: a. Qualifications The Boardnomination process encourages diversity of thought experience knowledge age and gender.It also ensures that the Board has an appropriate blend of functional and industryexpertise. b. Positive Attributes - Apart from the duties of Directors as prescribed inthe Act the Directors are expected to demonstrate high standards of ethical behaviourcommunication skills and independent judgment. The Directors are also expected to abide bythe respective Code of Conduct as applicable to them. c. Independence - A Director will beconsidered independent if he / she meets the criteria laid down in Section 149(6) of theAct and Regulation 16(1)(b) of the SEBI Listing Regulations.
PERFORMANCE EVALUATION OF THE BOARD ITS COMMITTEES AND INDIVIDUAL DIRECTORS
The Board of Directors has carried out an annual evaluation of its own performanceboard committees and individual directors pursuant to the provisions of the Act and SEBIListing Regulations. The Evaluation was based on the criteria and framework adopted by theBoard. The performance also included inputs from all the directors on the basis ofcriteria such as the board composition and structure effectiveness of board processesinformation functioning etc. The performance of the committees was evaluated by theboard after seeking inputs from the committee members based on criteria such as thecomposition of committees effectiveness of committee meetings etc. The above criteriaare broadly based on the Guidance Note on Board Evaluation issued by the Securities andExchange Board of India on 5th January 2017. In a separate meeting of independentdirectors performance of non-independent directors the Board as a whole and the Chairmanof the Company was evaluated considering the views of executive directors andnon-executive directors. The Board and the Nomination and Remuneration Committee reviewedthe performance of individual directors on the basis of criteria such as the contributionof the individual director to the board and committee meetings like preparedness on theissues to be discussed meaningful and constructive contribution and inputs in meetingsetc. At the board meeting that followed the meeting of the independent directors andmeeting of Nomination and Remuneration Committee the performance of the Board itsCommittees and individual directors was also discussed. Performance Evaluation ofIndependent Directors was done by the entire Board excluding the independent directorbeing evaluated.
INTERNAL CONTROLS SYSTEMS AND THEIR ADEQUACY
According to Section 134(5)(e) of the Act the term Internal Financial Control (IFC)means the policies and procedures adopted by a company for ensuring the orderly andefficient conduct of its business including adherence to the company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information and disclosures. The Company has ensured that adequatesystems for internal control commensurate with its size and complexity are in place. Thesesystems and controls ensures that all assets are safeguarded and protected and that thetransactions are authorized recorded and reported correctly. In addition the Company hasalso ensured that adequate checks and balances are in place to determine the accuracy andreliability of accounting data. All the related processes are properly documented andappropriate steps are undertaken to ensure adherence to the internal control systems.Roles and responsibility of various stakeholders involved in the process is clearlydemarcated. The Internal Auditors independently evaluate the adequacy of internal controlsand concurrently audit majority of the transactions in value terms. Independence of theaudit and compliance is ensured by direct reporting to the Audit & Risk ManagementCommittee of the Board. A CEO and CFO Certificate forming part of the CorporateGovernance Report further confirms the existence and effectiveness of internal controlsand reiterates their responsibilities to report deficiencies to the Audit & RiskManagement Committee and rectify the same. During the year such controls were tested andno reportable material weaknesses in the design or operation were observed.
REPORTING OF FRAUDS
There was no instance of fraud during the year under review which required theStatutory Auditors to report to the Audit Committee and / or Board under Section 143(12)of the Act and the rules made thereunder.
QUALIFICATIONS IN AUDIT REPORTS
Explanations or comments made by the Board on every qualification reservation oradverse remark or disclaimer made: a. by the Statutory Auditor in his report: There are noqualifications reservations or adverse remarks reported by M/s. Deloitte Haskins &Sells. LLP (ICAI Firm Registration No. 117366W/W-100018) Statutory Auditors in theirreport for the year under review. b. by the Company Secretary in Practice in hisSecretarial Audit Report; M/s. Ratish Tagde & Associates Company Secretary inpractice has made no qualifications or reservations or adverse remark in the secretarialaudit report. The observations of the Secretarial Auditor provided in the report areself-explanatory.
TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND a) Transfer of Unclaimed Dividend toInvestor Education and Protection Fund (IEPF)
Particulars of Dividend remaining unclaimed in terms of Section124(5) of the Actamounts transferred to the Unpaid Dividend Account of the Company which remain unpaid orunclaimed for a period of seven years from the date of such transfer shall be transferredby the Company to the IEPF established by the Central Government along with the underlyingshares.
The details pertaining to the transfers is forming part of the Corporate GovernanceReport which is annexed to this report.
b) Transfer of Shares to IEPF
As required under Section 124(6) of the Act Equity Shares in respect of which dividendhas not been claimed by the members for seven consecutive years or more have beentransferred by the Company to the IEPF Authority during the financial year 2019-20.Details of shares transferred have been uploaded on the website of IEPF as well as theCompany.
c) Demat Suspense Account Unclaimed Shares
As on 31st March 2020 there are 11 members holding 851 Equity Shares of Rs 10/- eachlying in the escrow account due to non-availability of their correct particulars. Adetailed note in this regard is provided in the Corporate Governance Section under"Suspense Account for the unclaimed shares". The voting rights on these sharesshall remain frozen till the rightful owner of such shares claims the shares.
RELATED PARTY TRANSACTIONS
All Related Party Transactions during the FY2020 were executed at arm's length basisand in the ordinary course of business. These transactions were in compliance with theapplicable provisions of the Act and the SEBI Listing Regulations.
During the year there were no materially significant Related Party Transactionsundertaken by the Company which required shareholder approval under the SEBI ListingRegulations. All Related Party Transactions are placed before the Audit Committee forapproval. Additionally prior omnibus approval of the Audit Committee is obtained for thetransactions which are repetitive in nature. A statement of all Related Party Transactionsis placed before the Audit Committee for its review on a quarterly basis specifying thenature value and other terms and conditions of the transactions.
The Related Party Transactions Policy adopted by the Company as approved by the Boardis uploaded on the Company's website. Details of transactions were required to be reportedin Form AOC-2 is annexed as Annexure 3.
The Company has a legacy of maintaining highest standards of Corporate Governancepractices. This has been achieved as the basic DNA of the Company and is based on thephilosophy that effective Corporate Governance practices provides a strong and stablefoundation for a successful enterprise. The Company always emphasizes on ensuringintegrity and transparency in all its dealings which is always critical to retain thetrust of all stakeholders. The core values of the Company's Corporate Governance systemcomprises of independence transparency accountability responsibility complianceethics values and trust. We believe that our Corporate Governance practices will enableus to efficiently and ethically execute business operations and enhance shareholders'wealth sustainably for all our stakeholders. Dynamatic Technologies is committed tomaintaining the best standards of Corporate Governance and proactively adopts ethical andtransparent governance practices even before they are mandated by law. The Company hasalways strived towards building trust with shareholders employees customers suppliersand other stakeholders based on the principles of good corporate governance includingtransparency and integrity. Strong leadership and best-in-class corporate governancepractices are considered one of the major strengths of the Company.
The Company is in compliance with all the applicable provisions of Corporate Governanceas stipulated under Chapter IV of the SEBI Listing Regulations. A detailed report onCorporate Governance pursuant to the requirements of the SEBI Listing Regulations formspart of the Annual Report. M/s. Ratish Tagde & Associates Company Secretary inPractice had conducted the Corporate Governance audit for the year under review. Acertificate from M/s. Ratish Tagde & Associates regarding compliance of conditions ofCorporate Governance as stipulated under SEBI Listing Regulations is presented in aseparate section forming part of this Annual Report.
AUDITORS Statutory Auditors
Under Section 139 of the Act and the Rules made thereunder it is mandatory to rotatethe statutory auditors on completion of the maximum term permitted under the said section.In line with the requirements of the Act M/s. Deloitte Haskins & Sells. LLP (ICAIFirm Registration No. 117366W/W-100018) are the Statutory Auditors of the Company for aperiod of five years from the conclusion of 44th Annual General Meeting until theconclusion of 49th Annual General Meeting.
