BOARD'S REPORT 2017-18
Your Directors are pleased to present the Thirty Fifth Annual Reporttogether with the Company's audited financial statements for the financial year endedMarch 31 2018.
FINANCIAL RESULTS STANDALONE & CONSOLIDATED
The standalone and consolidated financial highlights of your Companyare as follows:
| || || || ||( Rs in crores) |
|Particulars ||Standalone Year ended ||Consolidated Year ended |
| ||March 31 2018 ||March 31 2017 ||March 31 2018 ||March 31 2017 |
|Total Income ||33397.64 ||31394.02 ||33624.11 ||31505.61 |
|Profit before Finance cost and Depreciation ||5806.01 ||5157.24 ||5848.22 ||5097.92 |
|Expenses || || || || |
|Finance costs ||6.25 ||6.05 ||30.80 ||27.28 |
|Depreciation and amortisation expenses ||555.60 ||492.73 ||574.98 ||502.25 |
|Profit from ordinary activities before share of Profit / (Loss) of associates ||5244.16 ||4658.46 ||5242.44 ||4568.39 |
|Profit/ (Loss) of associates || || || || |
|Share in net Profit / (loss) of associates ||- ||- ||49.66 ||54.92 |
|Gain on dilution of interest in an associate ||- ||- ||- ||262.09 |
|Profit from ordinary activities before tax ||5244.16 ||4658.46 ||5292.10 ||4885.40 |
|Tax expense || || || || |
|Current tax ||1446.95 ||1082.08 ||1450.99 ||1082.24 |
|Deferred tax ||99.85 ||199.26 ||118.94 ||256.86 |
| ||1546.80 ||1281.34 ||1569.93 ||1339.10 |
|Net Profit from ordinary activities after tax ||3697.36 ||3377.12 ||3722.17 ||3546.30 |
|Other comprehensive income /(expense) (net of tax) ||(4.71) ||(14.08) ||(7.26) ||(18.71) |
|Total comprehensive income for the period ||3692.65 ||3363.04 ||3714.91 ||3527.59 |
|Net Profit / (Loss) attributable to || || || || |
|a) Owners of the Company ||3697.36 ||3377.12 ||3720.40 ||3584.27 |
|b) Non-controlling interest ||- ||- ||1.77 ||(37.97) |
|Other comprehensive income attributable to || || || || |
|a) Owners of the Company ||(4.71) ||(14.08) ||(5.89) ||(16.71) |
|b) Non-controlling interest ||- ||- ||(1.37) ||(2.00) |
|Total comprehensive income attributable to || || || || |
|a) Owners of the Company ||3692.65 ||3363.04 ||3714.51 ||3567.56 |
|b) Non-controlling interest ||- ||- ||0.40 ||(39.97) |
|Balance of Profit brought forward ||7418.53 ||6146.52 ||7597.60 ||6118.53 |
|Dividend || || || || |
|- Interim - 2017-18 ||1098.41 ||1098.33 ||1098.41 ||1098.33 |
|- Final - 2016-17 ||599.09 ||639.01 ||599.09 ||639.00 |
|Corporate Dividend Tax ||345.57 ||353.69 ||345.57 ||353.69 |
|Adjustment on account of change in controlling interest ||- ||- ||(23.50) ||- |
|Transfer to Foreign Currency Translation Reserve ||- ||- ||(4.42) ||(14.17) |
|Balance carried to Balance Sheet ||9068.11 ||7418.53 ||9247.01 ||7597.60 |
|Earning per equity share on Net Profit from ordinary activities after tax (face value Rs 2/- each) (In ) || || || || |
|- Basic ||185.14 ||169.12 ||186.30 ||179.49 |
|- Diluted ||185.13 ||169.12 ||186.29 ||179.49 |
During FY 2017-18 under review your Company clocked sales of 7587154units over 6664240 units in the previous FY.
During FY 2017-18 revenue from operations was Rs 32871.82 crores ascompared to Rs 30871.59 crores in FY 2016-17 registering an increase of 6.48%.
Profit before tax (PBT) in FY 2017-18 was Rs 5244.16 crores ascompared to Rs 4658.46 crores in FY 2016-17 reflecting an increase of 12.57%. Profitafter tax (PAT) was Rs 3697.36 crores as against Rs 3377.12 crores in FY 2016-17an increase of 9.48 % over the previous year.
