Your Directors have pleasure in presenting the Seventy Fourth Annual Report of theCompany along with Company's audited financial statements (standalone and consolidated)for the financial year ended on March 31 2020.
Financial Results (Standalone)
|Particulars ||Year ended on March 31 2020 ||Year ended on March 31 2019 |
|Revenue from operations ||5760.95 ||6196.36 |
|Other income ||92.25 ||80.85 |
|Total income ||5853.20 ||6277.21 |
|Profit from continuing operations before Interest Depreciation Exceptional Items & Tax ||768.07 ||814.14 |
|Finance Cost ||15.46 ||18.48 |
|Profit on continuing operations before Depreciation Exceptional Items & Tax fr Profit ||752.61 ||795.66 |
|Depreciation & Amortisation ||104.55 ||85.37 |
|Profit from continuing operations before Exceptional Items & Tax ||648.06 ||710.29 |
|Exceptional Item ||(9.22) ||10.91 |
|Profit from continuing operations before Tax ||638.84 ||721.20 |
|Tax Expense ||153.30 ||237.52 |
|Profit from continuing operations after Tax ||485.54 ||483.68 |
|Profit / (Loss)from discontinued operations before Tax ||- ||1.89 |
|Tax Expense of discontinued operations ||- ||0.66 |
|Profit / (Loss) from discontinued operations after Tax ||- ||1.23 |
|Net profit for the period ||485.54 ||484.91 |
Financial Performance/ State of Company Affairs
The brief highlights of the Company's performance (Standalone) for the financial yearended March 31 2020 are:
Total income of the Company for FY 2020 stood at Rs. 5853.20 crores. (Rs.6277.21 crores in FY 2019)
Profit from continuing operations before Interest Depreciation ExceptionalItems & Tax stood at Rs. 768.07 crores
Profit from continuing operations before Tax (PBT) stood at Rs. 638.84 croresand Profit from continuing operations After Tax (PAT) stood at Rs. 485.54 crores. Netprofit for the period stood at Rs. 485.54 crores
Your Company sold 86018 tractors during the year under review as against 96412tractors sold during the last financial year.
Management Discussion & Analysis
In terms of the provisions of Regulation 34 of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 (hereinafter referred as the "SEBI ListingRegulations") the Management Discussion and Analysis is set out in this Annual
Report and provides a detailed analysis on the performance of individual businesses andtheir outlook.
Based on the Company's performance your Directors are -pleased to recommend forapproval of the members a Dividend of Rs. 2.50 per Equity Share (25%) on the face valueof Rs. 10/- each aggregating Rs. 22.22 crores for the financial year ended March 31 2020except on the equity shares held by Escorts Benefit and Welfare Trust (EBWT). The dividendpayout is subject to the approval of members at the ensuing Annual General Meeting (AGM).
The dividend payout for the period under review has been formulated in accordance withshareholders' aspirations and the Company's Dividend Distribution Policy to paysustainable dividend linked to long-term growth objectives of the Company to be met byinternal cash accruals.
The dividend distribution policy is available on our website athttps://www.escortsgroup.com/investors/governance.html
Employee Stock Option Scheme
The Scheme is in line with the SEBI (Share Based Employee Benefits) Regulations 2014("SBEB Regulations") and there have been no material changes to the schemeduring the financial year 2019-20. The Scheme has been implemented in accordance with theSBEB Regulations and the resolutions passed by the members. The auditors certificate wouldbe available during the Annual General Meeting for inspection by members. The details asrequired to be disclosed under the SBEB Regulations would be available on the Company'swebsite at www.escortsgroup.com.
Directors and Key Managerial Personnel
In accordance with the provisions of Companies Act 2013 (hereinafter referred as"the Act") and Articles of Association of the Company Mr. Hardeep SinghDirector retire by rotation at the ensuing AGM and being eligible offer himself forre-appointment.
The Board of Directors in their meeting held on January 29 2020 co-opted Ms. TanyaDubash as an Additional and Independent Director on the Board of the Company on therecommendation of Nomination and Remuneration Committee. The Board considered the domainknowledge and experience of Ms. Tanya Dubash in the areas of branding and marketing whileapproving her appointment as an Independent Director on the Board of the Company. TheBoard is of the opinion that Ms. Tanya Dubash possesses requisite qualificationexperience expertise and hold high standard of integrity. She shall hold office as anAdditional
Director of the Company upto the date of ensuing Annual General Meeting and is eligiblefor appointment as a Director. Her appointment is appropriate and in the best interest ofthe Company.
Pursuant to the provisions of Section 149 and other applicable provisions of the Actyour Directors are seeking appointment of Ms. Tanya Dubash as an Independent Director fora period of 5 years w.e.f January 29 2020.
Mr. D.J. Kakalia and Mr. Girish Behari Mathur had resigned from the Board of Directorsof the Company w.e.f. November 27 2019 and December 31 2019 respectively.
The shareholders of the Company had also approved the reappointment of Ms. NitashaNanda as Whole-time Director for a period of 5 years with effect from January 16 2020 byway of Postal Ballot.
