(Including Management Discussion & Analysis)
Your Board of Directors is pleased to present the 72 nd Annual Report of the Company together with Audited Accounts for the year ended 31st March 2019.
The Indian economy started the fiscal year 2018-19 with a healthy 8.2% growth in the first quarter on the back of domestic resilience. Growth eased to 7.3% in the subsequent quarter mainly due to global headwinds like rising trade tensions and geo-political uncertainties in some parts of the world and financial health of banking sector. The Indian rupee witnessed high volatility this year falling nearly 14% between April to October in wake of global headwinds coupled with widening current account deficit led by higher crude oil prices. However rupee turned around in the second half of the year a sharp downward reversal in crude oil prices helped it recover from its record lows.
Despite softer growth the Indian economy remains one of the fastest-growing and possibly the least affected by global turmoil. The effects of external shocks were contained in part by India's strong macroeconomic fundamentals and policy reforms (including amendments to the insolvency and bankruptcy code bank recapitalisation and foreign direct investment).
With strength in consumption and a gradual revival in investments especially with a greater focus on infrastructure development the growth projections for the next few years are estimated to remain upwards of 7%. The improving macroeconomic fundamentals have further been supported by reforms that have helped foster an environment to boost investments and ease banking sector concerns. Together these augur well for a healthy growth path for the economy. India has already surpassed France to become the sixth-largest economy. By 2019 it may become the fifth- largest economy and the third-largest in the years to come.
Despite the positive outlook the economy remains vulnerable to domestic and geopolitical risks especially economic and political changes that can affect relative prices and hurt current and fiscal account deficit. While expectations of inflationary pressures remain benign concerns have risen on the twin deficit problem - current account deficit and fiscal deficit - especially as portfolio investments remain subdued while trade deficit stays high. While fiscal expansion remains key to accelerating growth it may strain government coffers if private investment loses steam.
With a strong stable government in place we are optimistic that the government will take measures which will ensure growth and India will continue to be one of the fastest growing economies in the world.
INDUSTRY STRUCTURE & DEVELOPMENT
After a buoyant start to the year industry slowed down considerably. The last quarter of the year under review did not bring any respite. The uncertainty ahead of the General Elections added to the burden of high interest rates and cost of insurance. Domestic sales of passenger vehicles grew by 2.7% during the year under review compared with 7.9% in the previous year. However the commercial vehicle division performed better growing by 17.5% against 19.9% in the previous year. Domestic sales of three-wheelers grew by 10.2% in the year under review against 24.2% the previous year. Two-wheeler sales saw a modest 4.9% growth in the year under review against 14.8% the previous year.
Despite domestic market conditions being tough your Company continued its leadership position in the Automotive Battery business during the year under review. With a wide array of products covering diverse market segments your Company reported double-digit growth across vehicular non-vehicular and two-wheeler segments.
Although OE demand slowed down your Company managed to maintain its high share across almost all leading vehicle manufacturers. Your Company's exports grew significantly in 2018-19 as it made inroads in key Middle East and South East Asian markets.
Your Company registered robust double-digit growth in the Industrial Division. The UPS business which is the largest business vertical of the Industrial Division registered doubledigit growth in all product segments and your Company's products continue to be the preferred choice of almost all the OEMs in the country. The UPS business has become the growth engine of the Industrial Division with timely capacity addition and continuous upgrades and automation powering sales growth.
In the Solar Division a continuous drive to expand market reach and penetration through channel partners led to significant growth. Your Company did this by offering reliable solutions for the government's rural electrification drive and also for Mini and Micro grids powered by renewable energy in the un-served parts of the country.
Financial stress in the Indian telecom sector speeded up consolidation of the industry and there were a number of shut-downs and M&A announcements of mobile telephony operators and tower infrastructure companies. Your Company's sales to the telecom sector were subdued following reduced offtake by telecom tower companies in view of the M&A and consequent reduction in the tenancies of the tower infrastructure companies.
The other business verticals including Traction Power and Projects also reported robust growth and your Company continues to the preferred brand for most of its customers.
Batteries for submarines
During the year under review your Company successfully met the battery requirements of the Indian Navy with timely deliveries. It has supplied the second set of Type-IV batteries including special copper inter-cell connectors and spares for the Indian Navy's Scorpene-class submarine two sets of Type-II (ATV) batteries for nuclear submarines and one set of Type-I batteries for Kilo-class submarines. The first set of indigenous Type-IV submarine batteries and inter-cell connectors supplied by your Company has passed all the harbour trials after installation on board.
Your Company also exported two sets of new-design submarine batteries along with all accessories and spares to Vietnam Navy. The first set of batteries has passed the sea trials and the second set is due for commissioning soon.
During the year under review your Company has also secured a maiden order to manufacture and export one set of batteries for a mini-submarine which is expected to be supplied during the financial year 2019-20. A repeat order for two sets of Type-II submarine batteries for the Indian Navy along with an export order for a set of Type-I submarine batteries is also being pursued.
In the fiscal year 2018-19 exports of automotive batteries grew impressively through new markets and brands backed by promotional activities and an increase in market share in the existing markets.
Your Company was able to extend the reach of its fourwheeler batteries to most of the Gulf Cooperation Council countries South East Asia and some African nations. These successes pushed up export sales significantly compared with the previous financial year.
For industrial batteries your Company has increased its global presence by venturing into new traction markets in Peru Taiwan and Saudi Arabia while consolidating and increasing market share in European and South East Asian markets. The traction business in Germany Greece and the UAE has grown significantly over the previous year. For the standby segment your Company has entered new markets such as Congo Malawi Kazakhstan and Kuwait. It has doubled its business in key markets such as Nigeria South Africa and Lebanon and established a strong foothold in the Solar market in Greece and Spain.
Your Company has achieved Global quality in its traction range and has been regularly supplying to Jungheinrich Germany the world's largest OEM in electric fork lift market.