Earnings before Interest Depreciation and Taxes (EBIDTA) stood at17.38 % in FY 2017-18 as compared to 16.42% in FY 2016-17.
CONSOLIDATED FINANCIAL STATEMENTS
In accordance with the provisions of the Companies Act 2013 (theAct') and Indian Accounting Standard (Ind AS)-110 on Consolidated FinancialStatements read with Ind AS-28 on Investments in Associates and Joint Ventures theAudited Consolidated Financial Statements for the FY ended March 31 2018 are provided inthis Annual Report.
CHANGES IN CAPITAL STRUCTURE
During the FY under review 14617 equity shares of Rs 2 each wereallotted on exercise of employee stock options by the employees of the Company.Consequently the issued and paid-up share capital of the Company as on March 31 2018 wasRs 399422910 divided into 199711455 equity shares of Rs 2 each.
The Company has not issued any equity shares with differential rightssweat equity shares or bonus shares. The Company has only one class of equity shares withface value of Rs 2 each ranking pari-passu.
Your Directors are pleased to recommend for your approval a finaldividend of Rs 40 per equity share (2000%) of face value of Rs 2 each in additionto an interim dividend of Rs 55 per equity share (2750%) declared in the month of February2018 aggregating a total dividend payout of Rs 95 per equity share for FY 2017-18. In theprevious FY total dividend payout of Rs 85 per equity share of the face value of Rs 2each was made. Final dividend if approved at the ensuing Annual General Meeting shall bepaid to the eligible Members within the stipulated time period. Dividend DistributionPolicy of the Company as per the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 (Listing Regulations') is available at the following link:https://www.heromotocorp.com/en-in/about-us/key-policies/dividend-distribution-policy.html and is also provided as Annexure- I.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
The management discussion and analysis report forms an integral part ofthis report and gives details of the overall industry structure economic developmentsperformance and state of affairs of your Company's business in India and abroad riskmanagement systems and other material developments during the FY under review.
CHANGE IN NATURE OF BUSINESS
During FY 2017-18 there was no change in the nature of Company'sbusiness.
CAPACITY EXPANSION NEW PROJECTS & STRATEGIC ALLIANCES
During FY 2017-18 construction of sixth manufacturing facility atSricity in Chittoor District in the state of Andhra Pradesh has commenced with a proposedcapacity of 1.8 million units per annum. Your Company will invest Rs 1600 crores insetting up this manufacturing facility. The plant is expected to be operational in FY2019-20.
During FY 2017-18 the second overseas plant of your Company at Jessorein Bangladesh started commercial production during the first quarter.
Your Company is constantly expanding the boundaries on innovation both internal and external. It has been running internal idea generation contestssuccessfully involving employees for many years now. In FY 2017-18 your Company tookimportant steps to tap into the external innovation ecosystem. It piloted crowdsourcing' where a few identified problems are thrown as challenges to the externalinnovation ecosystem to solve.
Your Company continues its march to strengthen the reach of GlobalBusiness. During FY 2017-18 your Company added two markets Trinidad & Tobagoand Guyana to grow the countries in which HMCL is present in to 37. Moreimportantly it strived to increase market share in the large markets across South AsiaAfrica & Middle East and Latin America in which the Company is already present. TheCompany increased its despatches to Bangladesh by close to 200% leveraging a 70% increasein the industry and substantially growing the market share. Your Company also commissioneda plant through a joint venture in Bangladesh.
Continuing with the past strategy your Company works closely withstrong allied distributor partners offering differentiated financing vehicle models andafter sales solutions. Your Company's focus is to enhance salesmen skills at thedealerships optimize the channel coverage and execute targeted brand building andmarketing campaigns.
SUBSIDIARIES ASSOCIATE AND JOINT VENTURE COMPANIES
The Company has 6 subsidiaries including step down subsidiaries and 3associate companies. The Company regularly monitors the performance of these companies.
The Company shall make available the annual accounts of the subsidiarycompanies to any member of the Company who may be interested in obtaining the same. Theannual accounts of the subsidiary companies will also be kept open for inspection at theRegistered Office of the Company and respective subsidiary companies. Further the annualaccounts of the subsidiaries are also available on the website of the Company viz.www.heromotocorp.com. The consolidated financial statements presented by the Companyinclude the financial results of its subsidiary companies.