The report of the Statutory Auditors along with notes to Schedules is enclosed to thisreport. The observations made in the Auditors' Report are self-explanatory and thereforedo not call for any further comments. The Auditor's Report does not contain anyqualification reservation or adverse remark.
As per Section 148 of the Act read with the Companies (Cost Records and Audit) Rules2014 as amended from time to time the Company is required to have its cost recordsaudited by a Cost Accountant in practice. The Board of Directors based on therecommendation of the Audit Committee had appointed M/s. Rao Murthy & AssociatesCost Accountants as Cost Auditor of the Company for conducting the Cost Audit for theFY2021 to conduct cost audits pertaining to relevant products prescribed under theCompanies (Cost Records and Audit) Rules 2014 as amended from time to time. The Membersare hereby requested to ratify the remuneration payable to Cost Auditor's for the FY2021.
The Internal Audit function is responsible for assisting the Audit & RiskManagement Committee on an independent basis with a full status of the risk assessmentsand management. M/s. KPMG Assurance and Consulting Services LLP. were appointed asInternal Auditors of the Company for the FY2020.
The Company had appointed M/s. Ratish Tagde & Associates Company Secretary inpractice to conduct its Secretarial Audit for the financial year ended 31st March 2020.The Secretarial Auditors have submitted their report confirming compliance by the Companyof all the provisions of the applicable corporate laws. The Report does not contain anyqualification reservation or adverse remark. The Secretarial Audit Report is annexed as Annexure4 to this report.
M/s. BVS & Associates Chartered Accountants are the Tax Auditors of the Companyfor the FY 2020.
RISK MANAGEMENT POLICY
At Dynamatic Technologies Risk management is a part of the Business DNA which aids themanagement adopt an integrated approach to managing current and emerging threats. It playsa key role in business strategy and planning discussions at Dynamatic Technologies settingthe boundaries for Group level risk taking within the framework of Company's risk appetiteDynamatic Technologies has a robust process in place to identify key risks across theCompany and prioritises relevant action plans to mitigate all the risks that theorganization faces such as strategic financial liquidity security regulatory legalreputational and other risks that have been identified and assessed to ensure that thereis sound Risk Management Policy in place to address such concern/risk. Our aim is to helpreinforce our resilience by encouraging a holistic approach to the management of risk andreturn throughout our organization as well as the effective management of our riskcapital and reputational profile. The Audit & Risk Management Committee has beenentrusted with the responsibility of assisting the Board members with risk assessment andits minimization procedures which includes discussing the management submissions onrisks prioritizing key risks and approving action plans to mitigate such risks. TheCompany has a Risk Management Policy in place which enables framing an appropriate actionfor the key risks identified so as to make sure that risks are adequately compensated ormitigated in the designated response time. The main objectives of the said policy include:
i. To ensure that all the current and future material risk exposures of DynamaticTechnologies are identified assessed quantified appropriately mitigated and managed;
ii. To establish a framework for Dynamatic Technologies' risk management process and toensure company-wide implementation;
iii. To ensure systematic and uniform assessment of risks related with each of theunits of Dynamatic Technologies;
iv. To enable compliance with appropriate regulations wherever applicable through theadoption of best practices; and
v. To assure business growth with financial stability. The said policy has beenuploaded on Company's website (www.dynamatics.com/investor.html).
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Loans guarantees and investments covered under 186 of the Act form part of the notesto the financial statements provided in this Annual Report.
During the year under review the Company has neither accepted nor renewed any depositsfrom the public and as such no amount of principal or interest was outstanding as on theBalance Sheet date within the meaning of Section 73 of the Act and the Companies(Acceptance of Deposits) Rules 2014.