In order to maintain its leadership position your Company is focused on upgrading its products and manufacturing technology as well as acquiring newer and advanced technology to meet the emerging expectations of the users. The in-house Research & Development (R&D) division is recognised by the Government of India's Department of Scientific and Industrial Research (DSIR) as a fully-accredited Research Centre in energy storage. Import substitution of raw materials reducing energy consumption and manufacturing time are some priority areas.
Your Company's in-house R&D also plays a major role as the interface between its priorities and the adoption of technology from collaborators. Your Company has technical collaboration and assistance agreements with East Penn Manufacturing Company Inc (EPM) a leading US manufacturer of lead-acid batteries and related items. The Advanced Manufacturing Facility for premium automotive batteries based on punched-grid technology is now in full-scale operation. The technology has helped your Company not only introduce in the country the most robust products both in terms of performance as well as in life but also achieve the highest level of productivity with absolute product consistency.
Your Company also has a technical assistance and collaboration agreement with Furukawa Battery Company Limited of Japan (FBJ) for various automotive applications. Your Company is developing advanced automotive batteries with ultra-negative technology plates which are expected to deliver unmatched fast-charge capability as well as long life currently considered to be the best globally.
The long-standing technical cooperation agreement with Hitachi Chemicals Co (formerly Shin Kobe Electric Machinery Co) for a variety of automotive and industrial VRLA products continues to help robust exchange of technical information on latest developments. In recent times this has helped your Company reduce manufacturing costs substantially specifically in automotive battery production by reducing the power consumption in the manufacturing process.
Your Company also has a technical collaboration and assistance agreement with Moura Batteries (MB) Brazil for the development of advanced automotive batteries required by the environment-friendly new-generation vehicles in compliance with Euro VI standards. Your Company is also developing under the guidance of MB engineers what is popularly known as Enhanced Flooded Batteries (EFB) which are scheduled to be launched by the end of the current financial year.
In the Industrial Battery segment your Company crossed a significant milestone by developing during the course of the just-concluded year 28 MWH of battery storage mainly for micro-grid energy storage applications. The advanced `Ultrabattery' solution developed in collaboration with EPM and Ecoult Pty Australia for grid-level energy storage has also started to be deployed commercially.
Together with EPM the Industrial Battery group has also developed `Front Terminal' AGM VRLA products required by international telecom customers as well as data centres.
Development of the cutting-edge technology of bipolar battery in active cooperation with Advanced Battery Concepts (ABC) of the US is on course. The work is scheduled to move beyond laboratory studies to field testing in the current financial year.
HIGHLIGHTS OF PERFORMANCE
Your Company recorded net sales of Rs. 10588.31 crores in 2018-19 against Rs. 9186.32 crores in the previous year and a profit before tax of Rs. 1238.58 crores against Rs. 1006.16 crores the previous year.
|Financial Results||(In Rs. Crores)|
|Profit before depreciation finance cost & tax expenses||1449.84||1299.17|
|Depreciation and amortisation expenses||313.50||245.94|
|Profit Before Exceptional item and Tax||1130.29||1047.99|
|Profit Before Tax||1238.58||1006.16|
|Profit After Tax||844.05||668.35|
|(In Rs. Crores)|
|Other Comprehensive Income||(0.43)||2.90|
|Total Comprehensive Income for the year||843.62||671.25|
|Balance brought forward||5304.31||4878.59|
|Making a total of||6147.93||5549.84|
|Out of this appropriations are :|
|Final Dividend for 2017-18 (80%)||68.00||-|
|Final Dividend for 2016-17 (80%)||-||68.00|
|Tax on Final Dividend||13.98||13.84|
|Interim Dividend for 2018-19 (160%)||136.00||-|
|Interim Dividend for 2017-18 (160%)||-||136.00|
|Tax on Interim Dividend||27.96||27.69|
|(Aggregate Dividend amounts to 240% (previous year - 240%)||245.94||245.53|
|And leaving a balance of (which is carried forward to next year)||5901.99||5304.31|
Consolidated Financial Statements
As required under SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 and in accordance with the Indian Accounting Standard (Ind-AS) 110 Consolidated Financial Statements of the Company and its subsidiaries form part of the Annual Report and are reflected in the consolidated financial statements of the Company. These statements have been prepared on the basis of audited financial statements received from the subsidiary companies as approved by their respective Boards.
Your Company has paid an interim dividend at the rate of 160% i.e. @ Rs 1.60 per equity share of Re. 1 each on the equity shares to the shareholders whose names appeared on the Register of Members on 17th November 2018. Your Directors are now pleased to recommend a final dividend at the rate of 80% i.e. Re. 0.80 per equity share of Re. 1 each for the year ended 31st March 2019 subject to the approval of shareholders at the ensuing Annual General Meeting. Consequently the total dividend for the year ended 31st March 2019 including the interim dividend during the year amounts to 240% i.e. Rs. 2.40 per equity share of Re. 1/- each.
The paid up equity share capital as on 31st March 2019 was Rs. 85 crores divided into 850000000 equity shares of face value of Re. 1 each.
A) Issue of equity shares with differential rights
The Company did not issue equity shares with differential rights during the financial year 2018-19.
B) Issue of sweat equity shares
The Company did not issue sweat equity shares during the financial year 2018-19.
C) Issue of employee stock options
The Company did not issue stock options during the financial year 2018-19.
D) Provision of money by Company for purchase of its own shares by employees or by trustees for the benefit of employees
The Company does not have a scheme for purchase of its own shares by employees or by trustees for the benefit of employees.
During the year under review the Company did not accept any deposits from the public within the ambit of Section 73 of the Companies Act 2013 and the Companies (Acceptance of Deposits) Rules 2014.
Particulars of Loans Guarantees or Investments
Pursuant to Section 186 of the Companies Act 2013 the details of the loans given (Note numbers 6 and 13) guarantees on securities provided (Note no. 38(ii)) and investments made (Note nos. 4 and 9) by the Company during the year under review have been disclosed in the financial statements.