HMCL Netherlands B.V. (HNBV')
HNBV a wholly owned subsidiary of your Company was incorporated inAmsterdam as a private company with limited liability under the laws of The Netherlandswith the primary objective of promoting overseas investments. During FY 2017-18 HNBV hasinvested in operating companies in Colombia and Bangladesh and has reported Nil revenue(unadjusted) and a net loss of Rs 0.48 crores.
HMCL Colombia S.A.S. (HMCLC')
HMCLC was incorporated in Colombia as a joint venture between HNBV andWoven Holdings LLC as a simplified stock corporation company. During the FY under reviewHNBV increased its holding to 68% equity in HMCLC and 32% equity is now held by WovenHoldings LLC. The main business of HMCLC is to manufacture and sell two-wheelers inColombia. It has a manufacturing facility with a production capacity of 60000 per annum.During the year ended March 31 2018 the Company has reported unadjusted revenue of Rs123.17 crores and a net loss of Rs 60.58 crores.
HMCL Niloy Bangladesh Limited (HNBL')
HNBL was incorporated in Bangladesh as a joint venture between HNBV andNiloy Motors Limited Bangladesh as a limited liability company. HNBV currently holds 55%equity in HNBL and 45% equity is held by Nitol Niloy Group Bangladesh. HNBL has set up amanufacturing plant at Jessore in Bangladesh and started commercial operations on June 012017. The main business of HNBL is to manufacture and sell two-wheelers. During FY2017-18 HNBL reported unadjusted revenue of Rs 541.80 crores and a net Profit ofRs 77.16 crores.
HMCL (NA) Inc.
HMCL (NA) Inc. a wholly owned subsidiary of your Company wasincorporated as a Corporation pursuant to the General Corporation Law of the State ofDelaware United States of America. HMCL (NA) Inc. has invested in Erik Buell RacingInc. (EBR') a Delaware Corporation by subscribing to 49.2% of its equity sharecapital. During the period ended March 31 2018 HMCL (NA) Inc. has reported Nil revenue(unadjusted) and a net loss of Rs 0.01 crores.
HMCL Americas Inc. (HMCLA')
HMCLA a wholly owned subsidiary of your Company was incorporated as aCorporation pursuant to the General Corporation Law of the State of Delaware UnitedStates of America with the primary objective to pursue various global businesses. Duringthe year ended March 31 2018 HMCLA has reported Nil revenue (unadjusted) and a net lossof Rs 0.12 crores.
HMC MM Auto Limited (HMCMMA')
Your Company has a joint venture with Magneti Marelli S.p.A Italynamed HMC MM Auto Limited in India which is set up for the purpose of carrying outmanufacturing assembly sale and distribution of two wheeler fuel injection systems andparts. Your Company holds 60% of the equity share capital in HMCMMA. During FY 2017-18HMCMMA has reported unadjusted revenue of Rs 34.64 crores and a net loss of Rs 8.17crores.
Associate Companies Hero FinCorp Ltd. (HFCL')
HFCL an associate of your Company was incorporated in the year 1991.Your Company holds 41.03% in the equity share capital of HFCL. HFCL is a non-bankingfinance company engaged in providing financial services including two-wheeler financingand providing credit to Company's vendors and suppliers. Over the years it has addedseveral new products and customers in its portfolio like SME and commercial loans loanagainst property etc.
During FY 2017-18 HFCL's Profit attributable to the Company is Rs55.75 crores.
Ather Energy Private Ltd. (AEL')
AEL is a private limited company focused on developing designing andselling premium electric two-wheelers. During FY 2017-18 AEL's loss attributable tothe Company is Rs 11.84 crores.
Erik Buell Racing Inc. (EBR')
Your Company through its subsidiary HMCL (NA) Inc. has invested inErik Buell Racing Inc. (EBR') a Delaware Corporation by subscribing to 49.2%of its equity share capital. EBR has ceased its operations and entered into Assignment forthe Benefit of Creditors under Chapter 128 of the Wisconsin Statutes (Chapter 128Process').
A statement containing salient features of financial statement ofsubsidiaries and associate companies forms part of the financials.
