Your Directors take pleasure in presenting the Thirty Fourth AnnualReport together with the audited accounts of the Company for the financial year ended 31March 2021.
1. FINANCIAL SUMMARY / HIGHLIGHTS
(Rs. in Lakhs)
|Particulars ||2020-21 ||2019-20 |
|Total revenue ||69234 ||71147 |
|Profit before Interest expense and Depreciation ||9265 ||11032 |
|Provision for Depreciation ||(1171) ||(1258) |
|Finance cost ||(41) ||(50) |
|Profit before exceptional and prior period items and tax ||8053 ||9724 |
|Exceptional items ||- ||- |
|Profit before Tax from continuing operations ||8053 ||9724 |
|Provision for Tax ||(2124) ||(2583) |
|Net Profit After Tax ||5929 ||7141 |
The financials of the Company for the year under review as also thefinancial statements of the previous year are prepared under IND AS.
2. EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS
There were no reportable events subsequent to the date of the financialstatements.
3. CHANGE IN THE NATURE OF BUSINESS IF ANY
There has been no material change in the nature of business during theperiod under review.
The Board of Directors had approved an interim dividend of Rs. 19/- perequity share of Rs. 10/- each (190%) at its meeting held on 10 February 2021 resulting ina cash outflow of about Rs. 29.25 Crores for the financial year ended 31 March 2021.
This was disbursed on 10 March 2021. The Board has proposed a finaldividend of Rs. 25/- per equity share of Rs. 10/- each (250%) which dividend is subject toapproval of the shareholders at the ensuing Annual General Meeting.
5. IND AS STANDARDS
Your Company had adopted IND AS in pursuance of Section 133 of theCompanies Act 2013 and in compliance with the Companies (Indian Accounting Standard)Rules 2015. The financials for the current financial year ended 31 March 2021 and thecomparative figures for the last financial year ended 31 March 2020 have been preparedand published based on such INDAS standards.
The quarterly results are also published by the Company based on INDAS. These have been published in newspapers and also made available in the Company'swebsite www.esabindia.com and the website of the stock exchanges where the shares of theCompany are listed.
6. TRANSFERS TO THE INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
Pursuant to the applicable provisions of the Companies Act 2013("the Act") read with the Investor Education and Protection Fund Authority(Accounting Audit Transfer and Refund) Rules 2016 ("The Rules") all unpaidor unclaimed dividends are required to be transferred by the Company to the InvestorEducation and Protection Fund (IEPF) established by the Central Government aftercompletion of seven years. Further according to the Rules the shares in respect of whichdividend has not been paid or claimed by the Members for seven consecutive years or moreshall also be transferred to the dematerialized account created by the IEPF authority.
The Company had sent individual notices and also advertised in thenewspapers seeking action from the Members who have not claimed their dividends for sevenconsecutive years or more. Accordingly the Company is in the process of transferring suchunpaid or unclaimed dividends and corresponding shares up to Final Dividend 2013 to theIEPF shortly.
Members / claimants whose shares unclaimed dividend have beentransferred to the IEPF Demat Account of the Fund as the case may be may claim theshares or apply for refund by making an application to the IEPF Authority in Form IEPF-5(available on http:www.iepf.gov.in) along with requisite fee as decided by IEPF Authorityfrom time to time. The Member / Claimant can file only one consolidated claim in aFinancial year as per the IEPF Rules.
Due dates for transfer of Unclaimed Dividend to IEPF are providedelsewhere in the notice calling the Annual General Meeting.
Details of shares / shareholders in respect of which dividends have notbeen claimed are provided on our website at www.esabindia.com. The shareholders areencouraged to verify their records and claim their dividends of all the preceding sevenyears if not claimed.
7. BOARD MEETINGS
The Board of Directors met 7 times during the financial year 2020-21.The Meetings were held on 28 May 24 June 6 August 18 September 5 November of 2020 10February and 19 March of 2021.
8. DIRECTORS & KEY MANAGERIAL PERSONNEL
The Board of Directors of the Company has six members.
ESAB Holdings Limited withdrew the nomination of Mr.Scott Allen Grishamfrom the Board of Directors with effect from 24 March 2021. The Board of Directors wouldlike to place on record their sincere appreciation of the services rendered by Mr ScottAllen Grisham during his tenure as Chairman of the Company.
In terms of the Articles of Association the promoters of the Companyviz. Esab Holdings Limited have nominated Mr. Kevin Joseph Johnson as the Chairman of theBoard in place of Mr. Scott Allen Grisham with effect from 24 of March 2021. Mr KevinJoseph Johnson is a nominated Director of ESAB Holdings Limited and a non-retiringDirector in terms of the provisions of the Articles of Association.