Material Changes and Commitments
There have been no material changes that have occurred subsequent to the close of the financial year of the Company to which the financial statements relate and the date of the report for example:
> Settlement of tax liabilities;
> Operation of patent rights;
> Depression in market value of investments;
> Institution of cases by or against the Company;
> Destruction of any assets or disposal of a substantial part of undertaking;
> Changes in capital structure;
> Alteration in wage structure arising out of trade union negotiation; and
> Material changes concerning purchase of raw material and sale of the product.
Key Financial Ratios
In accordance with SEBI (Listing Obligations & Disclosure Requirements) (Amendment) Regulations 2018 the Company is required to give details of significant changes (i.e. change of 25% or more as compared to the
immediately previous financial year) in key sector-specific financial ratios including Debtors Turnover Inventory Turnover Interest Coverage Ratio Current Ratio Debt Equity Ratio Operating Profit Margin (%) and Net Profit Margin (%) and details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.
None of the ratios except Profit After Tax (PAT) has significant changes i.e. change of 25% or more compared to immediately previous financial year. PAT percentage increased by 26% due to profit from exceptional item of Rs. 108.29 crores (sale of property) in current year versus an exceptional item charge of Rs. 41.83 crores (brand settlement cost) in the previous year.
Return on net worth increased from 13.5% in 2017-18 to 15.7% in 2018-19. A significant driver is the exceptional item impact as explained under previous item. Additionally the business profit from operations grew by 10% over prior year.
Statutory Auditors and their Report
M/s B S R & Co. LLP Chartered Accountants (Firm's Registration No: 101248W/W - 100022) were appointed as Statutory Auditors of your Company at the Annual General Meeting held on 27th July 2017 for an initial term of five consecutive years till the conclusion of 75th Annual General Meeting of the Company.
Pursuant to the amendment in Section 139 of the Companies Act 2013 the requirement to place the matter relating to ratification of appointment of Statutory Auditors at every AGM has been omitted with effect from 7th May 2018.
The Report given by the Auditors on the financial statements of the Company is part of the Annual Report. There has been no qualification reservation adverse remark or disclaimer given by the Auditors in their Report.
The Statutory Auditors have not reported any incidence of fraud to the Audit Committee of the Company during the year under review.
Pursuant to Section 148 of the Companies Act 2013 read with the Companies (Cost Records and Audit) Rules 2014 (as amended) the cost records maintained by the Company in respect of the products manufactured by the Company are required to be audited. Your Directors on the recommendation of the Audit Committee have appointed M/s Mani & Co. Cost Accountants (Firm Registration no. 000004) to audit the cost records of the Company for the financial year 2019-20 at a remuneration of Rs. 900000/- plus out-of-pocket expenses and taxes as applicable.
A resolution regarding ratification of remuneration payable to M/s Mani & Co Cost Accountants forms part of the Notice convening the 72nd Annual General Meeting of the Company.
Secretarial Auditors & their Report
Pursuant to the provisions of Section 204 of the Companies Act 2013 read with the Companies (Appointment and Remuneration of Managerial
Personnel) Rules 2014 the Company has appointed M/s A. K. Labh & Co. practising company secretaries (FCS: 4848/CP No.: 3238) to audit secretarial and other related records of the Company for the financial year 2018-19. The Secretarial Audit Report is annexed herewith as Annexure - I. The Secretarial Audit Report does not contain any qualification reservation or adverse remark.
BUSINESS RESPONSIBILITY REPORT
In July 2011 the Ministry of Corporate Affairs Government of India came out with the `National Voluntary Guidelines on Social Environmental and Economic Responsibilities of Business'. These guidelines contain certain principles that are to be adopted by companies as part of their business practices and require disclosures regarding the steps taken to implement these principles through a structured reporting format viz. Business Responsibility Report. Pursuant to Regulation 34(2)(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 your Company has prepared the Business Responsibility Report and is annexed herewith as Annexure - II.
Transparency is the cornerstone of your Company's philosophy and it adheres to all requirements of corporate governance in letter and spirit. All the Committees of the Board of Directors meet at regular intervals as required in terms of SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015. Your Board of Directors has taken necessary steps to ensure compliance of statutory requirements. The Directors and Key Management Personnel and Senior Executives of your Company have complied with the approved `Code of Conduct for Board of Directors and Senior Executives' of the Company. The declaration to this effect pursuant to Schedule V of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 signed by Managing Director and CEO of the Company forms part of the Annual Report.
The Report on Corporate Governance as required under Regulation 34(3) read along with Schedule V of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 forms part of and is annexed herewith marked as Annexure - III. The Auditors' Certificate on compliance with Corporate Governance norms is also attached to this Report. Further as required under Regulation 17(8) of SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 a certificate from the Managing Director & CEO and Director- Finance & CFO is being annexed with this Report.
Your Company has a well-designed TQM Model to drive it towards continual improvement in order to deliver high- quality products and services to customers and fully engage all other stakeholders such as employees suppliers regulators and communities. The TQM model is aimed at developing a TQM culture for long-term success through customer satisfaction.
Your Company has deployed a globally-proven approach for business excellence and TQM culture viz. TPM Six Sigma 5S Kaizen Quality Circle and Innovation. Given the challenges that the organisation is facing each of these initiatives has been leveraged to set a new milestone. There is a monthly performance measurement mechanism for each of these initiatives. It has implemented International Standards such as ISO 9001 & IATF 16949 for Quality and ISO 14001 ISO 45001 for Environment Health & Safety. The focus on health and safety performance is very high. The organisation structure policy and procedure for health and safety is regularly reviewed and implemented.