The Board of Directors of your Company (the Board') hasapproved a policy for determining Material Subsidiaries. At present your Company does nothave a Material Subsidiary. The Policy on Material Subsidiaries can be viewed on theCompany's website www.heromotocorp.com at the following link:https://www.heromotocorp.com/en-in/about-us/key-policies/ policy-on-material.html.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
In terms of the applicable provisions of the Act and the Articles ofAssociation of the Company Mr. Suman Kant Munjal Director of the Company retires byrotation at the ensuing Annual General Meeting and being eligible has offered himself forre-appointment. Brief resume and other details of Mr. Suman Kant Munjal who is proposedto be re-appointed as a Director of your Company have been furnished in the ExplanatoryStatement to the Notice of the ensuing Annual General Meeting.
Key Managerial Personnel (KMP)
Mr. Pawan Munjal Chairman Managing Director & CEO Mr. NiranjanGupta Chief Financial Officer and Ms. Neerja Sharma Company Secretary are the KMP ofyour Company in accordance with the provisions of Section 2(51) 203 of the Companies Act2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules2014.
Declarations from Independent Directors
Your Company has received declarations from all the IndependentDirectors confirming that they meet the criteria of independence as prescribed in the Actand the Listing Regulations.
In the opinion of the Board Independent Directors fulfill theconditions specified in the Act Rules made thereunder and Listing Regulations and areindependent of the management.
During FY 2017-18 five meetings of the Board of Directors were held.For details of these Board meetings please refer to the section on Corporate Governanceof this Annual Report.
ANNUAL EVALUATION OF THE BOARD ITS COMMITTEES AND INDIVIDUAL DIRECTORS
A formal evaluation of the performance of the Board it'sCommittees the Chairman and the individual Directors was carried out for FY 2017-18. Ledby the Nomination & Remuneration Committee (NRC') the evaluation wascarried out using individual questionnaires covering amongst others composition ofBoard conduct as per Company values & beliefs contribution towards development ofstrategy & business plan risk management receipt of regular inputs and informationcodes & policies for strengthening governance functioning performance &structure of Board Committees skill set knowledge & expertise of Directorspreparation & contribution at Board meetings leadership etc.
As part of the evaluation process the performance of Non-IndependentDirectors the Chairman and the Board was conducted by the Independent Directors. Theperformance evaluation of the respective Committees and that of Independent andNon-Independent Directors was done by the Board excluding the Director being evaluated.
DIRECTORS' RESPONSIBILITY STATEMENT
Your Directors make the following statement in terms of Section 134 ofthe Act which is to the best of their knowledge and belief and according to theinformation and explanations obtained by them:
1. that in the preparation of the annual accounts for the financialyear ended March 31 2018 the applicable accounting standards were followed along withproper explanation relating to material departures;
2. that appropriate accounting policies were selected and applied consistently andjudgments and estimates that are reasonable and prudent were made so as to give a true andfair view of the state of affairs as at March 31 2018 and of the Profit and loss of yourCompany for the financial year ended March 31 2018;
3. that proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of your Company and for preventing and detecting fraud and otherirregularities;
4. that the annual accounts for the financial year ended March 31 2018 have beenprepared on a going concern basis;
5. that the Directors have laid down Internal Financial Controls which were followed bythe Company and that such Internal Financial Controls are adequate and are operatingeffectively; and
6. that the Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and operatingeffectively.
Pursuant to provisions of the Act the Nomination and RemunerationCommittee (NRC') of your Board has formulated a Remuneration Policy for theappointment and determination of remuneration of the Directors Key Managerial PersonnelSenior Management and other employees of your Company. The NRC has also developed thecriteria for determining the qualifications positive attributes and independence ofDirectors and for making payments to Executive and Non-Executive Directors of the Company.
The NRC takes into consideration the best remuneration practices in theindustry while fixing appropriate remuneration packages and for administering thelong-term incentive plans such as ESOPs RSUs etc. Further the compensation package ofthe Directors Key Managerial Personnel Senior Management and other employees is designedbased on the set of principles enumerated in the said policy.
Your Directors afirm that the remuneration paid to the Directors KeyManagerial Personnel Senior Management and other employees is as per the RemunerationPolicy of your Company.
The Remuneration details of the Directors Chief Financial Officer andCompany Secretary along with details of ratio of remuneration of each Director to themedian remuneration of employees of the Company for the FY under review are provided as Annexure- II.
The Remuneration Policy of your Company can be viewed at thefollowing link:https://www.heromotocorp.com/en-in/about-us/key-policies/remuneration-policy.html and isalso provided as Annexure - III.