Mr. Ajay Kumar Sharma Group General Counsel & Company Secretary had resignedw.e.f. November 30 2019 and in his place Mr. Satyendra Chauhan has been appointed asCompany Secretary and Compliance Officer of the Company w.e.f. January 29 2020.
The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet with criteria of independence as prescribed under subsection (6)of Section 149 of the Act and under Regulation 161(1)(b) & 25(8) of SEBI (ListingObligations and Disclosure Requirements) Regulation 2015 (hereinafter referred as"the Listing Regulations"). The policy for selection of Directors anddetermining Directors independence is attached as
Annexure - A and forms an integral part of this Report.
The Company has devised a Policy for performance evaluation of Independent DirectorsBoard Committees and other individual Directors which includes criteria for performanceevaluation of the Non-Executive and Executive Directors. In accordance with the Policy aprocess of evaluation was followed by the Board for its own performance and that of itsCommittees and individual Directors. The remuneration policy for directors key managerialpersonnel and other employees is annexed as Annexure B and forms an integral partof this Report.
The brief resumes and other disclosures relating to the Directors who are proposed tobe appointed/ re-appointed as required to be disclosed pursuant to Regulation 36 of theSEBI Listing Regulations and Clause 1.2.5 of the Secretarial Standard 2 are given in theAnnexure to the Notice of the 74th AGM.
Your Directors recommend the appointment/ re-appointment of the above said Directors atthe ensuing AGM.
The Company has devised a process where various presentations/ programs are beingconducted to make them familiarise with various developments at Industry level newbusiness initiatives and organisation strategies etc.
The details of programme for familiarisation of Independent
Directors with the Company their roles rights responsibilities in the Companynature of industry in which the Company operates business model of the Company andrelated matters are put up on the website of the Company www.escortsgroup.com.
The Company recognises and embraces the importance of a diverse board in its success.We believe that a truly diverse board will leverage differences in thought perspectiveknowledge skill regional and industry experience cultural and geographical backgroundage ethnicity race and gender which will help us retain our competitive advantage.
Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo
The particulars relating to conservation of energy technology absorption foreignexchange earnings and outgo as required to be disclosed under Section 134(3)(m) of theAct read with Companies (Accounts) Rules 2014 are provided as Annexure C and formsan integral part of this Report.
Corporate Governance is about maximising shareholders value ethically and sustainably.At Escorts the goal of corporate governance is to ensure fairness for every stakeholder.We believe strong corporate governance is critical to enhancing and retaining investortrust. We also endeavor to enhance long term shareholder value and respect minority rightsin all our business decisions.
Your Company reaffirms its commitment to the good corporate governance practices andhas adopted the
Code of Business Conduct which has set out the systems processes and policiesconforming to international standards. Pursuant to Regulation 34(3) of the SEBI ListingRegulations Corporate Governance Report and Auditors' Certificate regarding compliance ofconditions of Corporate Governance are enclosed as Annexure D and forms an integralpart of this Report.
Corporate Social Responsibility (CSR)
The key philosophy of all CSR initiatives of the Company is to make CSR a key businessprocess for sustainable development of the society. The initiatives aim at enhancingwelfare measures of the society based on the immediate and long term social andenvironmental consequence of its activities.
The Company intends to undertake other need-based initiatives in compliance withSchedule VII of the Act.
The CSR Policy may be accessed on the Company's website www.escortsgroup.com underInvestors Information Section. During the year the Company has spent Rs. 9.85 crores(2.01%) of the average net profits of last three financial years on CSR activities.
The Annual Report on CSR activities is enclosed as Annexure E and forms anintegral part of this Report.
Consolidated Financial Statements
The Consolidated Financial Statements have been prepared in accordance with the Act andIndian Accounting Standard (IND AS) - 110 applicable to the Consolidated FinancialStatements read with IND AS-28 on Accounting for Investments in Associates and IND AS-31on Financial Reporting of Interests in Joint Ventures issued by The Institute of CharteredAccountants of India. The Audited Consolidated Financial Statements along with theAuditors' Report thereon are annexed with this Report.
Subsidiaries Joint Ventures and Associate Companies
The statement in Form AOC-1 containing salient features of financial statements ofsubsidiaries associate and joint venture companies prepared in accordance with Section129 of the Act read with Rule 5 of Companies (Accounts) Rules 2014 forms an integralpart of this Report. The Consolidated Financial Statements presented by the Companyinclude the financial results of its subsidiaries associate and joint venture companies.
During the financial year ended on March 31 2020 the Company has infused additionalequity capital in Escorts Crop Solutions Limited subsidiary of the Company and EscortsKubota India Private Limited Joint Venture at different point of times. The details ofthe said investment/ disinvestment is provided in the note 7 of the Notes to Accounts ofthe Standalone Financial Statements of the Company.
The Company will make available the Annual Accounts of its subsidiaries associate andjoint venture companies and related information to the members of the Company who may beinterested in obtaining the same. The annual accounts of its subsidiaries associate andjoint venture companies will also be available for inspection.