Mr Rohit Gambhir is the Managing Director of the Company. He wasappointed for a period of five years with effect from 1 November 2013. He wassubsequently re-appointed for a term of 5 years with effect from 1 st November 2018 vide apostal ballot resolution of the shareholders dated 25 September 2018.
There are four Non-executive and Independent Directors on the Board ofthe Company.
In accordance with the provisions of Article 129 of the Company'sArticles of Association Mr Rohit Gambhir retires by rotation at the forthcoming AnnualGeneral Meeting and being eligible has offered himself for re-appointment. The details asrequired under Regulation 36 (3) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 regarding Mr. Rohit Gambhir are published as part of theNotice calling the Annual General Meeting.
Key Managerial Personnel
In compliance with Section 203 of the Companies Act Mr Rohit GambhirManaging Director Mr. B.Mohan Vice-President Finance & Chief Financial Officer andMr S Venkatakrishnan Company Secretary have been designated as the Key ManagerialPersonnel of the Company.
Mr. B Mohan Chief Financial Officer joined the Company on 1 February2005 and Mr. S Venkatakrishnan Company Secretary joined the Company on 10 March 2006.
9. DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS
As required under Section 149 (7) of the Companies Act 2013 all theIndependent Directors on the Board of the Company have individually issued the stipulatedannual declaration confirming that they meet all the criteria of independence asstipulated under the Act. Further the Independent Directors have completed their KYCconfirmation on the MCA website and have also uploaded their profile in the Institute ofCompany Affairs before the stipulated date. All the Directors have been exempted fromundergoing the mandatory online tests based on their quantum and areas of experience.
10. COMMITTEES OF THE COMPANY
A. AUDIT COMMITTEE
The Company's Audit Committee consists of three Independent Directorsand one Non-executive Director. Mr K Vaidyanathan is the Chairman of the said Committee.Mr. Vikram Tandon and Mr. Sudhir Chand are the other Independent Directors on theCommittee. Mr. Kevin J Johnson was coopted as member of the Committee with effect from 24March 2021 in place of Mr Scott Allen Grisham and joined the audit committee at itsmeeting held on 21 May 2021.
The said Committee met 6 times during the financial year 2020-2021 onthe 24 June 6 August18 September 5 November of 2020 and 10 February and 19 March of2021. The constitution and the terms of reference of the Committee are in line with therequirements of Section 177 of the Companies Act and Regulation 18 of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.
There were no occasions during the year where the Board of Directorsdid not accept the recommendations of the Audit Committee.
B. NOMINATION AND REMUNERATION COMMITTEE
The Company's Nomination and Remuneration Committee consists of threeIndependent Directors and one Non-Executive Director. Mr. K Vaidyanathan is the Chairmanof the said Committee while Mr. Sudhir Chand & Ms. Sabitha Rao Independent Directorsare the Members of the Committee. Mr. Kevin J Johnson Chairman of the Board was cooptedas Member of the Nomination and Remuneration Committee with effect from 24 March 2021 inplace of Mr Scott Allen Grisham.
This Committee met twice during the financial year 2020-2021 on the 10February and 19 March of 2021.
This Committee lays down the policy on remuneration stating therein theattributes required for the Managing Director Independent Directors and Key ManagerialPersonnel. The said policy also states the modus operandi for determining the remunerationfor the above referred personnel. The remuneration policy of the Company can be viewed onthe Company's website www.esabindia.com.
The said committee is constituted in compliance with Section 178 (4) ofthe Companies Act 2013 and Regulation 19 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.
C. STAKEHOLDERS RELATIONSHIP COMMITTEE
The Company's Stakeholders Relationship Committee consists of twoIndependent Directors one Non-executive Director and the Managing Director. Mr VikramTandon is the Chairman of the Committee Mr Sudhir Chand Independent Director and MrRohit Gambhir Managing Director are the Members of the Committee. Mr Kevin J Johnson wascoopted into the stakeholders relationship committee with effect from 24 March 2021 inplace of Mr Scott Allen Grisham.
The Committee met four times during the year on 24 June 6 August 5November of 2020 and on the 10 February 2021.
This Committee and the matters being placed before the said committeeare in compliance with Section 178(5) of the Companies Act 2013 and Regulation 20 of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
D. CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
The Company's Corporate Social Responsibility Committee consists of oneIndependent Director one Non-executive Director and the Managing Director. Ms Sabitha Raois the Chairperson of the said Committee and Mr Rohit Gambhir Managing Director is theother Member of the said Committee. Mr Kevin J Johnson was coopted as Member of thisCommittee with effect from 24 March 2021 in place of Mr Scott Allen Grisham.
The Committee met once during the financial year 2020-2021 on 24 June2020.
The Committee lays down the Policy on Corporate Social Responsibilitystating therein the strategy objectives funding & allocation for the CSR projectsimplementation strategy and steps involved in achieving the CSR objectives. The Policy onCorporate Social Responsibility of the Company and the budget allocation for CSR projectsfor the year 2021-22 can be viewed on the Company's website www.esabindia.com.