EMPLOYEES' INCENTIVE SCHEME
In terms of the SEBI (Share Based Employee Benefits) Regulations 2014as amended from time to time (SEBI Regulations') the NRC of your Boardinter-alia administers and monitors the Employees' Incentive Scheme 2014 of yourCompany and the Employees' Stock Option Plans framed thereunder.
Further the NRC has at its meeting held on October 31 2017 granted29800 stock options under ESOP Plan 2017 to the eligible employees at an exercise optionprice of Rs 2818 per option. In addition the NRC also approved grant of 15769Restricted Stock Units under RSU Plan 2017 to the eligible employees at the face value ofRs 2 per unit.
Applicable disclosures as stipulated under the SEBI Regulations withregard to the Employees' Stock Option Scheme are provided as Annexure - IV tothis Report and is available on the Company's website www.heromotocorp.com and canbe viewed at the following link: https://www.heromotocorp.com/en-in/esop.php.
Your Company has received a certificate from M/s B S R & Co. LLPStatutory Auditors (Firm Registration No. 101248W/W-100022) that the Employees'Incentive Scheme 2014 for grant of stock options has been implemented in accordance withthe SEBI Regulations and the resolution passed by the Members in their general meeting.The certificate would be placed at the ensuing Annual General Meeting for inspection bythe Members.
Your Company is committed to benchmarking itself with global standardsof Corporate Governance. It has put in place an effective Corporate Governance systemwhich ensures that provisions of the Act and Listing Regulations are duly complied withnot only in form but also in substance.
The Board has also evolved and adopted a Code of Conduct based on theprinciples of good Corporate Governance and best management practices that are followedglobally. The Code is available on your Company's website www.heromotocorp.comand can be viewed at the following link: https://www.heromotocorp.com/en-in/about-us/code-of-conduct.html.
In terms of Listing Regulations a report on Corporate Governance alongwith the certificate from M/s Sanjay Grover & Associates Company Secretaries (FirmRegistration No. P2001DE052900) confirming compliance of the conditions of CorporateGovernance is annexed hereto and forms part of this Annual Report as Annexure - V andAnnexure - VI respectively.
TRANSFER TO GENERAL RESERVE
During the FY under review no amount has been transferred to GeneralReserve of the Company.
TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND
During the FY under review your Company has transferred unpaid/unclaimed dividend amounting to Rs 13.43 crores for FY 2009-10 along with the relevantshares to the Investor Education and Protection Fund (IEPF) of the Central Government ofIndia.
MATERIAL CHANGES AND COMMITMENTS
No material change and/or commitment affecting the financial positionof your Company has occurred between April 1 2018 and the date of signing of this Report.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
During FY 2017-18 your Company has not given any loan or guaranteepursuant to provisions of Section 186 of the Act. Details of investments made in terms ofSection 186 of the Act are as under:
| || || ||( Rs in crores) |
| ||Principal Amount (Shares) ||Principal Amount (Bonds/Debentures) ||Total |
|Opening ||868.01 ||284.55 ||1152.56 |
|Addition * ||163.53 ||- ||163.53 |
|Reduction ** ||- ||(63.66) ||(63.66) |
|Closing Balance ||1031.54 ||220.89 ||1252.43 |
* HMC MM Auto Limited - Rs 3.00 crores HMCL(NA) Inc. - Nil HMCLNetherlands BV - Rs 70.44 crores HMCL Americas Inc - Nil Hero FinCorp Limited - Rs 70.03crores Ather Energy Private Limited - Rs 20.06 crores
** Maturity of bonds and amortization
Your Company has neither accepted nor renewed any deposits during FY2017-18 in terms of Chapter V of the Act.
CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES
During FY 2017-18 all contracts/arrangements/transactions entered intoby your Company with related parties under Section 188(1) of the Act were in the ordinarycourse of business and on an arm's length basis. During FY 2017-18 your Company hasnot entered into any contract/arrangement/transaction with related parties which could beconsidered material' in accordance with its Policy on Materiality of RelatedParty Transactions. Thus there are no transactions required to be reported in Form AOC-2.
Further during FY 2017-18 there were no materially significantrelated party transactions entered into by your Company with the Promoters Directors KeyManagerial Personnel or other designated persons which might have potential conflict withthe interest of the Company at large.