There is no change in subsidiary joint venture or associate Company during the yearended March 31 2020.
Contracts and Arrangements with Related Parties
All contracts/ arrangements/ transactions entered by the Company during the financialyear with related parties were in the ordinary course of business and on an arm's lengthbasis. During the year the Company had not entered into any contract/ arrangement/transaction with related parties which could be considered material in accordance with thepolicy of the Company on the materiality of related party transactions.
The particulars of contracts or arrangements with related parties referred to inSection 188(1) of the Act in the prescribed Form AOC-2 is appended as Annexure F tothis report.
The Policy on materiality of related party transactions and dealing with related partytransactions may be accessed on the Company's website www.escortsgroup.com under InvestorsInformation Section.
Your Directors draw attention of the members to note 48 in the notes to accounts in thestandalone financial statement and to note 47 in the notes to accounts in the consolidatedfinancial statement which sets out related party disclosures.
Auditors and Auditors' Report Statutory Auditors
Pursuant to the provisions of Section 139 of the Act read with Companies (Audit andAuditors) Rules 2014 the shareholders of the Company in the 71st AGM held on September21 2017 had appointed M/s Walker Chandiok & Co LLP Chartered Accountants New Delhi(Firm Registration No. 001076N/ N500013) as Statutory Auditors of the Company for a periodof 5 years i.e. upto the conclusion of AGM to be held in the year 2022.
In accordance with the Companies (Amendment) Act 2017 enforced on May 7 2018 by MCAthe appointment of Statutory Auditors is not required to be ratified by members at everyAGM.
The observations and comments given by M/s. Walker Chandiok & Co LLP CharteredAccountants Statutory Auditors in their report read together with notes to Accounts forthe year ended March 31 2020 are self-explanatory and hence do not call for any furthercomments under Section 134 of the Act.
The Statutory Auditors of the Company have not reported any fraud as specified inSection 143(12) of the Act.
The Board of Directors of the Company has re-appointed M/s. Ramanath Iyer and Co. CostAccountants New Delhi (Firm Registration No. 000019) Cost Auditors of the Company underSection 148 of the Act for conducting the audit of cost records for the financial year2020-21.
The due date of filing the Cost Audit Report for the year ended on March 31 2019 wasSeptember 30 2019 and the same had been filed on August 19 2019.
Further this is to confirm that the requirement of maintaining cost records as perSection 148(1) of the Act is applicable to the Company and accordingly the Company hasmade and maintained cost records.
The Board of Directors of the Company had appointed M/s. Jayant Gupta and AssociatesPracticing Company Secretary to conduct secretarial audit of the Company for the financialyear 2019-20.
The Secretarial Audit Report for the financial year ended March 31 2020 is enclosed asAnnexure G and forms an integral part of this Report.
The observations and comments given by the Secretarial Auditors in their report areself-explanatory and hence do not call for any further comments under Section 204(3) ofthe Act.
The Board has also re-appointed M/s. Jayant Gupta and Associates Practicing CompanySecretary to conduct secretarial audit of the Company for the financial year 2020-21.
The Risk Management Committee of the Board has been entrusted with the responsibilityto assist the Board in (a)
Overseeing and approving the Company's enterprise wide risk management framework; and(b) Overseeing that all the risks that the organisation faces such as strategicfinancial credit market liquidity security property IT legal regulatoryreputational and other risks have been identified and assessed and there is an adequaterisk management infrastructure in place capable of addressing those risks.
The Company has laid down a Risk Management Policy and the same is available on thewebsite of the Company at https://www.escortsgroup.com/investors/governance.html
The details of constitution of Risk Management Committee of the Company is provided inReport on Corporate Governance at Annexure - D of the Directors' Report.
Internal Financial Control and its Adequacy
The Board has adopted policies and procedures for ensuring the orderly and efficientconduct of its business including adherence to Company's policies the safeguarding ofits assets the prevention and detection of fraud error reporting mechanisms theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial disclosures.
The Company has in place adequate internal financial controls for ensuring the orderlyand efficient conduct of its business. During the year such controls were tested and noreportable material weakness in the design or operation was observed.
Disclosures Meetings of the Board
Five meetings of the Board of Directors were held during the year. For further detailsplease refer Report on Corporate Governance annexed as Annexure D to this Report.
For constitution and other details of the Audit Committee please refer Report onCorporate Governance annexed as Annexure-D to this Report.
All the recommendations made by the Audit Committee were accepted by the Board.
Extracts of Annual Return
In terms of provisions of Section 92 of the Act read with the Companies (Management andAdministration) Rules 2014 the extracts of Annual Return in Form MGT-9 is enclosed as AnnexureH and forms an integral part of this Report. The Annual Return for Financial Year2019-20 is also available on the Company's website at www.escortsgroup.com.
The Company has adopted a Whistle Blower Policy establishing vigil mechanism forDirectors and Employees to report their concerns about unethical behaviour actual orsuspected fraud or violation of the Company's Code of Conduct. The mechanism provides foradequate safeguards against victimisation of effected Director(s) and Employee(s). Inexceptional cases Directors and Employees have direct access to the Chairman of the AuditCommittee. It is affirmed that no personnel of the Company has been denied access to theAudit Committee.