Implementing best practices and promoting competitive capability are some important areas on which your Company focused during the year. During the year under review your Company bagged many prestigious awards such as:
> Golden Peacock National Quality Award 2018
> Dun & Bradstreet Corporate Awards 2018
> Apex India Environment Excellence Award
> Commendation for Significant Achievement in Corporate Excellence - CII - ITC Sustainability Award 2018
> CII ER Productivity Award
> Arogya World Trust - Gold Award
Your Company is committed to developing a robust TPM culture across the organisation. All manufacturing units have TPM practice though maturity level varies from factory to factory. Implementation of TPM is in various stages. Four factories have secured the consistent commitment award in TPM from JIPM Japan. Two factories have won Excellence award during the year under review. The JIPM Japan gave the Bawal factory in Haryana a category A award for TPM and the Ahmednagar factory a category B award in March 2019.
OCCUPATIONAL HEALTH SAFETY & ENVIRONMENT
Your Company has a well-designed EHS or Environment Occupational Health & Safety policy that is effectively deployed across all factories. All factories are certified for EMS ISO 14001 ISO 45001 & OHSAS 18001 by certification bodies of global repute.
Your Company used natural and manmade resources in an optimal and responsible manner and ensures the sustainability of resources by reducing reusing recycling and managing waste. Your Company regularly monitors and prevents pollution through waste minimisation at the source recovery/treatment of emissions and releases and conservation of energy thus progressively improving the environment occupational health and overall carbon footprint.
Your Company has established implemented and maintained a procedure for the identification of hazards assessment of their risk and determining the necessary controls. Safety Audits Hazard Evaluation Emergency Management Planning are conducted periodically in the factories.
Your Company's employees as well as the upstream partners are being regularly trained and put through awareness programmes to minimise health and safety risks for employees and contract workers.
Your Company is transparent about the sustainability challenges. Identifying which economic environmental and social issues are most important for the business environment and stakeholders is most important. The sustainability efforts include reduction of pollution waste elimination effective use and recycling of existing natural resources (such as water oil gas and metal) and energy saving. Your Company also keeps an eye on the sustainability of its upstream partners. It has conducted several vendor sustainability programs in all the regions involving almost all the critical vendors. They have been given periodic training on Risk Assessment Environment Health & Safety and Quality for the sustainability of their businesses.
CORPORATE SOCIAL RESPONSIBILITY
Your Company always strives for long-term sustainability through inclusive growth and development involving not only the community around its main operational locations but in society at large at the regional and national level. The core thematic areas that continue to be the main pillars of your Company's Corporate Social Responsibility (CSR) philosophy even before CSR became regulatory compliance for organisations to follow under the Companies Act 2013 are:
> Basic Education
> Environment Management
> Women Empowerment and
> Community Development.
The Board of Directors of your Company has approved a CSR Policy viz. EIL CSR Policy in accordance with Section 135 of the Companies Act 2013 and the Companies (Corporate Social Responsibility Policy) Rules 2014 notified by the Ministry of Corporate Affairs Government of India which is available on your Company's website at http:// www.exideindustries.com/investors/governance-policies . aspx. The CSR policy underlines the guiding principles and mechanisms for undertaking various CSR activities/ programs by the Company.
The disclosure in line with Rule 9 of the Companies (Corporate Social Responsibility Policy) Rules 2014 is annexed as Annexure - IV.
A total amount of Rs. 1921.89 lakh was spent during the year under review as against the 2% obligation of Rs. 1898.22 lakh. The main thrust during the year was not only to consolidate the efforts made over the past few years but also achieve newer dimensions under the given ambit of CSR. During the year your Company established certain model projects especially in community solid waste management and development of vocational skills as livelihood options and also encouraged employees to volunteer. The model projects that were developed in the previous year especially the ones in basic education and public health stabilised.
Your Company made significant strides in achieving over 100% utilisation for the year to harness all its resources for successful execution and completion of numerous CSR projects across all locations including the manufacturing units at Haryana Maharashtra Tamil Nadu Uttarakhand West Bengal and certain projects at the national level.
Projects on education health and sanitation remained the areas of thrust for 2018-19 too. Your Company took some significant initiatives in public healthcare women empowerment and promoting education including special education and employment enhancing vocational skills eradication of hunger poverty and malnutrition both with partner organisations as well as directly by internal teams at the plants. Your Company was also involved in other associated interventions such as support for homes for destitute children environmentally conscious initiatives for conservation of natural resources training to promote rural sport and nationally recognised sports and setting up of old- age homes.
A strong internal control framework is an essential prerequisite of a growing business. In this context your Directors to the best of their knowledge and belief and according to the information and explanations obtained by them state that your Company's internal control systems are commensurate with its size and scale of operations that are designed to provide reasonable assurance that the Company's financial statements are reliable and prepared in accordance with the law.
While the industry has seen an overall slowdown during the last two quarters of the year under review the mid-to longterm outlook is quite positive. The market is expected to once again grow in line with its potential after the General Elections.
With India expected to be the third largest consumer base by 2025 the automotive industry looks set for profitable and stable growth over the next few years. Initiatives such as the Automotive Mission Plan 2016-26 and Make in India should give the industry a boost.
OPPORTUNITIES AND THREATS
The market for batteries required by data centres is expected to show healthy growth in the next few years. The Indian government's initiative to develop a 100 cities as smart cities that offer smart solutions to their citizens through the use of technology information and data is expected to fuel demand for back-up power systems and hence batteries. Further mobile broadband penetration in the form of Wi-Fi is very low in India and it is estimated that there will be a significant increase in the number of Wi-Fi hot spots which will push sales of UPS and so the batteries that power them.
The latest game-changer in the energy market is expected to come in the form of Battery Energy Storage Systems. With more and more renewable energy being pumped into the grid from utilities as well as decentralised generators the distribution networks are becoming increasingly unstable. Battery Energy Storage Systems are meant for both grid scale as well as off-grid scale. The energy storage market for grid-connected and off-grid renewables is likely to provide significant opportunities.
The robust growth in automobile sales over the last few years has ensured medium and long-term opportunity for replacement battery sales an area in which your Company's brand equity and strong channel relationship give it a huge competitive edge.