HUMAN RESOURCES & DEVELOPMENT
Dynamatic Technologies believes that human resources are the backbone for the overallgrowth of the organization and identifying upgrading of talent & competence ofemployees is a must. The Human Resources function is to foresee the changes likely tohappen in the industry and prepare the employees capabilities accordingly. Multiskillingability to keep pace with the demands of the digital world continuously changing diverselabour laws and social scenarios are kept in mind while steering the human resources. Thehuman resources should remain vibrant and flexible to adopt to challenging times.Dynamatic Technologies undertakes the best possible efforts to not only maintain cordialrelationships with the employees but also to create an equitable just and harmonious workenvironment conducive to their personal and professional development. DynamaticTechnologies has put in place a customised software to capture attendance of employees andassist carrying out payroll activity completely in a digital format. This softwareaddresses all HR modules from recruitment to separation thus eliminating humanintervention and subjectivity. Data pertaining to employees is kept safe and protected indigital form. All communications to employees both blue collar and white collar are madethrough this platform. As employees can access this system remotely communication hasbeen more effective.
The Company's focus has always been to acquire nurture and develop the best talent toprepare them for leadership roles within the organization. There are various ongoingexercises being undertaken to enhance the skills of employees through constant trainingand learning initiatives. Human Resources team organises sensitization programs andencourage communication to ensure an organizational culture that always provides for afair and safe working environment for all the employees. The Company has an excellenttrack record of cordial and harmonious industrial relations and over the years not asingle man-day has been lost on account of labour unrest.
CORPORATE SOCIAL RESPONSIBILTY (CSR)
Your Company has a Policy on Corporate Social Responsibility which has been posted onthe website of the Company at www.dynamatics.com. Pursuant to the provisions ofsection 135 and other applicable provisions of the Act read with applicable rules thecompany has undertaken various initiatives during the FY2020 as follows:
Your company focuses its CSR activities on three thematic areas - Equip Empower andEnrich. Under Empower theme Dynamatic Technologies engages with "Directorate ofEmployment & Training Government of Karnataka" for supporting ITI as a centrefor excellence for skill development and vocational training. This ITI is being supportedwith provision of equipment for laboratories volunteering of employees for trainingsessions developing training modules and enrolling women students who belong to ruralcommunity alongwith students from underprivileged backgrounds.
Dynamatic Technologies has strengthened its objectives of CSR and through its SkillDevelopment Initiative Team has been imparting skills to trainees with ITI / Diplomabackground and in serving workers from Aerospace Industry who volunteer to enhance theirskill levels. The Dynamatic Skill Initiative Team has developed curriculum forsystematically training the ITI passed students both in theory subjects and on thepractical aspects of aircraft structural assembly work which serves as the basis for the 3months long bridge course. Dynamatic Technologies had two such batches completing theircourse successfully during this year and the passed out trainees have been employed invarious aerospace industries in and around Bangalore. This curriculum has been widelyappreciated and is now approved as Two years long Trade (aerospace fitters trade) in Govt.ITIs all over the country. The course addresses the technical skills in operations such assheet metal forming material handling drilling riveting painting and NDT etc.
Affiliation application has been filed by IMC for course on AEROSPACE STRUCTURAL ANDEQUIPMENT FITTER under CTS Course. Proposal is sent to DET and DGET for consideration.
The Aerospace Skill Development Centre which has been established with all necessaryinfrastructure to train the trainees in aerospace subjects under Institute Managementcommittee has further come up with two CNC program courses this year one is in turningand other is in milling. CNC machines are in place at the ITI facility and necessarycutting tools and raw material for practicing on the machines have been provided byDynamatic Technologies. Classes for fresh batch of trainees are being conducted in thesetrades and at the same time the ITI students in the existing trades are also trained intechnical and certain soft skills.
The Senior ITI Machinist trainees and also ITI faculty were trained on CNC programmingboth in theory and in practical subjects. An existing seminar hall at GovernmentIndustrial Training Institute has been converted in to fully equipped hall for conductingclasses to regular ITI trainees. This seminar hall was inaugurated by Dr. UdayantMalhouthra CEO & Managing Director Dynamatic Technologies together with Mr.Vaijagonda Joint Director Department of Industrial Training and Employment on 30thOctober 2019.
CNC OPERATOR-TURNING A Level 3 Course which is registered under Chief Minister'sKaushalya Karnataka Yojane (CMKKY) in Department of Skill Development and Entrepreneurshipand Livelihood was also started during this year in the ITI. The Annual Report on CSRactivities in terms of the requirements of Companies (Corporate Social ResponsibilityPolicy) Rules 2014 is annexed as Annexure-5 which forms part of this Report.