All related party transactions are placed before the Audit Committeefor its approval. There was no related party transaction requiring approval of the Board.During FY under review the Audit Committee has approved transactions through the omnibusmode in accordance with the provisions of the Act and Listing Regulations. Related partytransactions were disclosed to the Board on regular basis as per Ind AS-24. Detailsof related party transactions as per Ind AS-24 may be referred to in Note 36 of theStandalone Financial Statements.
The policy on related party transactions is available on theCompany's website www.heromotocorp.com and can be viewed at the following link:https://www.heromotocorp.com/en-in/about-us/ key-policies/related-party-transactions.html.
RISK MANAGEMENT FRAMEWORK
Your Company follows an exhaustive risk identification exercise backedby targeted risk mitigation plan. It enables your Company to identify the risks in advanceand galvanize the appropriate stakeholders from the Company to blunt them.
FY 2017-18 saw a few new risks driven by the dynamic nature of theexternal environment. A few illustrative ones included the following:
a) Gearing up post demonetization
b) Preparing for the GST transition
Your Company deployed internal teams for creating and executing riskmitigation strategies. It also took advice from external agencies and engaged with theCompany's stakeholders such as the suppliers and dealers. You will be pleased tolearn that your Company was one of the very first ones to completely transition to the GSTregime. For other identified risks the Company took a number of measures including butnot limited to revisiting policies developing new distribution models and expanding therisk realm to current non-competitors.
This FY your Company also updated a Risk Management Framework. Thisframework is aimed at standardizing the risk management exercise across the organization.The Board continues to review the risk management practices at your Company and providescritical inputs.
Your Company has constituted a Risk Management Committee to oversee therisk management efforts under the Chairmanship of Mr. M. Damodaran IndependentDirector. The details of the Committee alongwith its charter are set out in the CorporateGovernance Report forming part of this Report. The Board periodically reviews theCompany's risks and their mitigation plans.
VIGIL MECHANISM/ WHISTLE BLOWER POLICY
Your Company is committed to the highest standards of ethical moraland legal business conduct. Accordingly the Board of Directors has formulated a VigilMechanism/Whistle Blower Policy which provides a robust framework for dealing with genuineconcerns & grievances. Your Company has an ethics hotline managed by a third partywhich can be used by employees Directors vendors suppliers dealers etc. to report anyviolations to the Code of Conduct. Specifically employees can raise concerns regardingany discrimination harassment victimisation any other unfair practice being adoptedagainst them or any instances of fraud by or against your Company. During FY under review14 complaints were received and processed. Out of these 12 complaints have beeninvestigated & acted upon and remaining 2 are under investigation.
During FY 2017-18 no individual was denied access to the AuditCommittee for reporting concerns if any.
The Vigil Mechanism/Whistle Blower Policy of the Company is availableon the Company's website www.heromotocorp.com and can be viewed at the followinglink: https://www.heromotocorp.com/en-in/about-us/key-policies/vigil-mechanism-policy.html.
CORPORATE SOCIAL RESPONSIBILITY
Your Company has constituted a Corporate Social Responsibility (CSR)Committee which functions under direct supervision of Mr. Pawan Munjal ChairmanManaging Director & CEO of HMCL who is also the Chairman of the CSR Committee. Othermembers of the Committee are Gen. (Retd.) V. P. Malik and Mr. Pradeep Dinodia who areNon-Executive and Independent Directors of your Company.
Your Company has implemented the CSR Policy duly formulated andrecommended by the CSR Committee to the Board. The CSR policy lays down CSR activities tobe undertaken by your Company. The CSR activities undertaken by your Company are based onthe approved CSR Policy which is available on the Company's websitewww.heromotocorp.com and can be viewed at the following link:https://www.heromotocorp.com/en-in/about-us/key-policies/corporate-social-responsibility.html.