The formation of the Committee and its terms of reference are in linewith the requirements of Section 135 (1) of the Companies Act 2013. The CSR Report whichis attached as annexure to this report is in compliance with the Companies (CorporateSocial Responsibility Policy) Amendment Rules 2021.
E. RISK MANAGEMENT COMMITTEE
The Company has a Risk Management Committee as stipulated by theCompanies Act 2013 and Regulation 21 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015. The Company's Risk Management Committee consists of MrRohit Gambhir Managing Director and Mr B Mohan Vice President Finance & ChiefFinancial Officer of the Company. Mr Kevin J Johnson was coopted as Member of the RiskManagement Committee with effect from 24 March 2021 in place of Mr Scott Allen Grisham. ARisk Management Committee is now mandatory for the Company since it is now part of the Top500 Companies in terms of market capitalization.
The said Committee met once during the Financial year on 10 February2021.
The said Committee lays down the Policy on Risk Management. The mainobjective of this policy is to ensure sustainable business growth with stability and topromote a pro-active approach in reporting evaluating and mitigating those risks whichare material in nature and are associated with the business. In order to achieve the keyobjective the policy establishes a structured and disciplined approach to RiskManagement.
The Risk Management Policy of the Company can be viewed on theCompany's website www.esabindia.com.
11 .VIGIL MECHANISM
The Company has set up a whistleblower policy which can be viewed onthe Company's website www.esabindia.com. In terms of the said policy the Directors andemployees are given direct access to the Chairman of the Audit Committee to report onalleged wrongdoings. The said policy has been made available at the Offices / Plants ofthe Company at conspicuous places to enable the employees to report concerns if anydirectly to the Chairman of the Board and to the Chairman of the Audit Committee.Employees who join the Company newly are apprised of the availability of the said policyas a part of their induction schedule.
The above is in compliance of Section 177 (9) & (10) of theCompanies Act 2013 and in terms of Regulation 22 of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015. The Company did not receive any complaintsunder the whistle blower policy during the year under review.
12. DIRECTORS' RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to theinformation and explanations obtained by them your Directors make the followingstatements as per the requirements of Section 134 (5) of the Companies Act 2013.
1. In the preparation of the annual accounts for the financial yearended 31 March 2021 the applicable accounting standards have been followed;
2. The Directors have selected such accounting policies listed in Note2.2 to the Notes to the Financial Statements and applied consistently and made judgmentsand estimates that are reasonable and prudent so as to give a true and fair view of thestate of the affairs of the Company at the end of the financial year on 31 March 2021 andof the Profit of the Company for that year;
3. The Directors have taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of this Actfor safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;
4. The Directors have prepared the annual accounts for the year ended31 March 2021 on a going concern basis;
5. The Directors have laid down internal financial controls to befollowed by the Company and that such internal financial controls are adequate and wereoperating effectively; and
6. The Directors have devised proper systems to ensure compliance withthe provisions of all applicable laws and that such systems were adequate and operatingeffectively.
13. MANAGEMENT DISCUSSION AND ANALYSIS
A. ECONOMIC & BUSINESS ENVIRONMENT
The financial year commenced with huge disruptions caused by Covid19which turned into a raging pandemic as the year progressed. The Company had to contendwith extreme levels of disruption on every front with a strong and sustained focus onhealth and safety. The Company had to adapt to remote working with increasing reliance onIT on its workflows. The Company had also to contend with challenges in the supply chainarising from restrictions on mobility and frequent lockdowns that were announced from timeto time.
The year under review also witnessed a sharp and sustained surge incommodity prices with some metal prices hitting all time highs. This contributed topressure on margins as prices of steel and alloys have a significant bearing on theprofitability of the Company.
Capital goods went through a difficult cycle as well with low levels ofcapacity additions in the light of weak demand overall.
The economy reportedly contracted by about 8% during the Financial Yearwith several customer segments addressed by the Company reportedly contracting at muchhigher rates.
In the context of the above the Company continued to maintain itsposition as a leading player in the domestic welding industry. The Company's geographicalreach within the Country strong financial profile & benefits derived from being partof a group which has wide presence across the globe helped deliver a strong performance inan extremely difficult economic environment.
B. OUTLOOK OPPORTUNITIES AND THREATS
The Country is in the grip of a second wave of Covid 19 withcatastrophic impact all around triggering a fresh and serious set of measures to containits spread. The Company has been adapting to ever changing needs prioritizing health andsafety while delivering on its commitments to customers. The Company continues to followapplicable guidelines on safety protocols as directed by the Government and also internalguidelines on health and safety.