EXTRACT OF THE ANNUAL RETURN
Pursuant to the provisions of section 92(3) of the Act and rule 12(1) of the Companies(Management and Administration) Rules 2014 the extract of Annual Return in theprescribed Form MGT-9 is annexed herewith as Annexure-6 which forms part of thisReport.
POLICY ON PREVENTION PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORK PLACE
The Company has zero tolerance for sexual harassment at workplace and has adopted aPolicy on Prevention Prohibition and Redressal of Sexual Harassment at Workplace in linewith the provisions of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 and the rules made thereunder. The Policy aims toprovide protection to employees at workplace and prevent and redress complaints of sexualharassment and for matters connected or incidental thereto with the objective ofproviding a safe working environment where employees feel secure.
Policy for Safety and Well Being of Women
An awareness program on Prevention of Sexual Harassment at the Work Place was conductedby a team from SASHA (Support against Sexual Harassment) to ensure a safe securefriendly and respectful work-environment to all employees. SASHA assists workplaces in theeffective implementation of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013. The Company strives to create a safe friendly andinclusive work environment for its employees and we are proud to state that there havebeen no complaints regarding harassment at the workplace. Further the Company has a fullyfunctional Creche at the Aerospace Division. The facility is maintained by an efficientteam of caretakers and equipped with amenities like a kitchen rest room and kids playarea. The facility is open to all the employees' children and is also monitored under CCTVfor safety.
Women's Day celebrations this year included a chat with CEO. On this occasion womenemployees had an open house with the CEO & Managing Director and shared experiences ofworking at Dynamatic Technologies. All the women employees of the Hydraulics and AerospaceDivisions participated and were excited about meeting with CEO & MD. Women employeeswere also given a day off for a company sponsored trip to a Resort.
The HR team has more women in your company than men proving the point that the companyhas the mandate to increase the women employees in all its functions and improve thegender ratio.
WHISTLE BLOWER POLICY AND VIGIL MECHANISM
The Company has adopted a Vigil Mechanism Policy through which all stakeholdersincluding Directors and Employees may report unethical behaviour malpractices actual orsuspected fraud wrongful conduct and violation of the Company's code of conduct withoutfear of reprisal. Details of complaints received and the action taken are reviewed by theAudit & Risk Management Committee.
During the year under review the Company / Committee has not received any suchcomplaint. The functioning of the vigil mechanism is reviewed by the Audit & RiskManagement committee from time to time.
This Policy provides for adequate safeguards against victimization of employees whoavail of this mechanism. The Policy also provides for direct access to the Chairman of theAudit Committee in order to best manage such events and to enable integrity ofinformation. It is affirmed that no personnel of the Company will be denied access to theAudit Committee. The policy on vigil mechanism may be accessed on the Company's website (https://www.dynamatics.com/investor.html)
PARTICULARS OF REMUNERATION OF DIRECTORS KMP AND EMPLOYEES
In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the names and other particulars of the employees drawing remuneration inexcess of the limits set out in the said rules is attached which forms part of thisreport. Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is attached as Annexure-7 which forms part ofthis report.
ENVIRONMENTAL PROTECTION MEASURES
The Company continuously strives to reduce its environmental footprint while enhancinglivelihood of people across the product value chain. In view of this objective theCompany has adopted several measures for improvement in the field of environment safetyand health. Measures like standard operating procedures training programmes for alllevels of employees regarding resource conservation environment protection andhousekeeping have been conducted. Sustainable living is a part of long-term businessstrategy of the Company.
ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO
The information relating to conservation of energy technology absorption Research& Development and Foreign Currency is appended as Annexure-8.
Events Subsequent to the Date of the Financial Statements
There have been no material changes / commitments affecting the financial performanceof the Company which occurred between the end of the Financial Year of the Company towhich the Financial Statements relate and the date of this Report.
Change in the Nature of Business if any
The Company continues to focus on its key business segments and looks for selectivegrowth / expansion opportunities. There was no change in the nature of business during theyear under review. State of the affairs of the Company and future plan of action andoutlook is discussed in this report.