The CSR Policy of your Company as adopted by the Board broadly coversthe following focus areas:
a) To direct HMCL's CSR Programmes inter-alia towards achievingone or more of the following - enhancing environmental and natural capital; supportingrural development; promoting education including skill development; providing preventivehealthcare providing sanitation and drinking water; creating livelihoods for peopleespecially those from disadvantaged sections of society in rural and urban India andpreserving and promoting sports;
b) To develop the required capability and self-reliance ofbeneficiaries at the grass roots in the belief that these are pre-requisites forsocial and economic development;
c) To engage in afirmative action/interventions such as skill buildingand vocational training to enhance employability and generate livelihoods for personsincluding from disadvantaged sections of society;
d) To pursue CSR Programmes primarily in areas that fall within theeconomic vicinity of the Company's operations to enable close supervision and ensuremaximum development impact;
e) To carry out CSR Programmes in relevant local areas to fulfil commitments arisingfrom requests by government/ regulatory authorities and to earmark amounts of monies andto spend such monies through such administrative bodies of the government and/or directlyby way of developmental works in the local areas around which the Company operates;
f ) To carry out activities at the time of natural calamity or engage in DisasterManagement System;
g) To contribute to the Prime Minister's National Relief Fund or any other fundset up by the Central Government for socio-economic development and relief and welfare ofthe Scheduled Caste the Scheduled Tribes Other Backward Classes minorities and women;
h) To contribute or provide funds to technology incubators located within academicinstitutions which are approved by the Central Government;
i) To contribute to any fund setup by the Central Government or State Government(s)including Chief Minister's Relief Fund which may be recognised as CSR activity;
j) To promote sustainability in partnership with industry associations like theConfederation of Indian Industry (CII) PHD FICCI etc. in order to have a multiplierimpact.
During the FY under review your Company spent Rs 84.34 crores on itsCSR activities which amounts to 2.04% of the average net Profits of previous threefinancial years. The CSR initiatives undertaken by your Company along with other detailsform part of the Annual Report on CSR activities for FY 2017-18 which is annexed asAnnexure - VIII.
The Audit Committee of your Company comprises of the followingNon-Executive and Independent Directors:
|1. Mr. Pradeep Dinodia ||Chairman |
|2. Mr. M. Damodaran ||Member |
|3. Gen. (Retd.) V. P. Malik ||Member |
|4. Dr. Pritam Singh ||Member |
Further details on the Audit Committee and its terms of reference etc.have been furnished in Corporate Governance Report which forms part of this Report as Annexure- V.
During the FY under review all recommendations of the Audit Committeewere accepted by the Board of Directors of the Company.
AUDITORS AND AUDITORS' REPORT
M/s BSR & Co. LLP Chartered Accountants (Firm Registration No.101248W/W-100022) were appointed at the previous AGM as the Statutory Auditors of theCompany until the conclusion of 39th Annual General Meeting of the Company.They have audited the financial statements of the Company for the FY under review. Theobservations of Statutory Auditors in their Report read with relevant Notes to Accountsare self-explanatory and therefore do not require further explanation. The Auditors'Report does not contain any qualification reservation or adverse remark. Further therewere no frauds reported by the Statutory Auditors to the Audit Committee or the Boardunder Section 143(12) of the Act.
The Board on the recommendation of Audit Committee has approved theappointment of M/s Ramanath Iyer & Co. Cost Accountants as Cost Auditors for thefinancial year ending March 31 2019. The Cost Auditors will submit their reportfor the FY 2017-18 on or before the due date.
In accordance with the provisions of Section 148 of the Act read withCompanies (Audit & Auditors) Rules 2014 since the remuneration payable to the CostAuditors is required to be ratified by the shareholders the Board recommends the same forapproval by Members at the ensuing AGM.
M/s Sanjay Grover & Associates Company Secretaries (FirmRegistration No. P2001DE052900) were appointed to conduct Secretarial Audit of yourCompany during FY 2017-18.
The Secretarial Audit Report for the said FY is annexed herewith andforms part of this Report as Annexure - IX. The Report does not contain anyqualification reservation or adverse remark.
INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY
Your Company has a robust and well embedded system of internalcontrols. This ensures that all assets are safeguarded and protected against loss fromunauthorised use or disposition and all financial transactions are authorised recordedand reported correctly.
An extensive risk based programme of internal audits and managementreviews provides assurance to the Board regarding the adequacy and efficacy of internalcontrols. The internal audit plan is also aligned to the business objectives of theCompany. Comprehensive policies guidelines and procedures are laid down for all businessprocesses. The internal control system has been designed to ensure that financial andother records are reliable for preparing financial and other statements and formaintaining accountability of assets.
INSIDER TRADING CODE
In compliance with the Securities and Exchange Board of India(Prohibition of Insider Trading) Regulations 2015 (the PIT Regulations') onprevention of insider trading your Company has a comprehensive Code of Conduct forregulating monitoring and reporting of trading by Insiders. The said Code lays downguidelines which advise Insiders on the procedures to be followed and disclosures to bemade in dealing with the shares of the Company and cautions them on consequences ofnon-compliances.
