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HBL Power Systems Ltd.

BSE: 517271 Sector: Consumer
NSE: HBLPOWER ISIN Code: INE292B01021
BSE 00:00 | 24 Jan 19.20 0.25
(1.32%)
OPEN

19.30

HIGH

19.45

LOW

18.90

NSE 00:00 | 24 Jan 19.05 0.15
(0.79%)
OPEN

19.00

HIGH

19.45

LOW

18.80

OPEN 19.30
PREVIOUS CLOSE 18.95
VOLUME 19403
52-Week high 29.75
52-Week low 12.50
P/E 24.30
Mkt Cap.(Rs cr) 532
Buy Price 18.90
Buy Qty 3508.00
Sell Price 19.20
Sell Qty 1.00
OPEN 19.30
CLOSE 18.95
VOLUME 19403
52-Week high 29.75
52-Week low 12.50
P/E 24.30
Mkt Cap.(Rs cr) 532
Buy Price 18.90
Buy Qty 3508.00
Sell Price 19.20
Sell Qty 1.00

HBL Power Systems Ltd. (HBLPOWER) - Director Report

Company director report

Dear Members

Your Directors take pleasure in presenting the 33rd Annual Report for the financialyear ended on March 312019. The standalone financial performance is presented belowprepared in accordance with the Ind AS notified under the Companies (Indian AccountingStandards) Rules 2015 and Companies (Indian Accounting Standards) Amendment Rules 2016 asamended.

Sl. Particulars 2018-19 2017-18
1 Revenue from Operations 125720.03 162411.26
2 Other Income 1694.48 2271.99
3 Total Income 127414.51 164683.25
4 Total Expenditure 116578.84 149825.95
5 (Earnings before interest depreciation and tax (EBIDTA 10835.67 14857.30
6 Finance Costs 3059.66 4054.57
7 Depreciation & Amortization expenses 4435.21 4603.19
8 Profit before Exceptional items and Tax 3340.80 6199.54
9 (Exceptional Items - Income / (Expenses 664.45 (975.77)
10 (Profit before tax (PBT 4005.25 5223.77
11 Provision for tax & Deferred tax adjustment 1494.35 2258.08
12 (Other comprehensive income (net 24.65 10.10
13 (Total Comprehensive Income for the Period (PAT 2486.25 2955.59
14 (Earnings Per Share (Diluted EPS of Rupees 0.90 1.07
15 (Proposed Dividend (on share of Rs. 1 each 30% 25%

Performance review 2018-19

Year 2018-19 was a challenging year for the Company amidst disruptive headwinds in theTelecom segment with a negative growth. Both revenue from operations and Profit before Taxhave shown a consequent decline over the previous year. Your Company continued to focus onmanaging cash efficiently and ensured that it had adequate liquidity and minimizedborrowing costs. Continuing initiatives on cost saving product optimization anddevelopments have provided positive results. Notwithstanding this there was an intensecompetition in Telecom industry business which is our main business segment forcingreduction in demand and our margins. And this affected our revenues and profitability asyou would have noticed. In this situation your Company managed an overall creditableperformance with a stronger Balance Sheet.

Current year's performance 2019-20

Going forward economic activity is likely to be supported by the continuing politicalleadership which we believe possesses the vision and resolve to usher in an era ofinclusive growth. We are making steady progress towards our vision to gain from potentialopportunities in Railways and Defence business. While we do not anticipate any majormomentum in Telecom sector demand in the immediate future to offset this to an extentyour Company is examining alternative product initiatives. Your Company will continue topursue its initiatives on cost reduction product development to stay healthy in aturbulent market. The Management Discussion and Analysis section in the Annual Reportprovides more information and the shareholders may refer to the same for further insights.

Dividend

Your Directors are pleased to recommend a dividend of 30% (ie '0.30 paise per equityshare of C.1 each fully paid up) for the Financial Year 2018-19 subject to the approval ofthe members at the ensuing Annual General Meeting. The proposed dividend includingdividend distribution tax will absorb ' 1002.51 Lakhs.