In the fight against the pandemic and in the larger public interest your Companywishes to support the Government of India by stepping up to the challenge and serve thecountry in developing and manufacturing indigenous medical equipment that are mostaffordable and critical for rural primary health centers. One such Make in Indiainitiative by the team of engineers of your Company under the guidance of renownedmedical doctors scientists and various design experts is developing and manufacturingdisposable mechanical resuscitators / ventilators that do not require electricity tofunction and can control oxygen mix for a controlled breathing system that are criticalfor treatment COVID-19 patients.
Significant & Material Orders Passed by the Regulators
During the year under review no significant / material orders were passed by theregulators or the Courts or the Tribunals impacting the going concern status and theCompany's operations in future.
Partnerships and Collaborations
In February 2020 the Company signed a strategic collaboration agreement with HindustanAeronautics Limited (HAL) and Israel Aerospace Industries (IAI). This partnership betweenHAL IAI and Dynamatic Technologies is first in the country to manufacture IAI-designedunmanned aerial vehicles (UAVs). This collaboration will enhance technology sharing andbusiness partnership between India and Israel.
During the year under review the Company's debt facilities were rated by India Ratingsand Research. The instrument wise ratings are as below:
|Instrument Type ||Rating / Outlook ||Rating Action |
|Fund based working capital limits ||IND BBB+/ Positive/IND A2+ ||Affirmed; Outlook revised to Positive from Stable |
|Non-fund-based working capital limits ||IND A2+ ||Affirmed |
|Term Loan ||IND BBB+/Posi- tive ||Affirmed; |
| || ||Outlook revised to Positive from Stable |
Change of name of Registrar and Transfer Agent (RTA) of the Company
The Company was informed by its RTA namely KFin Technologies Private Limited (erstwhileKarvy Fintech Private Limited) about change of its name to KFin Technologies PrivateLimited w.e.f. 5th December 2019.
Listing with Stock Exchanges
The Company confirms that it has paid the Annual Listing Fees for the year FY2020 toNSE (DYNAMATECH) and BSE (505242) where the Company's Shares are listed.
Management's Discussion & Analysis Report
Pursuant to regulations 34 of the SEBI Listing Regulations Management's Discussion& Analysis Report for the year is presented in a separate section forming part of theAnnual Report.
Business Responsibility Report
As required under Regulation 34 of the SEBI Listing Regulations the BusinessResponsibility Report is provided in a separate section and forms part of the AnnualReport.
The list of the promoters is disclosed for the purpose of the SEBI (SubstantialAcquisition of Shares and Takeovers) Regulations 2011.
Mr. Udayant Malhoutra is the promoter of the Company within the definition ofPromoter' for the purpose of regulations 2(1)(s) of the SEBI (SubstantialAcquisition of Shares and Takeovers) Regulations 2011.
Details of the promoter group are appended as under:
|No. ||Name of the entity / person |
|1. ||JKM Holdings Private Limited |
|2. ||Udayant Malhoutra and Company Private Limited |
|3. ||JKM Offshore India Private Limited |
|4. ||Wavell Investments Private Limited |
|5. ||Mrs. Barota Malhoutra |
|6. ||Vita Private Limited |
|7. ||Christine Hoden (India) Private Limited |
|8. ||Pramilla Sanitary Products Private Limited |
|9. ||Greenearth Biotechnologies Limited |
The Board of Directors would like to express their sincere gratitude and appreciationto the investors financial institutions and banks for their continued support during theyear. The Directors would like to thank the regulatory authorities and governmentauthorities and agencies for their continued guidance and co-operation. The Directors alsowish to place on record their deep sense of appreciation to executives and employees atall levels for their hard work dedication and commitment to the Company. Their enthusiasmand efforts have enabled the Company to be at the forefront of the industry.
The Board would also like to take this opportunity to thank all the Company's customerswithout whom our success story would not have been possible.
For and on behalf of the Board of Directors
|UDAYANT MALHOUTRA ||P S RAMESH |
|CEO & Managing Director ||ED Group Technical Services & HR |
|DIN : 00053714 ||DIN : 05205364 |
|Place: Bengaluru || |
|Date: 3rd July 2020 || |