While your Company has taken definitive steps in preparing for future demands of electric mobility it is simultaneously
ensuring technological upgrades in the lead-acid space that would keep it ahead of competitive threats.
The lead-acid battery business has seen a host of new players over the last few years both at a regional and national level. Being the dominant brand in the category your Company is susceptible to constant pressure at a market level as these new players try to wean away consumers and channel partners essentially through low-price offerings. Your Company is addressing these challenges through the adoption of latest technologies and lean manufacturing practices in order to quickly develop differentiated products that will change the price-value equation in its favour.
RISKS AND CONCERN
There is an inherent threat from new battery technologies such as Lithium-Ion technology which is likely to penetrate automotive applications as well as various industrial applications such as telecom data centers UPS solar street lights and energy storage systems. Your Company has taken the strategic step of entering the Li-Ion battery business through a joint venture with Leclanche S.A. and now has a road map for the launch of Li-Ion products.
The strong brand equity of your Company its understanding of Indian market across segments coupled with the partner's capability in Li-Ion technology will help it offer a competitive product and create a big footprint in the business.
Your Company has a long and healthy association with all automotive OEM customers and maintains a very high market share. Customers sometimes seek to offset their high dependency on a single source. But your Company has excelled in engaging these OEM customers by proactively fulfilling their emerging expectations on product technology and price. The operating standards of manufacturing facilities are upgraded with highest degree of commitment to ensure that these facilities stand above the expected standards in Customers Audit. Projects on new product development cost reduction performance enhancement and capacity expansion to ensure that their expectations are exceeded.
The brand equity of your Company is very high and one of its key strengths. It has taken all necessary measures to build on it ensuring controls to protect the brand. In view of increased penetration of social media the inherent risk of communities employees and customers sharing their expectations concerns and suggestions and so impacting the brand image has gone up. Your Company has implemented a Social Media Framework through a technology platform to ensure effective management of its reputation by timely redressal of concern action on suggestions and enquiries.
Other actions for ensuring the protection of the brand includes the registration of the trademark in countries where the Company intends to sell its products. Your Company is also leveraging the know-how of collaborators to offer a great experience to the customer on product performance.
Your Company has shown healthy growth over the last several years and taken steps to expand capacity to meet this demand and remain cost competitive. Company-wide cost reduction initiatives have been launched ensuring the budgetary control in all facets of the business including raw material conversion marketing and distribution. Your Company has a focused initiative to improve productivity and control costs of energy consumables overheads logistics and marketing.
VIGIL MECHANISM/ WHISTLE-BLOWER POLICY
Your Company has a Whistle-Blower Policy that offers a formal mechanism to its directors employees and stakeholders to report genuine concerns about unethical behavior actual or suspected fraud or violation of the Company's Code of conduct in accordance with the provisions of the Companies Act 2013 read with the Companies (Meeting of Board and its Powers) Rules 2014 and SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015. The policy provides for adequate safeguards against victimisation of persons who use such mechanism and provides for direct access to the Chairperson of the Audit Committee in appropriate or exceptional cases. Your Company has a dedicated email address for reporting such concerns. It is affirmed that no personnel of the Company has been denied access to the Audit Committee. The policy was amended during the year under review and is available on the website http:// www.exideindustries.com/investors/governance-policies . aspx. The Audit Committee of Board is entrusted with the responsibility to oversee the vigil mechanism.
Your Company has five Indian subsidiaries viz Chloride Metals Limited Chloride Power Systems & Solutions Limited Chloride International Limited Exide Life Insurance Company Limited Exide Leclanche Energy Private Limited and three foreign subsidiaries viz. Chloride Batteries S.E Asia Pte. Ltd. Singapore Espex Batteries Limited UK and Associated Battery Manufacturers (Ceylon) Limited Sri Lanka.
> Exide Life Insurance Company Limited (ELI) a 100% subsidiary of your Company is engaged in the business of life insurance and annuity offering a range of individual and group life pension and health products across traditional and unit-linked platforms. It reaches customers through technology-enabled solutions and its network of 200 plus offices to cater to the needs of customers.
ELI has assets under management or AUM of over Rs. 14200 crores as of 31st March 2019. The total premium collected by ELI during the year ended 31st March 2019 was Rs. 2886 crores as against Rs. 2532 crores collected during the previous year. It has also recorded a profit before tax of Rs. 12.03 crores during the year 31st March 2019 as against a profit of Rs. 60.02 crores recorded during the previous year.
As at 31st March 2019 market consistent embedded value (MCEV) of ELI was Rs. 2404 crores against MCEV of Rs. 2137 crores in the previous year.
> Chloride Metals Limited another 100% subsidiary of your Company having its plants at Markal in Khed Taluka of Pune and at Malur in Kolar district of Karnataka operates smelters with integrated facilities for extracting lead from exhausted batteries and manufacturing and supplying recycled lead and lead alloys. The net sales of Chloride Metals Limited was Rs. 2079.63 crores and its profit before tax was Rs. 17.69 crores representing an increase of 0.12% in net sales and a decrease of 40% in profit before tax compared to the previous financial year.
> Chloride Power Systems & Solutions Limited a 100% subsidiary of your Company having its factory at Sector V Salt Lake City Kolkata is engaged in manufacture and sale of battery chargers D.C. Power Systems solar installations and associated equipment. During the year 2018-19 Chloride Power achieved a turnover of Rs. 116.62 crores and a profit before tax of Rs. 2.04 crores.
> Chloride International Limited is at present not engaged in any trading or manufacturing activity and has income from rent and interest/dividend on securities. The income of Chloride International Limited during 2018-19 amounted to Rs. 95.86 lakhs with a profit before tax of Rs. 84.04 lakhs representing an increase of 41% and 49% respectively over the figures for the previous financial year.