Prices of raw materials continue to increase in the current financialyear due to a combination of local and global factors. There are disruptions at customers'end as well due to short term cessation of fabrication activities as mandated byGovernment guidelines.
We continue to see threats arising from excess capacities in the marketand competition from Tier II and global players pursuing growth in an anemic environment.Additionally volatilities in customer segments and any economy linked headwinds poserisks as well.
14. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Management evaluates the Company's internal controls from time totime and also works with independent internal auditors to test these and identify areasfor improvement. Additionally the Company is subjected to reviews applicable forSubsidiaries of US headquartered entities. The Company continues to list and evaluate keycontrols and process to an extent leveraging on the work done as part of its globalreporting requirements. Key findings and actions taken to implement or remediate the sameare reviewed by the Audit Committee periodically at its meetings. The scope and coverageof internal audits are aligned to have coverage in terms of key controls and locations.The endeavor is to align to the requirements of Internal Control on Financial Reporting(ICFR) framework while leveraging on work done as part of global reporting requirements.Management testing through independent audit teams followed by external testing were doneduring the year.
The scope of work of Internal Auditors includes review of controls onaccounting financial reporting statutory and other compliances and operational areas inaddition to reviews relating to efficiency and economy in operations. In the context ofhigher levels of work from home during the year controls in Information Technology were apriority area as well during the Financial Year.
Our efforts on the above lines are expected to ensure compliance withthe requirements of Internal Controls on Financial Reporting.
15. FINANCIAL PERFORMANCE OF THE COMPANY
A. INCOME AND EXPENDITURE
The Company's revenue from contract with customers was lower by 2.4%The reduction was seen across all key product categories and also driven by lack of largevalue orders as in the preceding financial year. Service income on support services onR&D and shared services grew over the previous year.
New product offerings and enhancements were areas of continuing focusas the Company pursued growth and market share. The Company saw good growth in income fromservices to related party entities which grew by 25.5%
Other income fell by about 9% driven by lower interest rates and lowersurplus cash for investment.
Finance income was at comparable levels after adjusting for partrepayment of loans by a related party.
Materials costs as a percentage to sales was higher due to higher inputcosts and product mix
Overheads including employee costs were lower by 2.9% over the previousyear primarily due to significant reduction in travel costs. Transportation costs andpower / fuel costs were lower in line with lower sales.
The Company has continued to provide for Depreciation at useful livesbased on a technical evaluation of useful life of assets.
Profit before tax was lower by 17.2% over the previous year with theimpact of lower sales and higher input costs with some offsets on overheads driven byrestrictions on mobility.
B. BALANCE SHEET
The turbulence in the overall economy had a severe impact onmanufacturing and more so on enterprises in the small and medium segment which had to dealwith manpower constraints in addition to limited bandwidth for riding a difficult phase.For the Company this meant having to deal with higher short-term working capitalrequirements and taking considered decisions on supply chain and distribution.
We continued to focus on cash flows and to monitor working capitalclosely through the year. Our spends on capital expenditure were aligned to the evolvingenvironment. Our cash position of being a debt free enterprise stood us in good stead.Closing cash and equivalents including investments were at Rs. 83.3 Crores after dividendpayments of Rs. 137 Crores during the financial year.
Capital Expenditure was about Rs. 13.15 Crores as against Rs. 13.35Crores in the preceding year. The capital expenditure was primarily on productivityimprovements capacity enhancements and upgrading IT systems.
Inventories were lower in value terms and in terms of days to sales asthe Company adapted to volatilities and disruptions through the year. The Company focusedon monitoring and reduction of Inventory levels with emphasis on containing excesses andobsolescence.
Trade receivables were higher by 17% over the previous year in thelight of difficult cycles in liquidity and consequently longer credit terms. TheManagement continued to focus on quality of receivables with rigorous monitoring ofcollections and overdue amounts.
16. SUBSIDIARY / JOINT VENTURE / ASSOCIATE COMPANY
The Company does not have any subsidiary joint venture or an associatecompany.
17. HOLDING COMPANY
Colfax Corporation is a Delaware USA based industrial group withexisting global business interests in medical devices fabrication technology productsand services. Colfax Corporation holds 73.72% of equity shares of your Company throughESAB Holdings Limited UK and Exelvia Group India BV Netherlands which are its indirectwholly-owned subsidiaries.
18. EXTRACT OF THE ANNUAL RETURN
The Extract of the Annual Return in form MGT-9 of the Company made upas on the Financial Year ended 31 March 2021 is attached by way of Annexure-1.This is also made available in the website of the Company viz. www.esabindia.com. Thoseinterested may visit our website and see the details of MGT-9.