Your Company also has a Code of practices and procedures of fairdisclosures of unpublished price sensitive information. Both the aforesaid Codes are inline with the PIT Regulations.
BUSINESS RESPONSIBILITY REPORT
As stipulated under the Listing Regulations the BusinessResponsibility Report (BRR') has been prepared and forms part of the AnnualReport as Annexure - X. The Report provides a detailed overview of initiativestaken by your Company from environmental social and governance perspectives.
The equity shares of your Company are presently listed on the BSELimited (BSE') and the National Stock Exchange of India Limited(NSE').
As on March 31 2018 total number of employees on the records of yourCompany were 8266 as against 8069 in the previous FY.
Your Directors place on record their appreciation for the significantcontribution made by all employees who through their competence dedication hard workco-operation and support have enabled the Company to cross new milestones on a continualbasis.
PARTICULARS OF EMPLOYEES
The statement of Disclosure of Remuneration under Section 197 of theAct and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 (Rules') is appended as Annexure - II to the Report. Theinformation as per Rule 5(2) of the Rules forms part of this Report. However as per firstproviso to Section 136(1) of the Act and second proviso of Rule 5(2) of the Rules theReport and Financial Statements are being sent to the Members of the Company excluding thestatement of particulars of employees under Rule 5(2) of the Rules. Any Member interestedin obtaining a copy of the said statement may write to the Company Secretary at theRegistered Office of the Company.
EXTRACT OF ANNUAL RETURN
In terms of Sections 92(3) and 134(3)(a) of the Act and Rules madethere under extract of the Annual Return in Form No. MGT-9 is annexed to this Report as Annexure- XI.
COMPLIANCE WITH SECRETARIAL STANDARDS
The Company is fully compliant with the applicable SecretarialStandards (SS) viz. SS-1 & SS-2 on Meetings of the Board of Directors and GeneralMeetings respectively.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGEEARNINGS AND OUTGO
Information required under Section 134(3)(m) of the Act read with Rulesmade thereunder is annexed to this report as Annexure - XII.
Your Directors state that there being no transactions with respect to
following items during FY under review no disclosure or reporting is required inrespect of the same:
1. Deposits from the public falling within the ambit of Section 73 of the CompaniesAct 2013 and the Companies (Acceptance of Deposits) Rules 2014.
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 your Company underany scheme save and except ESOS referred to in this Report.
4. Neither the Managing Director nor the Whole-time Director of your Company receiveany remuneration or commission from any of its subsidiaries.
5. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company's operations in future.
6. Buy back of shares.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE(PREVENTION PROHIBITION & REDRESSAL) ACT 2013
Your Company has in place a policy on Prevention of Sexual Harassmentat workplace. This policy is in line with the requirements of The Sexual Harassment ofWomen at the Workplace (Prevention Prohibition & Redressal) Act 2013. All employeeswhether permanent contractual temporary and trainees are covered under this Policy.
As per the said Policy an Internal Complaints Committee is also inplace to redress complaints received regarding sexual harassment. Following is the summaryof complaints received and disposed off during FY under review:
No. of complaints received: 2
No. of complaints disposed off: 2
AWARDS AND RECOGNITION
During FY under review the Company has received multiple awards and recognition. Someof them are listed below:
1. State Level Bhamashah Respect Certificate by the Rajasthan Government.
2. Best CSR Practices in private sector by CSR Leadership Summit & Awards.
3. Energy Efficient Award by CII.
4. International Fire and Security Exhibition and Conference (IFSEC) Award forExcellence in Physical Security.
5. National Safety Award by Ministry of Labour & Employment.
6. Platinum Rating in GreenCo assessment (commensurate to world class manufacturing) byCII.
The Board of Directors would like to express their sincere thanks tothe shareholders & investors of the Company for the trust reposed on the Company overthe past several years. Your Directors would also like to thank the central governmentstate governments financial institutions banks customers employees dealers vendorsand ancillary undertakings for their co-operation and assistance. We would like toreiterate our commitment to continue to build our organisation into a truly world classenterprise in all respects.
| ||For and on behalf of the Board |
| ||Pawan Munjal |
|Date: May 2 2018 ||Chairman |
|Place: New Delhi ||DIN: 00004223 |