Subsidiaries Associate and Joint Venture Companies (as on March 312019)

As per the notification issued by the Ministry of Corporate Affairs on July 27 2016with regard to Companies (Accounts) Amendment Rules 2016 the report of the Board shallcontain highlights of performance of subsidiaries associates and joint venture companiesand their contribution on overall performance of the company. Accordingly we herebyfurnish the following:

Subsidiary companies HBL America Inc. HBL Germany GmBH Germany SCIL Infracon Pvt Ltd
Associate companies within the meaning of Section 2(6) of the Companies Act 2013 ("Act"). Naval Systems & Technologies Pvt Ltd (NSTL)
Joint Venture Company Gulf Batteries Company Ltd in the Kingdom of Saudi Arabia (KSA).

The Consolidated Financial Statements presented by the Company include the financialresults of its subsidiary and associate except JV company i.e. Gulf Batteries Company Ltdprepared in accordance with the Companies Act 2013 (Act) and applicable Ind AS notifiedunder the Companies (Indian Accounting Standards) Rules 2015 and Companies (IndianAccounting Standards) Amendment Rules 2016 as amended.

Pursuant to provisions of section 129(3) of the Act a statement containing salientfeatures of the financial statements of the Company's subsidiaries in Form AOC-1 isattached to the financial statements of the Company and as per the provisions of section136 of the Act the standalone financial statements of the Company consolidated financialstatements along with relevant documents and separate audited accounts in respect ofsubsidiaries are available on the website of the Company. There has been no materialchange in the nature of the businesses of the subsidiaries except as disclosed hereunder.

Highlights of performance of subsidiaries associates and joint venture companies andtheir contribution on overall performance of the Company:

Operational and financial performance of the subsidiaries associates and joint ventureshall be provided as and when the same is made available.

Subsidiary Companies

SCIL Infracon Private Limited (SIPL)

Shareholders are already aware that SIPL is not in operation since over five years.Hence the Board of Directors of SIPL in its on 15th March 2019 claimed the status of theCompany as dormant and filed necessary forms with the Ministry of Corporate Affairs.

Joint Venture Company

Gulf Batteries Co. Ltd (GBC) in the Kingdom of Saudi Arabia (KSA)

Your Company holds 40% stake in GBC. Your Company therefore filed a petition forliquidation (winding up) of GBC before a Commercial Court in Saudi Arabia. The case wasnot decided in favour of the Company. The Company is in consultation with the legalcounsel for filing a fresh appeal for liquidation (winding up) of GBC as the accumulatedloss of nearly 75% of its capital as per Saudi Arabian laws in a situation like thissuch Company is terminated by force of law. GBC financials statements have not beenavailable for consolidated financial statements of the Company.

Material Changes and Commitments

No material changes and commitments have occurred after the closure of the FY 2018-19on March 31 2019 till the date of this Report which would affect the financial positionof your Company.

Directors' Responsibility Statement

Pursuant to Section 134(5) of the Companies Act 2013 the Board of Directors to thebest of their knowledge and ability confirm that:

i. in preparation of the annual accounts the applicable Ind AS accounting standardshave been followed and there are no material departures;

ii. they have selected such accounting policies as per Ind AS and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit of the Company for that period;

iii. they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

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

v. they have laid down internal financial controls to be followed by the Company andsuch internal financial controls are adequate and operating effectively;

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

Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the internal cost statutoryand secretarial auditors and external consultants and the reviews performed by managementand the relevant board committees including the audit committee the board is of theopinion that the Company's internal financial controls were adequate and effective duringthe financial year 2018-19.

Directors and Key Managerial Personnel (KMP)

Name of the appointee Date of appointment

i Kavita Prasad as CFO Upto 12.11.2018
i K Sridharan as CFO w.e.f. 12.11.2018

Mr. Ajay Bhaskar Limaye (DIN 02762738) retires by rotation and is eligible forre-appointment. Your Board recommends his reappointment.

Independent Directors:

As per sub-section (10) and (11) to Section 149 of the Companies Act 2013 (Act) anindependent Director shall hold office not more than two terms of five consecutive yearsin each term. Explanation to sub-section (11) clarifies that any tenure of an independentdirector on the date of commencement of the Act shall not be counted as a term under thosesub-sections. Accordingly P Ganapathi Rao and Preeti Khandelwal Non-ExecutiveIndependent Directors whose first five years term of office ends on November 13 2019 areeligible and recommended for appointment for a further period of five years in terms ofsub-section (10) and (11) to Section 149 of the Act at the forthcoming Annual GeneralMeeting (AGM) of the Company.