19. STATUTORY AUDITORS
M/s. S R Batliboi & Associates LLP Chennai (Firm Regn No.101049W/ E300004) were re-appointed for a period of four years by the shareholders at the AnnualGeneral Meeting held on 28 August 2020 as the Statutory Auditors of the Company incompliance with Section 139 (1). The re-appointment of statutory auditors was informed tothe Registrar of Companies through Form ADT 1 dated 29 August 2020 vide SRN R51933133.The details of remuneration of the statutory auditors with break-up of fee paid to SRBAand its network firms as required by the provisions of amended SEBI (LODR) Regulations forthe financial year 2020-2021 is given as part of the Corporate Governance Report.
This is the first year out of the four years that they have beenre-appointed. Their remuneration is fixed in line with the recommendations of the auditcommittee and as duly approved by the Board of Directors.
M/s. S R Batliboi & Associates LLP Chartered Accountants havegiven their written consent to continue as the Statutory Auditors of the Company and havealso issued a certificate that the appointment if made shall be in accordance with theconditions and that they satisfy the criteria provided under Section 139(1) Section 141and Chapter X of the Companies Act read with Companies (Audit and Auditors) Rules 2014.
The Statutory Auditors have issued a clean report on the financials ofthe Company and have not issued any qualifications for the financial year ended 31 March2021. Members may please take note of the changes in the requirements with respect to thereport of the Auditors including specific references to key audit matters.
20. SECRETARIAL AUDIT
In terms of Section 204 (1) of the Companies Act 2013 the Company hasappointed M/s. V Mahesh & Associates Chennai to do the secretarial audit of theCompany for the financial year 1 April 2020 to 31 March 2021. Their appointment wasinformed to the Registrar of Companies Chennai vide SRN R44181733 form MGT-14 dated 2July 2020.
M/s. V Mahesh & Associates have now completed their secretarialaudit and have issued their certificate dated 8 May 2021 as per the prescribed format inMR-3 to the shareholders of the Company which is annexed to this Report as Annexure-2.
They have no adverse observations in their report and have confirmedthat the Company has proper board processes and a compliance mechanism in place. They havealso affirmed that the Company has complied with the relevant statutes rules andregulations and secretarial standards as applicable.
21. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEOUTGO
The information required under Section 134 (3) (m) of the CompaniesAct 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 is given in theAnnexure-3 and forms part of this Report.
22. DETAILS RELATING TO DEPOSITS
The Company has not accepted any deposits during the period underreview as envisaged under Section 73 74 & 76 of the Companies Act 2013. There havebeen additional filing requirements introduced with respect to liabilities not in thenature of deposits. The necessary form DPT 3 has been filed for the financial year 2019-20on 25.06.2020 vide SRN No. R43113679
23. SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS
During the year under review there have been no significant andmaterial orders passed by any regulators / courts / tribunals that could impact the goingconcern status and the company's operations in future.
24. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
The Company had made a loan of Rs.30 Crores to M/s. EWAC AlloysLimited related party and a fellow subsidiary on an arm's length basis at a rate notexceeding 9% per annum (Floater rate) as per Section 186 and 188 of the Companies Act2013 during the year under review. The Company has informed the same to Registrar ofCompanies by filing form MGT 14 dated 22 September 2020 vide SRN R57728883.
The Board of Directors from time to time has authorized the Company toinvest the surplus funds of the Company in deposits with Bank and investments in debtfunds liquid funds and fixed maturity plans with mutual funds for a tenor not exceeding100 days. The investments are made in liquid and debt funds. The Company has earned anincome of around Rs. 139 Lakhs for the period 1 April 2020 to 31 March 2021 in the formof dividends and fair value gains of investments. The Company has not given any guaranteesother than bank guarantees in the normal course of business to meet contractualobligations.
25. RISK MANAGEMENT POLICY
In compliance with the requirements of Section 134 (3) (n) of theCompanies Act 2013 and as required under Regulation 21 of the SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 the Company has constituted a RiskManagement Committee consisting of Mr Kevin J Johnson as the Chairman (with effect from24 March 2021) Mr Rohit Gambhir Managing Director and Mr. B Mohan Chief FinancialOfficer as the Members of the Committee. The said Committee lays down the procedures toidentify risks and the mitigation procedures and adopted a policy in this regard. TheBoard of Directors defines the roles and responsibilities of the Committee.
The policy on Risk Management has been hosted in the Company's websitewww.esabindia.com. The said committee updates the Board of Directors on a periodical basison the material risks faced by the Company and the measures taken by the Company tomitigate the said risks. The Committee analysed various risks including those arising fromCOVID- 19 cyber security aspects and remote access control and other different controlsnecessary to be established with executives working from home. They suggested the actionsto be taken to mitigate these risks which went a long way in the Company successfullymanaging all the risks. The Ministry of Home Affairs (MHA) had also during the pandemichad issued various guidelines for the plants to follow and the Company had complied withall these MHA guidelines to ensure that all the risks associated with the COVID 19pandemic were adequately being addressed.