> Exide Leclanche Energy Private Limited (ELEPL) the joint venture company in which your Company holds an equity shareholding of 74.99% was incorporated on 29th September 2018 in collaboration with Leclanche SA of Switzerland. Leclanche SA is a leading provider of high-quality energy storage solutions and is supporting by way of providing the desired technical support for manufacturing Li-Ion batteries. The manufacturing facility of ELEPL is located in Gujarat. The commercial production of the Company has not yet started. There was a loss of Rs. 3.92 crores during the year under review.
> Your Company also holds 100% of the share capital in Chloride Batteries S.E Asia Pte. Ltd. Singapore. Chloride Batteries is engaged in production and distribution of industrial battery chargers rectifiers and parts and the distribution of industrial and automotive batteries. It caters to the South East Asian and Australian markets. During the year 2018-19 it achieved a turnover of SGD 27.31 million and incurred a loss of SGD 0.2 million.
> Espex Batteries Limited UK a 100% subsidiary of your Company is engaged in marketing and selling of lead- acid batteries for industrial applications in the UK and its neighboring areas. During 2018-19 the Company achieved a turnover of GBP 7.7 million and made a profit before tax of GBP 0.17 million.
> Your Company also holds 61.5% of the share capital in Associated Battery Manufacturers (Ceylon) Limited Sri Lanka which is engaged in the business of manufacturing and marketing of lead-acid batteries. During the year 2018-19 this Company achieved a turnover of SLR 3453.68 million and made a profit before tax of SLR 242.81 million.
Exide Life Insurance Company Limited and Chloride Metals Limited are material subsidiaries as per the thresholds laid down under the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
The profit and loss accounts balance sheet auditors' report and directors' report of the subsidiaries are not attached to the annual accounts of your Company pursuant to general exemption granted vide general circular number 2/2011 dated 08.02.2011 issued by the Government of India Ministry of Corporate Affairs and in terms of Section 136 of the Companies Act 2013. Pursuant to the provisions of Section 129(3) of the Companies Act 2013 read with Rule 5 of Companies (Accounts) Rules 2014 a statement containing salient features of financial statements of subsidiaries in Form AOC-1 is attached to the financial statements. However the necessary details about the subsidiaries are given in the consolidated financial statements. The Company will make available the financial statements and related detailed information of the subsidiary companies upon request by any Member of the Company or its subsidiary companies. Copies of the financial statement of the subsidiaries would also be available for inspection by any such person at the registered office of your Company on any working day as specified in the Notice convening the 72nd Annual General Meeting.
Pursuant to Section 136 of the Companies Act 2013 the financial statements of the Company consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries are available on the website of the Company.
EXTRACT OF THE ANNUAL RETURN
The extract of the Annual Return in Form No. MGT-9 attached as Annexure - V shall form part of the Board's report. The extract is also available under the Investor section on the website of the Company at www.exideindustries.com .
At the 71st Annual General Meeting (AGM) held on 2nd August 2018 the shareholders approved the appointment of Mr. Surin Shailesh Kapadia (having DIN: 00770828) as a Non-Executive Independent Director to hold office for the first term of five consecutive years.
Mr. Subir Chakraborty (having DIN: 00130864) retires by rotation in accordance with the provisions of the Companies Act 2013 and being eligible offers himself for re-appointment at the ensuing Annual General Meeting.
Pursuant to the provisions of the Companies Act 2013 the shareholders at the 67th AGM of your Company held on 22nd July 2014 had appointed Mr. Vijay Aggarwal Mr. Sudhir Chand and Ms. Mona Desai as Independent Directors to hold office for a term of five consecutive years up to the conclusion of the ensuing Annual General Meeting. Their term will expire at the conclusion of the 72nd AGM.
Considering their vast knowledge experience and expertise in their respective fields and the contribution made by these Directors during their tenure as an Independent Director the Nomination & Remuneration Committee and the Board of Directors of your Company has recommended reappointment of Ms. Mona N Desai as Independent Director for second term of five consecutive years from the conclusion of the ensuing 72nd Annual General Meeting till 22nd July 2024. It has also recommended the re-appointment of Mr. Sudhir Chand as an Independent Director for a second term of three consecutive years from the conclusion of the ensuing 72nd Annual General Meeting till 22nd July 2022.
The Company has received declaration from Ms. Mona N Desai and Mr. Sudhir Chand that they continue to fulfill the criteria of independence as prescribed under the provisions of the Companies Act 2013 read with the Schedules and Rules issued thereunder as well as Regulation 16 of the Listing Regulations (including statutory re-enactment thereof for the time being in force).
The term of Mr. Gautam Chatterjee Managing Director and Chief Executive Officer (CEO) and Mr. Arun Mittal Wholetime director designated as Director-Industrial is due to expire on the close of business hours on 30th April 2019.
The Board of Directors at its meeting held on 30th April 2019 has re-appointed Mr. Gautam Chatterjee as the Managing Director and CEO for a further period of two years with effect from 1st May 2019 subject to the approval of the Shareholders. He will attain the age of 70 years on 25th February 2020 and hence continuation of his employment as Managing Director & CEO pursuant to Section 196(3) and Schedule V of the Act through a Special Resolution proposing his re-appointment as Managing Director and CEO with effect from 1st May 2019 will be placed at the ensuing Annual General Meeting for approval of the Shareholders.
The term of Mr. Subir Chakraborty Whole-time director designated as Director-Automotive is due to expire at the close of business hours on 30th April 2020. The Board of Directors at its meeting held on 30th April 2019 has appointed Mr. Subir Chakraborty as Deputy Managing Director for a period of two years with effect from 1st May 2019 subject to the approval of the Shareholders. A resolution proposing his appointment as Deputy Managing Director with effect from 1st May 2019 will be placed at the ensuing Annual General Meeting for approval of the Shareholders.