The Whistle Blower Policy is available on Company's website athttps://www.escortsgroup.com/investors/ governance.html
Registrar and Share Transfer Agent
The Share Transfer and related activities are being carried out by M/s KFinTechnologies Private Limited (earlier Karvy Fintech Private Limited) Registrar and ShareTransfer Agent from the following address:- M/s KFin Technologies Private Limited Tower BPlot No. 31-32 Selenium Building Gachibowli Financial District NanakramgudaHyderabad-500032 Telangana
All correspondence may kindly be sent to the above address only.
During the year the Board of Directors of the Company had approved the issuance ofEquity Shares to Kubota Corporation Japan (proposed allotee) by way of preferentialissue. The approval of the shareholders was also sought for issuance of equity shares tothe proposed allottee and alteration of articles by way of Postal Ballot. The saidresolutions were approved by the shareholders with requisite majority.
Particulars of Loans given Investments made Guarantees given and Securities provided
Particulars of loans given investments made guarantees given and securities providedalong with the purpose for which the loan or guarantee or security is proposed to beutilised by the recipient has been given below. The details are also provided elsewhere inthe Annual Report and forms an integral part of this Report.
Details of Investments made:
(Rs. in crores)
|Name of Party ||Amount |
|Escorts Crop Solutions Limited ||2.70 |
|Escorts Kubota India Private Limited ||60.00 |
Details of Guarantees and Loans given:
|Nature ||Purpose ||Party Name ||Amount (Rs. in crores) |
|Guarantee Given ||The Corporate Guarantee was issued in favour of Mizhuo Bank Limited for an amount of Rs. 11.025 crores for its share of 49% in Tadano Escorts India Private Limited (TEI) a Joint Venture Company. The facility for an amount of Rs. 22.50 crores was availed by TEI for meeting their non-fund based requirements. ||Mizhuo Bank Limited ||11.025 |
|Guarantee given ||The Corporate Guarantee was issued in favour of Tata Capital Financial Services Limited for credit facility of Rs. 7.50 crores availed by Escorts Securities Limited a subsidiary of the Company for meeting their working capital requirements. ||Tata Capital Financial Services Limited ||7.50 |
|Loan given ||An amount of Rs. 1 crore was given to Adico Escorts Agri Equipments Private Limited a Joint Venture Company for meeting their business requirements at a rate of interest of 13% p.a. for a period of one year. ||Adico Escorts Agri Equipments Private Limited ||1.00 |
Particulars of Employees and related disclosures
In terms of provisions of Section 197(12) of the Act read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 a statement showingthe names and other particulars of the employees drawing remuneration in excess of theprescribed limits are available with the Company Secretary. Having regard to theprovisions of Section 136(1) of the Act the Annual Report excluding the aforesaidinformation is being sent to the members of the Company. Any member interested inobtaining such particulars may write to the Company Secretary of the
Company and the same will be furnished on request.
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 annexed as Annexure I and forms an integralpart of this Report.
The Company has not accepted/ renewed any Fixed Deposit during the financial year andas such no amount of principal or interest was outstanding as of the Balance Sheet date.
Investor Education and Protection Fund (IEPF)
Pursuant to the applicable provisions of the Companies Act 2013 read with IEPFAuthority (Accounting Audit Transfer and Refund) Rules 2016 (the Rules') allunpaid or unclaimed dividends are required to be transferred by the Company to the IEPFestablished by the Central Government after the completion of seven years.
Further according to the rules the shares in respect of which dividend has not beenpaid or claimed by the shareholders for seven consecutive years or more shall also betransferred to the demat account created by the IEPF Authority. Accordingly the Companywas required to transfer the unclaimed and unpaid dividends and shares from time to timeas per the requirements of the IEPF rules details of which are provided on our website.
As on March 31 2020 no unclaimed deposits are pending for transfer to InvestorEducation and Protection Fund.
During the year the credit rating of the Company have been reaffirmed as under:
ICRA limited has reaffirmed the long-term rating from "ICRA AA-" & watchwith developing implication and short-term rating reaffirmed "ICRA A1+".
CRISIL has reaffirmed long term rating "CRISIL AA-"/ Stable and Short-Termrating "CRISIL A1+".
Material Changes and Commitment affecting the financial position
There are no material changes affecting the financial position of the Companysubsequent to the closure of the Fiscal 2020 till the date of this report except theimpact of COVID-19.
Prevention of Sexual Harassment
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 thereunder for prevention and redressalof complaints of sexual harassment at workplace. The Company is committed to provide equalopportunities without regard to their race caste sex religion colour nationalitydisability etc. All women associates (permanent temporary contractual and trainees) aswell as any women visiting the Company's office premises or women service providers arecovered under this Policy. All employees are treated with dignity with a view to maintaina work environment free of sexual harassment whether physical verbal or psychological.
The Company has also complied with provisions relating to the constitution of InternalComplaints Committee under the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.