26. CORPORATE SOCIAL RESPONSIBILITY
As required under Section 134 (3) (o) read with Section 135 (1) of theCompanies Act 2013 the Company has constituted a Corporate Social ResponsibilityCommittee. The Committee has Ms. Sabitha Rao as the Chairperson and Mr Rohit Gambhir asthe Member of the said Committee. Mr Kevin J Johnson was coopted as Member of theCommittee in place of Mr Scott Allen Grisham with effect from 24 March 2021.
The Committee formulated a policy on CSR and the Board of Directorsapproved the same. The policy as required under Section 135 (4) (a) of the Companies Act2013 has been uploaded on the Company's website www.esabindia.com.
As part of ongoing initiatives the Company has been involved inpromoting and educating safe welding practices including usage of all personal protectiveequipment during the process of welding to ensure total safety of the welders especiallyat smaller towns through deployment of duly trained resources. The Company had also tiedup with certain vocational institutions for educating the welders in Tier II and Tier IIIcities on welding through deployment of personnel.
The Company also tied up with All India Manufacturing Association atIrungattukottai for setting up a welding school which had given vocational training to theprospective welders to take welding as their profession for their livelihood. The Companyalso during the year 2021-2022 have planned various activities and have budgeted for theseprojects accordingly and had obtained the approval of the CSR Committee and the Board ofDirectors at its respective meetings held on 21 May 2021 to carry out these activities.The CSR Report enclosed as annexure is in compliance with the Companies (Corporate SocialResponsibility Policy) Amendment Rules 2021 amended with effect from 22 January 2021.
During the year under review the Company had also engaged buddingengineers under the NEEM scheme for imparting vocational training in the neighbourhood ofour Plant to provide training in welding consumables with the intent of providing skillsets relevant to employment.
The Company also initiated actions on environmental protection withexpenditure on greenery and gardening outside of its plant locations.
The Company also initiated action in and around its plant at Ambatturon community and infrastructure development. The Company had also contributed towardsprevention and control of COVID 19 and by providing sanitizers and necessary personalprotective equipment.
The Company's spend on CSR increased from Rs. 70 Lakhs in the previousyear to Rs. 133 Lakhs during the year under review. The Company had clear focus and tie upwith various parties to expend the entire money on CSR Budget during the current year andshall carry forward its activities as envisaged in Schedule VII of the Companies Act2013 in a structured manner towards its stated objectives on CSR.
The Company's policy on CSR envisages expenditure in areas fallingwithin the purview of Schedule VII of the Companies Act 2013. The annual report on CSRactivities is enclosed by way of Annexure - 4 to this report.
27. RELATED PARTY TRANSACTIONS
As required under Section 188 of the Companies Act 2013 and Regulation23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 thecompany places before the audit committee the list of related parties from whom they buyraw materials or finished goods to whom the Company extends services or exports goods.The details of the basis of pricing and the margins on such transactions are also tabled.The Audit Committee accords its omnibus approval for such related party transactions on anannual basis. The updates on the transactions with the related parties are placed beforethe audit committee on a quarterly basis. The details are also placed before the Board ofDirectors for its information.
As required under Regulation 23 of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Company has formulated a policy on relatedparty transactions and the same was approved by the Audit Committee and the Board ofDirectors. The said policy has been uploaded on the company's website www.esabindia.com.
All the transactions with the related parties entered into during theperiod under review have been in the ordinary course of business and at arms' lengthbasis. There have been no material related party transactions entered into during thisperiod.
The details of related party transactions pursuant to Clause (h) ofsub-section (3) of Section 134 of the Act is enclosed in form no. AOC 2 as Annexure - 5.
28. FORMAL ANNUAL EVALUATION
As required under Section 134 (3) (p) of the Companies Act 2013 andRegulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 the Board of Directors had already approved the evaluation criteria for evaluatingthe performance of the Board of Directors its committees and the performance ofIndependent Directors.
Accordingly as required under Schedule IV of the Companies Act 2013and Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Independent Directors at their separate meeting held on 10February 2021 evaluated the performance of the non independent Directors and the Board asa whole. They also reviewed the performance of the Chairman of the Company and alsoassessed the quality quantity and timeliness of flow of information between the CompanyManagement and the Board that was necessary for the Board to effectively and reasonablyperform their duties.
Also as required under Regulation 17 (10) of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 the Board assessed the performance of theIndependent Directors as per the criteria laid down and has recommended their continuationon the Board of the Company at its meeting held on 21 May 2021.
As required under the said regulations the Board of Directors assessedthe performance of the individual directors on the Board based on parameters such asrelevant experience and skills ability and willingness to speak up focus on shareholdervalue creation high governance standards knowledge of business processes and proceduresfollowed openness of discussion / integrity relationship with management impact on keymanagement decisions etc. The Members of the Committees of Audit Nomination &remuneration Stakeholders relationship Corporate social responsibility and Riskmanagement committee were also assessed on the above parameters and also in the context ofthe committee's effectiveness vis-a-vis the Act and the listing regulations.