The Board of Directors at its meeting held on 30th April 2019 has re-appointed Mr. Arun Mittal as whole-time director designated as Director-Automotive for a period of five years with effect from 1st May 2019 subject to the approval of the Shareholders. A resolution proposing his re-appointment as a whole-time director designated as Director-Automotive with effect from 1st May 2019 will be placed at the ensuing Annual General Meeting for approval of the Shareholders.
Necessary information pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 in respect of directors to be appointed and re-appointed at the ensuing Annual General Meeting are given in the Annexure to the Notice convening the Annual General Meeting scheduled to be held on 3rd August 2019.
None of the Directors of your Company are disqualified for being appointed as directors as specified in Section 164(2) and Rule 14(1) of Companies (Appointment and Qualification of Directors) Rules 2014.
KEY MANAGERIAL PERSONNEL
During the year the following directors/executives continued as Key Managerial Personnel of the Company:
> Mr. Gautam Chatterjee Managing Director & CEO
> Mr. A K Mukherjee Director - Finance & CFO
> Mr. Subir Chakraborty Whole-time director (Director - Automotive)
> Mr. Arun Mittal Whole-time director (Director - Industrial)
> Mr. Jitendra Kumar Company Secretary & EVP - Legal & Administration
DECLARATION OF INDEPENDENCE
All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
Further the Board of Directors has taken on record the declaration and confirmation submitted by the Independent Director under regulation 25(8) after assessing its veracity.
Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 the performance evaluation of the Board as a whole and of the Chairman and the NonIndependent Directors was carried out by the Independent Directors. This exercise was carried out in accordance with the Nomination & Remuneration Policy framed by the Company within the framework of applicable laws.
The Board carried out an annual evaluation of its own performance as well as the evaluation of the working of its committees and individual directors including Chairman of the Board. The performance evaluation of all the directors was carried out by the Nomination and Remuneration Committee. The questionnaire and the evaluation process were reviewed in accordance with the SEBI guidance note on Board evaluation dated 5th January 2017 and suitably aligned with the requirements.
While evaluating the performance and effectiveness of the Board various aspects of the Board's functioning such as adequacy of the composition and quality of the Board time devoted by the Board to Company's longterm strategic issues quality and transparency of Board discussions execution and performance of specific duties obligations and governance were taken into consideration. Committee performance was evaluated on the basis of their effectiveness in carrying out respective mandates composition the effectiveness of the committees the structure of the committees and meetings independence of the committee from the Board contribution to decisions of the Board. A separate exercise was carried out to evaluate the performance of Independent Directors including the Chairman of the Board who were evaluated on parameters such as level of engagement and contribution to Board deliberations independence of judgement safeguarding the interest of the Company and focus on creation of shareholders value ability to guide the Company in key matters attendance at meetings etc.
Considering the success of the Company in most spheres and the value delivered to all its stakeholders it was evident that the Directors had been diligent sincere and consistent in the performance of their duties. The Directors expressed their satisfaction with the evaluation process.
NOMINATION & REMUNERATION POLICY
In accordance with the provisions of Section 178(3) of the Companies Act 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 your Company has Nomination & Remuneration policy in place. In accordance with the requirements of SEBI (LODR) (Amendment) Regulations 2018 the Board amended the policy during the year under review to align the definition of Senior Management Personnel (SMP) and the process to determine their remuneration. The objectives and key features of this Policy are:
(a) Formulation of the criteria for determining qualifications positive attributes of directors Key Managerial Personnel (KMP) and senior management personnel and also independence of independent directors;
(b) Aligning the remuneration of directors KMPs and senior management personnel with the Company's financial position remuneration paid by its industry peers etc.;
(c) Performance evaluation of the board its committees and directors including independent directors;
(d) Ensuring board diversity;
(e) Identifying persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down;
(f) Directors' induction and continued training.
The revised Nomination & Remuneration Policy is available on the Company's website under the link http:// www.exideindustries.com/investors/governance-policies . aspx
The Board meets at regular intervals to discuss and decide on Company/business policy and strategy apart from other items of business. The Board exhibits strong operational oversight with regular presentations by business heads to the Board. The Board and committee meetings are prescheduled and a tentative annual calendar of Board and committee meetings is circulated to the directors well in advance to help them plan their schedule and to ensure meaningful participation at the meetings.
During the year under review five (5) board meetings and six (6) audit committee meetings were convened and held the details of which are given in the Corporate Governance report. The intervening gap between the meetings was within the period prescribed under the Companies Act 2013.
The details of the constitution of the Board and its Committees are given in the Corporate Governance report.
COMPLIANCE WITH CODE OF CONDUCT FOR THE BOARD OF DIRECTORS AND SENIOR EXECUTIVES
All directors and senior executives have affirmed compliance with the Code of Conduct for the Board of Directors and Senior Executives. A declaration to that effect is attached with the Corporate Governance report.
COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND ANNUAL GENERAL MEETINGS
The Company has complied with Secretarial standards issued by the Institute of Company Secretaries of India on Board Meetings and Annual General Meetings.
RISK MANAGEMENT POLICY
In accordance with the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 the Board of Directors of the Company are responsible for framing implementing and monitoring the risk management plans of the Company. The Company has a Risk Management Policy to identify risks associated with the Company assess its impact and take appropriate corrective steps to minimise the risks that may threaten the existence of the Company.
The Company's sustained leadership is an outcome of effective implementation of strategies. These strategies have been rolled out after a thorough diagnosis of the internal and external business environment with special attention to competition market emerging trends. The risks have been identified as an integral part of the business plan in line with the enterprise risk management (ERM) framework of the Company ensuring adequate controls and mitigating actions to achieve the business objectives.
ERM framework of your Company is comprehensive and robust enough to respond against any uncertainty. It has a three-tier risk identification mechanism involving the process owners at business sites corporate audit committee and board. The periodic review and audits are conducted to ensure your Company is effectively managing the risks and confidently progressing on the business goal. Risk management framework has been implemented in all the Subsidiary company.