Your Directors further state that during the year under review
2 cases were filed pursuant to the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 which were disposed off within 90 days.
The Company is in compliance with all the applicable Secretarial Standards.
Business Responsibility Report (BRR)
The SEBI Listing Regulations mandate the inclusion of BRR as part of the Annual Reportfor top 1000 listed entities based on market capitalisation.
In compliance with the SEBI Listing Regulations the BRR describing the initiativestaken by the Company from an environmental social and governance perspective is enclosedas Annexure J and forms an integral part of this Report.
Directors' Responsibility Statement
Pursuant to the requirement under Section 134(5) of the Act with respect to Directors'Responsibility Statement your Directors to the best of their knowledge and abilityhereby confirm that:
(i) in the preparation of the annual accounts for the year ended March 31 2020 theapplicable accounting standards read with requirements set out under Schedule III to theAct have been followed alongwith proper explanation relating to material departures;
(ii) the Directors have selected such accounting policies and applied them consistentlyand made judgements and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 31 2020 and of the profitand loss of the Company for the year ended on that date;
(iii) the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;
(iv) the Directors have prepared the annual accounts for financial year ended March 312020 on a going concern' basis;
(v) the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operating .effectively; and
(vi) the Directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:
1. Details relating to deposits covered under Chapter V of the Act.
2. Issue of equity shares with differential rights as to dividend voting or otherwise.
3. Issue of shares (including sweat equity shares) to employees of the Company underany scheme save and except ESOS referred to in this Report.
4. Neither the Managing Director nor the Whole-time
Directors of the Company receive any remuneration or commission from any of itssubsidiaries.
5. N o significant or material orders were passed Regulators or Courts or Tribunalswhich impact the going concern status and Company's operations in future. However membersattention is drawn to note 35 on Commitments and Contingencies in the Notes forming partof the standalone financial statement.
6. During the period under review no amount has been transferred to reserves.
Your Directors would like to express their sincere appreciation of the positiveco-operation received from the Central Government the Government of Haryana andUttaranchal and Karnataka Financial Institutions and the Company's Bankers CustomersDealers and all other business associates. by the Directors also wish to place onrecord their deep sense of appreciation for the commitment displayed by all executivesofficers workers employee unions and staff of the Company resulting in the successfulperformance of the Company during the year.
The Board also takes this opportunity to express its deep gratitude for the continuedco-operation and support received from its valued shareholders.
Annexure - A
To the DirectorsRs. Report
Policy on Appointment and Removal of Director's and Members of Senior Management
(i) This Policy on Appointment of Directors and Members of Senior Management (the" Policy") applies to the Board of Directors (the "Board")of Escorts Limited ("Escorts" or the "Company") and theSenior Management of Escorts. This Policy was recommended by the Nomination andRemuneration Committee of the Company ("NRC") and approved by the Boardat its meeting held on January 16 2015 and shall be subjected to periodic review by NRC.
(ii) The primary objective of the Policy is to provide a framework and set standardsfor the appointment of talented and self-motivated Directors and Members of SeniorManagement who should have the capacity and ability to lead Escorts towards achieving itsstated goals and strategic objectives taking into account the interest of allstakeholders.
(iii) The Board is ultimately responsible for the appointment of Directors andrecommending the appointment of Independent Directors to the shareholders for theirapproval.
(iv) The Board delegates its responsibility for the assessment and selection ofsuitable candidates for the position of Directors of Escorts to the NRC which will submitits recommendations to the Board in accordance with this Policy.
For the purposes of this Policy:
Rs. Executive BoardRs. shall mean and include the Chairman and Managing DirectorManaging Director and any other Whole-time Director of Escorts appointed by the Board/Shareholders by whatever name called.
Senior ManagementRs. shall mean and include the following:
Employees in the grade of Associate Vice President and above; and
KMPs (other than Whole-time Directors).
3. Criteria for Appointment as a Director and Senior Management Positions:
(i) Matching the requirements of Escorts and enhancing the competencies of the Boardare the basis for NRC to shortlist and recommend a candidate for appointment to the Board.Such candidate shall have primary or substantial
strategic and balance sheet management/ profitability management responsibilities. Whenrecommending a candidate for such appointment NRC shall consider:
(a) the results of assessment of the proposed appointee against a range of criteriaformulated by NRC which include but shall not be limited to skill sets regional andindustry experience background integrity and other qualities required to operatesuccessfully in the position of Director having due regard to the benefits of diversityof the Board;
(b) the extent to which the proposed appointee is likely to contribute to the overalleffectiveness of the Board and work constructively with the existing Directors and SeniorManagement;
(c) the present and potential future needs and requirements of the Company and sectorin which it conducts its business and operations;
(d) the nature of existing positions held by the proposed appointee including otherdirectorships held or other relationships and the impact it may have on the appointee'sability to exercise independent judgment;
(e) any requirements under applicable law (including but not limited to under theCompanies Act 2013 and/ or the rules and regulations made thereunder) and/ or under theListing Agreements; and
(f) time commitment required from a Director to properly discharge his fiduciary dutiestowards the Company.