The Independent Directors fulfilled the independence criteria asspecified under the above regulations and the Companies Act 2013. The Board was satisfiedwith the evaluation results which reflected the overall engagement and the effectivenessof the Board and its committees. The Independent Directors also updated their currentprofiles by paying up the relevant fees in the website of the Ministry of CorporateAffairs on Independent Directors for a period of five years from 20202021. Since all thefour Independent Directors possess the necessary experience and the expertise they areexempted from taking up the online assessment test of the Ministry.
29. COST AUDITOR
As required under Section 148 of the Companies Act 2013 the Board ofDirectors at its meeting held on 21 May 2021 has appointed M/s. Geeyes & Co. CostAccountants within the meaning of Cost & Works Accountants Act and holding a validcertificate of practice No.000044 as the Cost Auditor for conducting the Cost Audit forthe financial year 2021-2022. The Audit Committee recommended the appointment subject tothe compliance of the requirements stipulated in the relevant notifications issued byMinistry of Corporate Affairs.
The Company has received a letter dated April 16 2021 from the CostAuditor stating that the appointment if made will be within the limit prescribed underthe Act.
The relevant Form CRA 2 for appointment of Cost auditor for thefinancial year 2020-21 was filed with the Registrar of Companies on 2 July 2020 vide SRNR44250884.
The cost audit report issued by the Cost Auditor for the financial yearended 31 March 2020 was filed with the Registrar of Companies vide form CRA - 4 dated 19October 2020 vide SRN R67693994.
30. RATIO OF REMUNERATION TO EACH DIRECTOR
As required under Section 197 (12) and Rule 5 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the details of ratioof remuneration to each Director to the median employee remuneration are as given below:
A. Executive Director
Ratio of remuneration paid to Mr Rohit Gambhir Managing Director vsthe median employee is: 26:1 (24:1 for the year ended 31.3.2020).
B. The percentage increase in the median remuneration of employees inthe financial year was 7.37%.
C. The number of management employees in the rolls of the Company as on31 March 2021 is 545 (526 as on 31 March 2020).
D. Average percentile increase made in salaries of employees other thanKMP in comparison to the percentile increase in the remuneration of KMP and thejustification thereof.
The average percentile increases in salaries of employees other thanKMP proposed was 8.03% while that of KMPs was 7.94%.
Justification thereof: Compensation revisions generally take intoaccount performance metrics on sales operating profits and working capital apart fromspecific elements attributable to various functions within the organization. Despite thedifficulties in the operating environment we exceeded the budget in all the threemetrics. Taking into consideration the rate of inflation it was decided to consider anaverage increase of 7.7%. This increase also includes a higher percentage of increase thathas been considered for junior / middle level employees who have been considered forpromotion.
As at the end of March 2021 the Company had 808 employees as against755 at the end of 31 March 2020. The Company believes in providing a working environmentthat is focused on the customers teamwork continuous improvement innovation and acompetitive environment where employees strive to improve value for shareholders.
E. The key parameters for any variable component of remunerationavailed by the Directors.
Variable Component to Mr Rohit Gambhir - This is linked to variousparameters financial and non-financial. Key elements include sales operating profitworking capital implementation of business systems.
Variable Component to Independent Directors - Is based on the roles andresponsibilities and their contribution to the Company in their respective capacities. TheCommission is individually determined based on their varying commitments of time andeffort to the Board and to its committees.
The Board of Directors would like to affirm that the remuneration paidto the Executive and Non-executive Directors and the Key Managerial Personnel is in linewith the Remuneration Policy of the Company.
Details of employees receiving the remuneration in excess of the limitsprescribed under Section 197 of the Act 2013 read with Rule 5(2) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are annexed as astatement and given in Annexure - 6. In terms of first proviso to Section 136(1) of theAct 2013 the Annual report excluding the aforesaid annexure is now being sent. Theannexure is available for inspection at the Registered Office of the Company and anyshareholder interested in obtaining a copy of the said annexure may write to the CompanySecretary at the Registered Office of the Company.
The Company's relationships with its Bankers viz. AXIS Bank Ltd. andHDFC Bank Ltd. continued to be cordial during the year. The Company would like to thankits Bankers for their support.
32. ENVIRONMENT HEALTH AND SAFETY
The Company continued its commitment to industrial safety andenvironment protection and all its factories have obtained its ISO 14001 and OHSAS 18001certification. Periodical audits are done by external and internal agencies to assess thecontinued levels of EHS efficiency of each of these plants and the OHSAS certificationgiven is renewed after every such audit. The Company is also networked with the Group onEHS initiatives and works closely with them on initiatives and actions concerning EHS.During the year under review the Company's Plants at Ambattur and Nagpur won globalrecognition for EHS initiatives.