Pursuant to regulation 21(5) of SEBI (LODR) Regulations 2015 effective from 01.04.2019 the requirement of constituting Risk Management Committee is applicable to the Company. As such your Company has duly constituted a Risk Management Committee during the financial year 2018-19.
The Risk Management Policy is available on the Company's website at the link http://www.exideindustries.com/investors/ governance-policies.aspx
The equity shares continue to be listed on the BSE Limited (BSE) National Stock Exchange of India Limited (NSE) and The Calcutta Stock Exchange Limited (CSE). The Company has paid the annual listing fee for the financial year 2019-20 to BSE NSE and CSE.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All related party transactions which were entered during the financial year were in the ordinary course of business and on an arm's-length basis. There were no materially significant related party transactions entered into by the Company with promoters directors key managerial personnel or other persons which may have a potential conflict with the interests of the Company.
All related party transactions are placed before the Audit Committee for review and approval. Prior omnibus approval is also obtained from the Audit Committee for related party transactions that are of repetitive nature and can be foreseen and accordingly the required disclosures are made to the Audit Committee on a quarterly basis in terms of the omnibus approval of the Committee.
The policy on materiality of related party transactions and also on dealing with related party transactions as approved by the Audit Committee and the Board of Directors is uploaded on the website under link http://www.exideindustries.com/ investors/governance-policies.aspx.
Since all related party transactions entered into by the Company were in the ordinary course of business and were on an arm's-length basis there were no material related party transactions during the year. Form AOC - 2 is therefore not applicable to the Company.
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE
There are no significant material orders passed by the regulators/courts/tribunals which would impact the going concern status of the Company and its future operations. However member's attention is drawn to the statement on contingent liabilities and commitments in the notes forming part of the financial statements.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Information pursuant to Clause (m) of Sub-Section (3) of Section 134 of the Companies Act 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 is annexed herewith as Annexure - VI.
Your Company believes that the strategic purpose of Human Resources is to be a catalyst for the transformation of our people which is required to ensure sustained business outperformance. Our Human Resources philosophy has been guided by the four pillars of Employee Efficiency Development Welfare and Culture Building.
Your Company continued its focus on talent management capability building leadership development and performance management. Under the umbrella of the Exide Learning Academy more than 2500 man-days of training were delivered on sales service and manufacturing to improve the skills of our employees. High-potential development continued through the Exide Power initiative of individual development planning (IDP) e-learning upskilling special assignments etc. In line with our effort of culture building your Company this year had launched Exide Coaching Academy to develop leaders as coaches through focused reinforcement role-modelling etc. Several high potential employees have benefitted from the executive coaching extended to them.
With initiatives like the Technocrat Programme creation of Technical Specialists and Learning Labs your Company has laid the foundation to build a healthy pipeline of talent in the specialist areas of Research and Development.
Your Company continues to drive performance through a quarterly evaluation process and a competitive performance- based bonus for all its employees. The You Did It platform to publicly recognise and reward top performers continues to motivate our employees.
High-quality leadership talent has also been infused across all functions to build a talent pipeline. Besides your Company continued to strengthen its position as an Employer of Choice across premier Business school campuses and create a strong talent pool to drive the Company's future growth.
The total number of employees of the Company as on 31st March 2019 was 5359.
PARTICULARS OF EMPLOYEES
The information required pursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of employees of the Company will be provided upon request. In terms of Section 136 of the Act the Report and financial statements are being sent to Members and others entitled thereto excluding the information on employees particulars which are available for inspection by the Members at the registered office of the Company during business hours on working days of the Company up to the date of the ensuing Annual
General Meeting. Any Member interested in obtaining a copy may write to the Company Secretary. Further we confirm that there was no employee employed throughout the financial year or part thereof who was in receipt of remuneration in the financial year which in the aggregate is in excess of that drawn by the Managing Director and Whole-time directors and holds by himself or along with his spouse and dependent children not less than two per cent of the equity shares of the Company.
Particulars of employees pursuant to Section 197 of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are annexed hereto and marked as Annexure - VII.
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
Your Company has zero tolerance for sexual harassment at the workplace and has adopted a Policy on prevention prohibition and redressal of sexual harassment at the workplace in line with the provisions of The Sexual Harassment of Women at Workplace (Prevention Prohibition & Redressal) Act 2013 (`the Act') and Rules under it. It is committed to providing equal opportunities without regard to their race caste sex religion colour nationality disability etc. Your Company has complied with provisions relating to the constitution of an Internal Complaints Committee under the Act. The Internal Committee (IC) composes of internal members and an external member who has extensive experience in the field.
Your Company had organised workshops and awareness programmes at regular intervals for sensitising employees on the issues and implications of workplace sexual harassment. These workshops not only help create a safe and happy work environment to prevent any incidents of such nature but also an awareness on legal laws. Employees from various functions in Corporate Marketing R&D and Projects were part of these workshops.
During the financial year 2018-19 one case of sexual harassment was reported to IC which was duly investigated and closed.
DIRECTOR'S RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information and explanations obtained by them your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act 2013:
a. That in the preparation of the annual financial statements the applicable accounting standards have been followed along with proper explanation relating to material departures if any;
b. That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period;
c. That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d. That the Directors have prepared the annual accounts on a going concern basis;
e. That proper internal financial controls were in place and that the financial controls were adequate and were operating effectively; and
f. That systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.
This Report contains forward-looking statements that involve risks and uncertainties.
When used in this Report the words anticipate believe estimate expect intend will and other similar expressions as they relate to the Company and/or its businesses are intended to identify such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information future events or otherwise. Actual results performance or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the financial statements included herein and the notes thereto.
Your Directors would like to record their appreciation for the enormous personal efforts as well as the collective contribution of all the employees to the Company's performance. The directors would also like to thank its customers employee unions shareholders dealers suppliers bankers government agencies and all stakeholders for their co-operation and support to the Company and the confidence reposed on the management.
On behalf of Board of Directors
Bharat D Shah
Place : Mumbai
Date : 30th April 2019