(ii) The criteria to be considered when assessing prospective candidates forappointment as Directors shall include the following:
(a) highest levels of personal and professional ethics and integrity;
(b) high quality attributes such as discipline objectiveness sensitivity andcreativity;
(c) sharing and demonstrating the values of Escorts;
(d) qualification in relevant disciplines (e.g. finance secretarial managementaccountancy legal and engineers etc.) or being a recognised specialist in disciplines orareas relevant to the Company and/ or its business;
(e) experience in the management of a diverse organisation whether located in Indiaand/ or overseas in the Sector where the Company is already doing business or intents toenter into;
(f) experience in accounting and finance secretarial administration corporateengineering and strategic planning or fund management;
(g) demonstrable ability to work effectively with the Board;
(h) excellent interpersonal communication and representational skills;
(i) demonstrable leadership skills;
(j) strong influencing and negotiating skills; and
(k) continuous professional development to update knowledge and skills.
(iii) The criteria to be considered when assessing prospective candidates for a SeniorManagement position shall include the following:
(a) highest levels of personal and professional ethics and integrity;
(b) demonstrable leadership skills;
(c) specialist knowledge and/ or experience required for the Senior Management positionin question;
(d) good interpersonal relationships;
(e) demonstrating intelligence maturity and wisdom;
(f) possesses managerial abilities such as effective communication skills actionfocus people engagement cultural sensitivity flexibility team player strategicthinking etc.;
(g) sharing and demonstrating the values of Escorts ; and
(h) ability to significantly contribute towards achievement of the strategic andbusiness objectives of the Company.
(iv) Every person proposed to be appointed as a Director or a member of SeniorManagement should be able to give sufficient time and attention to the Company's affairs.
(v) The Policy is aimed to engage Directors (including Non-Executive Directors andIndependent Directors) and Members of Senior Management who are highly skilled competentand experienced persons within the fields of business finance accounting managementsales marketing administration research corporate governance technical operationslaw or other disciplines related to the Company's business and operations.
(vi) In addition to such requirements as may be specified under this Policy theIndependent Directors shall also fulfill the applicable requirements prescribed underSection 149 of the Companies Act 2013 and the rules and regulations made there under theprovisions of the Listing Agreement(s) and other applicable laws as modified or amended orsupplemented from time to time.
(vii) Each Independent Director shall be required to duly submit/ make the stipulateddeclarations required to be furnished pursuant to the provisions of the Companies Act2013 and the rules and regulations made thereunder the Listing Agreements otherapplicable laws and the Articles of Association of the Company.
(viii) No person shall be considered for appointment/ re-appointment as a Director ofEscorts if he is disqualified to be appointed/ re-appointed as such in terms of theprovisions of Section 164 of the Companies Act 2013 or under any other applicable law.
(ix) No person shall be considered for appointment as a Director of Escorts if he isalready a Director in ten or more public companies or private companies which is either aholding or subsidiary company of a public company.
4. Selection Process
(i) The selection procedure to be followed for the appointment of persons for the Boardis as below:
(a) NRC in consultation with the Chairman and Managing Director of Escorts shalldetermine the selection criteria applicable for each position at the Board level("Director Selection Criteria").
(b) For the positions of Whole-time Directors and based on the applicable SelectionCriteria NRC in consultation with the Chairman and Managing Director of Escorts shallgenerate a potential list of candidates for the Board position in question who may meetthe prescribed Director Selection Criteria.
(c) For the positions of Independent Directors or Non-Executive Directors NRC shallfinalise a list of potential candidate(s) who meets the applicable Director SelectionCriteria and shall submit such list to the Chairman of the Board along with itsrecommendations.
(d) The Chairman of the Board shall thereafter meet the short listed candidate(s) toassess their capability for the job. In the event that the Chairman may feel that no shortlisted candidate is suitable for appointment to the Board the Chairman may require NRC tosubmit a fresh list of candidates.
(e) The candidate selected by the Chairman shall be appointed in accordance with therelevant provisions of the Companies Act 2013 rules made thereunder and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 subject to the approval of theBoard and/ or Shareholders of Escorts at General Meeting.
(ii) The selection procedure to be followed for the appointment of persons at theSenior Management positions is as below:
(a) In case of vacancy of KMP (other than Whole-time Directors) the Company's HR inconsultation with NRC shall identify and short list employees to fill such vacancy whomay meet the criteria mentioned in this Policy. The appointment of the successfulcandidate shall be made by the Board in accordance with the provisions of the CompaniesAct 2013 rules made thereunder SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 and the Company's internal rules and regulations and policies.
(b) In case of vacancy in other Senior Management positions the Company's HR shallidentify and short list employees to fill such vacancy. The details of appointment will beplaced before NRC and/ or Board for noting only.
5. Appointment Procedure
(i) Every Director shall be appointed/ re-appointed by Escorts at Board or GeneralMeeting as per the requirements of the Companies Act 2013 Listing Agreement(s) or anyother applicable laws.