Certain statements in this Directors' Report may constitute"forward looking statements" within the meaning of applicable laws andregulations. Actual results may differ materially from those either expressed or impliedin this Report.
33. LISTING WITH STOCK EXCHANGES
The Company's equity shares are listed with a) BSE Limited and b)National Stock Exchange of India Limited. The annual fees for both the exchanges have beenpaid promptly for the year 2020-2021. Pursuant to the requirements of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the company had executed freshlisting agreements with BSE Limited and National Stock Exchange of India Limited on 9November 2015.
The Company had 14526 shareholders as at the end of the year 31 March2021. 98.99% of the shares are held in dematerialized form.
The Company is part of the Top 500 Companies by way of Marketcapitalization. The Company has adopted a dividend policy formed a risk managementcommittee and have also prepared a Business Responsibility Report for the year underreview. The Company's dividend policy can be viewed in its website www.esabindia.comunder investor relations.
As required under Regulation 39 (4) Read with Schedule VI of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the details of theshares issued by the Company consequent to amalgamation of erstwhile Maharashtra WeldaidsLimited with the Company in 1994 the details of the physical shares which remainsunclaimed and transferred to the Unclaimed Suspense Account and the reconciliation of theshares claimed by shareholders during the year 2020-2021 and the shares outstanding in thesuspense account as on 31 March 2021 is given below:
|Sl. No. Details ||No. of shareholders ||No. of equity shares |
|1. Aggregate number of shareholders and the outstanding shares lying in the unclaimed suspense account at the beginning of the year i.e. as on 1.4.2020 ||55 ||4010 |
|2. Number of Shareholders who approached the Company during the year ||1 ||50 |
|3. Number of shareholders to whom shares were transferred from the unclaimed suspense account during the year ||1 ||50 |
|4. No. of shares transferred to Investor Education and Protection Fund ||10 ||900 |
|5. Aggregate Number of shareholders and the outstanding shares lying in the unclaimed Suspense Account at the end of the year i.e. 31.3.2021 ||44 ||3060 |
44 shareholders holding 3060 equity shares constituting about 0.02% ofshares have not made their claim from the Company on the shares outstanding in theUnclaimed Suspense Account of ESAB India Limited. The voting rights for these shares shallremain frozen until these are claimed by the rightful owners.
34. CORPORATE GOVERNANCE
In terms of Chapter IV Regulation 15 Read with Schedule II of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 a Corporate GovernanceReport is made part of this Annual report.
A certificate from the Statutory Auditors of the Company regardingcompliance of the conditions stipulated for Corporate Governance as required under ClauseE of Schedule V read with Regulation 34 (3) of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 is attached to this report.
The declaration by the Managing Director addressed to the Members ofthe Company pursuant to Clause D of Schedule V Read with Regulation 34 (3) Chapter IV ofthe SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 regardingadherence to the Code of Conduct by the Members of the Board and by the Members of theSenior Management Personnel of the Company is also attached to this Report.
35. POLICY ON PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE ACT
The Company has also adopted the mandatory policy on Sexual Harassmentof Women at Workplace (Prevention Prohibition & Redressal) Act 2013. Employees havebeen sensitized on the provisions of this enactment and the Company has also constitutedan internal complaints committee with effect from 30 October 2013 to deal withcomplaints if any under the said Act. The Committee also has an independent external NGOrepresentative as one of its members. The Committee meets as and when requirement arises.The Company believes in providing safe working place for the Women in the Company andadequate protection are given for them to carry out their duties without fear or favour.All the employees of the Company as a part of induction are sensitized about theprovisions of the said Act.
As required under Section 21 of Chapter VIII of the said Act theCommittee has submitted its annual report in the prescribed format to the designatedauthority within the stipulated period.
36. SECRETARIAL STANDARDS
As on 31 March 2021 all the applicable Secretarial Standards whichhave been notified have been complied with by the Company.
A certificate of compliances issued by the Secretarial Auditor M/s. VMahesh & Associates dated 8 May 2021 is enclosed as Annexure - 2 and formspart of this Report.
37. ISSUE OF SHARES
The Company during the year under review has not issued any SWEATequity shares or shares with differential rights or under Employee stock option scheme nordid it buy back any of its shares.
Your Directors place on record their appreciation for the confidencereposed and continued support extended by its customers suppliers and shareholders.
Your Board would like to place on record its sincere appreciation tothe employees for having played a very significant part in the Company's operations tilldate and more so in a difficult year that we went through.
| ||For and on behalf of the Board of Directors |
| ||Kevin J Johnson |
|Chennai ||Chairman |
|21 May 2021 ||Anm ml DK+ OH 00.0001 |