During the year the non-executive directors of the Company had no pecuniaryrelationship or transactions with the Company except for the sitting fee paid forattending the Board meetings.

Number of meetings of the board

Four meetings of the board were held during the year. For details of the meetings ofthe board please refer to the Corporate Governance Report which forms part of thisreport.

Board evaluation

Pursuant to the provisions of the Companies Act 2013 and the Corporate Governancerequirements prescribed by SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Board has carried out an annual evaluation of its own performanceand that of its Committees as well as performance of all the Directors individually duringthe year. Feedback was sought by way of a structured questionnaire covering variousaspects of the Board's functioning such as adequacy of the composition of the Board andeffectiveness of its Committees execution and performance of specific duties governancemeaningful and constructive contribution and inputs in meetings etc. Evaluation wascarried out based on responses received from the Directors. A separate meeting of theIndependent Directors also was held where in performance of non-Independent Directorsperformance of the board as a whole and performance of the Chairman and Managing Directorwas evaluated. The Directors expressed their satisfaction with the evaluation process.

Policy on Directors' appointment and remuneration and other details

The Company's policy on Directors' appointment and remuneration and other mattersprovided in Section 178(3) of the Act has been disclosed in the Corporate GovernanceReport which forms part of the Directors' report.

Audit committee

The details pertaining to composition of Audit Committee are included in the Report onCorporate Governance which forms part of this report. Powers and role of the AuditCommittee are included in Corporate Governance Report. The Board of Directors has acceptedall the recommendations of the Audit Committee placed at respective meetings.

Risk Management

The Company has deployed a comprehensive framework to identify monitor and take allnecessary steps towards mitigation of various risk elements which can impact the existenceof the Company on a periodic basis. All the identified risks are managed throughcontinuous review of business parameters by the Management and the Board of Directors isalso informed of the risks and concerns.

Internal Financial Controls

Pursuant to Section 134 of the Companies Act 2013 the Directors state that the Boardthrough the operating management has laid down Internal Financial Controls to be followedby the Company and such policies and procedures were adopted by the Company for ensuringthe orderly and efficient conduct of its business including adherence to Company'spolicies the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information. The Audit Committee evaluates the internalfinancial control system periodically. To the best of their knowledge and ability andinputs provided by various assurance providers confirm that such financial controls areadequate with reference to the size and operations of the Company and no reportablematerial weakness or deficiency in the design or operation of internal financial controlswas observed.

Particulars of loans guarantees and investments

The particulars of loans guarantees and investments have been disclosed in thefinancial statements.

Transactions with related parties

None of the transactions with related parties falls under the scope of Section 188(1)of the Act. Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules 2014 are given inAnnexure I in Form AOC-2 and the same forms part of this report. Related partytransactions are in the ordinary course of business and on arm's length basis.

Corporate social responsibility

The Company has a Board level committee that supervises its Corporate SocialResponsibility (CSR) activities. The brief outline of the CSR Policy of the Company andthe initiatives undertaken by the Company on CSR activities during the year are set out inAnnexure II of this report in the format prescribed in the Companies (Corporate SocialResponsibility Policy) Rules 2014.

Extract of Annual Return

Pursuant to Section 92(3) of the Act the extract of Annual Return is given in AnnexureIII in the prescribed Form MGT-9 which forms part of this report.

Information regarding employees and related disclosures

Your Company consistently believes in concerted efforts in talent management andsuccession planning practices strong performance management and learning and traininginitiatives. Rewards and recognition are commensurate with performance and that employeeshave the opportunity to develop and grow. During the year there were no complaintsrelating to child labour forced labor involuntary labor sexual harassment in the lastfinancial year and pending as on the end of the financial year.

Category No.of complaints filed No.of complaints pending
1 Child labor / forced labor/ involuntary labor 0 0
2 Sexual harassment 0 0
3 Discriminatory employment 0 0

Disclosure as required under Section 22 of Sexual Harassment of women at workplace(Prevention Prohibition and Redressal) Act 2013

Your Company believes in providing a healthy environment to all HBL Employees and doesnot tolerate any discrimination or harassment in any form. The Company has in place agender neutral Prevention of Sexual Harassment (POSH) policy in line with therequirements of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. This policy is frequently communicated in assimilation programs andat regular intervals to all HBL employees. Following are some of the awareness programsimparted to train HBL Employees and Internal complaints committee (ICC).