(ii) No person shall be appointed/ re-appointed as a Director of Escorts unless he/ shehas been allotted the Director Identification Number (DIN) and he furnishes to Escorts adeclaration to the effect that he is not disqualified to become a Director under theprovisions of the Companies Act 2013 and rules made there under or under any other lawfor the time being in force and files consent to hold the office as Director.
(iii) No person shall be appointed as a Director whose name appears in the list ofwillful defaulters published by the Reserve Bank of India.
(iv) NRC shall ensure that the appointment/ reappointment of Directors of Escorts is asper the terms of this Policy and recommendations of candidates are made to the Board forappointment.
6. Term/ Tenure
(i) Managing Director/ Whole Time Director
The Company shall appoint or re-appoint any person as its Managing Director and CEO orWhole Time Director for a term not exceeding three to five years at a time with aprovision for periodic review of performance. No reappointment shall be made earlier thanone year before the expiry of term.
(ii) Independent Director
An Independent Director shall hold the office for a maximum term of upto fiveconsecutive years on the Board of the Company and will be eligible for re-appointment onpassing a special resolution by the Company and disclosure of such appointment in theBoard's report.
Independent Directors will normally have an age limit of 75 years. The Board mighthowever in specific cases review this age limit and continue the tenure of the appointmentsubject to such approvals as are needed. A new appointee will therefore be at the time ofappointment will not be more than 70 years old. The limit of 75 years will not apply tonon-independent directors and/ or to Independent Directors re-categorised asnon-independent directors subject the composition of the Board being in conformity withthe extant guidelines.
No Independent Director shall hold the office for more than two consecutive terms butSuch Independent Director shall be eligible for appointment after the expiry of threeyears of ceasing to become an Independent Director. Provided that an Independent Directorshall not during the said period of three years be appointed in or be associated with theCompany in other capacity either directly or indirectly. However if a person who hasalready served as an Independent Director for five years or more in the Company as onApril 1 2014 or such other date as may be determined by the Committee as per regulatoryrequirement he/she shall be eligible for appointment for one more term of upto five yearsonly.
At the time of appointment of Independent Director it should be ensured that number ofBoards on which such Independent Director serves is restricted to seven listed companiesas an Independent Director and three listed companies as an Independent Director in casesuch person is serving as a Whole-time (Executive) Director of a listed company.
7. Letters of Appointment to Directors
Escorts shall issue a formal letter of appointment to the person appointed as aDirector of Escorts. The letter of appointment to be issued to the Independent Directorsshall inter alia set out the matters as stated in Schedule IV of the Companies Act 2013.
8. Evaluation Procedure for Directors
(i) NRC shall develop such assessment criteria as it shall deem fit for the purposes ofundertaking performance evaluation of the Directors and the Board as a whole. NRC shallundertake an annual performance evaluation of all Directors of Escorts based on therelevant assessment criteria developed by it.
(ii) The assessment criteria for performance evaluation of Directors shall be disclosedin accordance with the relevant provisions of the Companies Act 2013 the rules framedthereunder and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
Due to reasons for any disqualification mentioned in the Companies Act 2013 rulesmade thereafter or under any other applicable Act rules and regulations the Committeemay recommend to the Board with reasons recorded in writing removal of a Director or KMPsubject to the provisions and compliance of said Act rules and regulations.
The Whole-time Directors KMP and senior management personnel shall retire as per theApplicable provisions of the Companies Act 2013 and the prevailing policy of the Company.
The Board will have the discretion to retain the Wholetime Directors KMP and seniorManagement personnel in the same position/ remuneration or otherwise even after attainingthe retirement age for the benefit of the Company.
11. Policy Review
(i) This Policy may be amended modified or supplemented from time to time to ensurecompliance with any modification amendment or supplementation to the Companies Act 2013and rules made thereunder SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Securities and Exchange Board of India Act 1992 and rules/regulations/ guidelines made thereunder the Memorandum and Articles of Association of theCompany or as may be otherwise prescribed by the Board from time to time.
(ii) NRC may issue/ implement such guidelines procedures formats and/ or reportingmechanisms to enforce this Policy as it may deem fit.
To the DirectorsRs. Report
Remuneration Policy for the Directors Key
Managerial Personnel Senior Management and
The primary objective of this Remuneration Policy for the Directors Key ManagerialPersonnel Senior Management and other employees (the "Policy") is toprovide a framework for the remuneration of the Directors Key Managerial Personnel (KMP)Members of Senior Management and other employees of the Escorts Limited ("Escorts"or the "Company").
In terms of Section 178 of the Companies Act 2013 read with rules framed thereunderand SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 theNomination and Remuneration Committee of Directors of the Company (NRC) has formulated andrecommended this Policy for the approval of the Board of Directors of Escorts.
The primary objectives of this Policy are as under:
(i) To ensure that the level and composition of remuneration is in line with othercompanies in the industry sufficient to attract and retain right talent at all levelsand keep them motivated enough to meet the organisational objectives.
(ii) To ensure that a reasonable balance is maintained in terms of composition ofremuneration (fixed and variable component).
(iii) To have performance measurement parameters in place to assess the overallperformance of Directors KMPs Members of Senior Management and other employees.
Based on the above objectives and broad parameters set herein the Board of Directorsof Escorts at its meeting held on January 16 2015 has approved this Policy.
This Policy shall be applicable and act as a guiding principle with regard toremuneration payable by Escorts to all Directors KMPs Members of Senior Management andother employees of the Escorts.
3. Remuneration of Non-Executive/ Independent Directors
(i) The key elements of remuneration of Non- Executive/ Independent Directors arecommission and sitting fees (except professional fee if any) subject to overall limit asprescribed in the
Companies Act 2013 read with rules made thereunder and the approval of theshareholders as applicable. They shall be covered under the Directors and OfficersLiability Insurance (D&O) Policy. The Independent Directors shall not be eligible forstock options.
(ii) Since the Non-Executive/ Independent Directors collectively endeavor to ensurethat the Company performs well and is compliant with applicable laws rules regulationsand guidelines they may be paid commission subject to the approval of the Board andsubject to extant legal regulatory and other applicable provisions and adequacy ofsustained profitability.
4. Remuneration of Whole-time Director's
including Whole-time KMP (being a Director)
(i) The Whole-time Directors are appointed on a contractual basis for a fixed tenure asapproved by the shareholders and such contracts are renewable upon expiry of the tenuresubject to recommendation by NRC/ Board and approval of the shareholders.
(ii) The remuneration paid to Whole-time Directors is within the limits approved by theshareholders of Escorts which includes fixed salary perquisites variable pay in the formof commission other benefits and allowances and certain retiral benefits within theoverall limit under Section 197 of the Companies Act 2013. They are also eligible forstock options as per the scheme framed/ to be framed by Escorts from time to time.
(iii) The Whole-time Directors shall be covered under the Directors and OfficersLiability Insurance (D&O) Policy.
(iv) Their annual increments shall be linked to their overall performance and asrecommended by NRC and approved by the Board from time to time.
(v) While fixing the remuneration components the Company will also reckon extant andemerging economic conditions state of the sector and economy competitive pressures forkey qualified personnel not merely in the sector but also in the analogous sectors wherethe skill sets would be relevant; the Company will also reckon (with a lag wherenecessary) the multiple of the total emoluments payable to such Directors visa-vis themean salary paid to an employee in the organisation.
5. Members of Senior Management KMP (other than Whole-time Directors) and otheremployees
(i) Senior Management shall mean and include the following:
(a) Employees in the grade of Associate Vice President and above; and
(b) KMPs (other than Whole-time Directors).
(ii) The key components of remuneration package of the Senior Management and otheremployees of Escorts shall comprise of basic salary dearness allowance house rentallowance transport allowance ex-gratia performance bonus contribution to providentfund and superannuation fund premium on medical insurance and personal accidentinsurance scholarship for children gratuity leave travel allowance leave encashmentetc. which is linked to their grade. They are also eligible for stock options as per thescheme framed/ to be framed by Escorts from time to time.
(iii) The remuneration performance appraisal and rewards of Members of SeniorManagement and other employees shall be in line with the stated objectives.
(iv) The annual increments for the Senior Management and KMP (other than Whole-timeDirectors) and other employees shall be linked to their overall performance and as decidedby the Chairman and Managing Director in consultation with their reporting managers andCompany's HR. The Board on the recommendation of NRC shall also review and approve theremuneration payable to the Key Managerial Personnel of the Company.
(v) Employees must conduct themselves to ensure that no breach of Code of ConductEscorts Code of conduct for prevention of Insider trading or such other code as may beapplicable from time to time Standard Operating Procedures (SOPs) and all other relevantand applicable codes is committed. Any such breach will have a direct bearing on theirperformance appraisal and rewards and shall also attract appropriate disciplinary action.
(vi) While fixing the remuneration components the Company will also reckon extant andemerging economic conditions state of the sector and economy competitive pressures forkey qualified personnel not merely in the sector but also in the analogous sectors wherethe skill sets would be relevant; the Company will also reckon (with a lag wherenecessary) the multiple of the total emoluments payable to such Directors visa-vis themean salary paid to an employee in the organisation.
6. Disclosures in the Board's Report
(i) The disclosures as required under the relevant provisions of the Companies Act2013 rules made thereunder and the revised SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 shall be made with regard to the remuneration details ofthe Directors KMPs Senior Management and other employees.
(ii) This Policy shall be uploaded on the website of the Company.
7. Policy review
(i) This Policy may be amended modified or supplemented from time to time to ensurecompliance with any modification amendment or supplementation to the Companies Act 2013rules made thereunder the Listing Agreements the Securities and Exchange Board of IndiaAct 1992 and rules/ regulations/ guidelines made thereunder the Memorandum and Articlesof Association of the Company or as may be otherwise prescribed by the Board from time totime.
(ii) NRC may issue/ implement such guidelines procedures formats and/ or reportingmechanisms to enforce this Policy as it may deem fit.