1. It is mandatory for every new joiner to undergo a program on 'Prevention of SexualHarassment ' during induction program.

2. The Internal Complaints Committee is trained by external agency when the committeemembers are on-boarded to the committee.

3. Policy of 'Prevention of Sexual Harassment' at workplace is available on internetfor HBL employees to access as and when required.

4. The 'Prevention of Sexual Harassment' policy is placed in conspicuous places forbetter visibility and communication of the policy. The posters are also displayed inregional languages at all HBL offices.

HBL has setup an Internal Complaints Committee(ICC) both at the Head office / Corporateoffice and at every major location where it operates in India. ICC has equalrepresentation of men and women. ICC is chaired by a senior woman employee and has anexternal women representation.

ICC investigates the case(s) and provides its recommendations to the apex authority .The apex authority upon receiving the recommendations from ICC arrives at the conclusionand acts upon such recommendations.

Penal Consequences of Sexual Harassment ("SH") and the constitution of theICC is displayed at conspicuous places.

Particulars of employees

The information required under Section 197 of the Act read with rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are givenbelow:

Employee Name Dr. AJ Prasad Mr. Suresh Kalyan Mr. MVV Vidyasagar
Total remuneration CTC (C Lakhs) C 96.15 Lakhs and commission '101.59 Lakhs '122.24 Lakhs '63.16 Lakhs
Designation and Nature of Duties Chairman and Managing Director Chief Operating Officer (COO) President - Electronics Group
Qualification / Experience (years) B. Tech from IIT Khargpur MS in Management from Massachusetts Institute of Technology USA Doctorate in International Business from Columbia University USA. BSc. Chartered Accountant 30 BE (Electrical & Electronics) 34
Date of commencement of employment Promoter of the Company 17.11.2014 01.04.2011
Age (years) 74 55 55
Last employment held before joining the Company Administrative Staff College of India Amara Raja Batteries Limited Hyderabad as President - Finance Director(Operations) at Axiom Consulting Ltd.

a. The ratio of the remuneration of each Non-Executive director to the medianremuneration of the employees of the Company for the financial year: Not Applicable asnone of the Non-Executive was paid any remuneration.

b. The percentage increase in remuneration of each Director Chief Executive OfficerChief Financial Officer Company Secretary

in the financial year:

Directors Chief Executive Officer Chief Financial Officer and Company Secretary % increase in remuneration in the financial year
Dr. A J Prasad Chairman and Managing Director No change
MSS Srinath Executive Director No change
A Kavita Prasad Executive Director No change
MVSS Kumar Company Secretary NIL
K Sridharan (appointed as CFO w.e.f. 12.11.2018 in place of Kavita Prasad) NIL

c. The percentage increase in the median remuneration of employees in the financialyear: 10-15 %

d. The number of permanent employees on the rolls of Company: 1816 (as at 31 March2019)

e. Comparison of the remuneration of the key managerial personnel against theperformance of the Company:

Aggregate remuneration of key managerial personnel (KMP) in 2018-19 218.80
Commission on profits to CMD 101.59
Total 320.39
Revenue 125720.03
Remuneration of KMPs as % of revenue 0.25
Remuneration of KMP as % of PBT 7.99

f. Comparison of remuneration of each the key managerial personnel(KMP) against theperformance of the Company:

Name Designation Remuneration Commission on profit Total
Dr. AJ Prasad Chairman and Managing Director 96.15 101.59 197.74
MSS Srinath Executive Director 50.55 - 50.55
Kavita Prasad Executive Director 30.83 - 30.83
MVSS Kumar Company Secretary 22.61 - 22.61
K Sridharan Chief Financial Officer (w.e.f. 12.11.2018) 18.66 - 18.66
Total 218.80 101.59 320.39

g. The key parameters for any variable component of remuneration availed by thedirectors:

Only commission on net profits was paid to Chairman and Managing Director in additionto the monthly remuneration.

h. The ratio of the remuneration of the highest paid director to that of the employeeswho are not directors but receive remuneration in excess of the highest paid directorduring the year: Not applicable.

Disclosure requirements

As per listing Regulations corporate governance report with auditors' certificatethereon and management discussion and analysis are attached which form part of thisreport.

Vigil Mechanism / Whistle blower policy

The Company has formulated a vigil mechanism /whistle blower policy to provide a vigilmechanism for employees including directors of the Company to report genuine concerns. Theprovisions of this policy are in line with the provisions of the Section 177(9) of the Actand the Regulation 22 of the SEBI (LODR) Regulations 2015.

Deposits from public

The Company has not accepted any deposits from public and as such no amount on accountof principal or interest on deposits from public was outstanding as on the date of thebalance sheet.

Conservation of Energy Technology Absorption and Foreign Exchange Earnings & Outgo

Information relating to conservation of energy technology absorption and foreignexchange earnings and outgo as required under Section 134(3)(m) read with Rule 8(3) ofthe Companies (Accounts) Rules 2014 is given in the Annexure hereto.

Corporate Governance

Pursuant to Schedule V of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 a separate section titled "Report on Corporate Governance" isattached to the Annual Report.

Statutory Auditors

M/s Rao & Kumar Chartered Accountants (FRN 03089S) Visakhapatnam who are theStatutory Auditors of the Company have been appointed by the members at the 31st AnnualGeneral Meeting (AGM) of the Company held on 26th September 2017 for a period of fiveyears to hold office till the conclusion of AGM in 2022 subject to ratification of membersat every year AGM. Accordingly they retire at the conclusion of the ensuing AGM and areeligible for reappointment. Your Directors recommend for their reappointment at the AGM.

The Report given by M/s. s Rao & Kumar Chartered Accountants on the financialstatements of the Company for the year 2018-19 is part of the Annual Report. There hasbeen no qualification reservation or adverse remark or disclaimer in their Report. Duringthe year under review the Auditors had not reported any matter under Section 143 (12) ofthe Act. Therefore no detail is required to be disclosed under Section 134 (3)(ca) of theCompanies Act 2013.

Cost Auditors

Your Board has appointed M/s K. Narashima Murthy & Co. Hyderabad Cost Accountants(FRN 000042) as Cost Auditors of the Company for conducting the audit of cost records ofthe Company. Your Board on recommendation of the Audit Committee proposes to re-appointthem as Cost Auditors for 2019-20 subject to the approval from Central Government.

Disclosure under Section 148(1) of the Companies Act 2013

The Company has been maintaining required cost records as specified under Section148(1) of the Companies Act 2013 read with Companies (Accounts) Rules 2014 as mendedfrom time to time.

Secretarial Auditors

CS Kamal Saboo has been proposed to be reappointed (CP No: 20802) Practicing CompanySecretary as a Secretarial Auditor for the financial year 2018-19 and his secretarialaudit report is attached to this Report in Annexure IV. There are no qualificationsadverse comments and observations in the secretarial audit report for the year 2018-19.

Cautionary Statement

Statements in this Annual Report particularly those that relate to ManagementDiscussion and Analysis describing the Company's objectives projections estimates andexpectations may constitute 'forward-looking statements' within the meaning of applicablelaws and regulations to enable shareholders and investors to comprehend our prospects.Although the expectations are based on reasonable assumptions the actual results mightdiffer materially from those expressed in the statement. Important factors that couldinfluence the Company's operations include global and domestic demand and supplyconditions affecting selling prices of finished goods input availability and priceschanges

in government regulations tax laws economic developments within the country and otherfactors such as plant breakdowns industrial relations etc.

Acknowledgements

Your Directors place on record its sincere appreciation towards the Company's valuedcustomers and esteemed shareholders for the support and confidence reposed by them in themanagement of the company and look forward to the continuance of this mutually supportiverelationship in future and remains committed to delivering and enhancing shareholdervalue.

Your Directors take this opportunity to thank all the Company's Bankers concernedCentral and State Government Departments Agencies for their support and co-operation tothe Company. The Board has special appreciation for the employees for their dedicatedservices and their ability to deliver good results in the future.

For and on behalf of the Board
Dr. A J Prasad
Chairman and Managing Director
Place: Hyderabad
August 13 2019