Your Directors have pleasure in presenting their second annual report and auditedaccounts for the financial year ended December 31 2020.
1. Financial results:
| || ||(Amount in Rs Crores) |
|Particulars ||01.01.2020 to 31.12.2020 ||19.2.2019 to 31.12.2019 |
|Profit before tax and exceptional items ||171.78 ||261.44 |
|Profit before tax and after exceptional items ||136.28 ||220.65 |
|Tax expense: || || |
|- Current tax ||60.12 ||62.20 |
|- Deferred tax ||(23.64) ||(6.94) |
|Profit after tax (1) ||99.80 ||165.39 |
|Other comprehensive income/ (loss) (net of tax) (2) ||(6.04) ||0.50 |
|Total (1+2) ||93.76 ||165.89 |
|Balance of retained earnings transferred pursuant to the scheme of arrangement ||- ||149.93 |
|Balance brought forward from previous year ||315.82 ||- |
|Transition adjustment due to adoption of Ind AS 116 "Leases" ||(106) ||- |
|Amount available for appropriation ||408.52 ||315.82 |
|Appropriations: || || |
|Equity dividend paid ||- ||- |
|Tax on equity dividend paid ||- ||- |
|Debenture redemption reserve ||- ||- |
|General reserve ||- ||- |
|Balance carried forward ||408.52 ||315.82 |
Your Directors recommend payment of a maiden dividend at the rate of Rs 2/- (Rupees twoonly) per equity share (100 percent) for the year ended December 31 2020 on 42381675equity shares of Rs 2/- each fully paid.
3. Performance review:
During the financial year ended December 2020 orders touched Rs 3217.7 crore asagainst Rs 2641.9 crore as on December 31 2019. The orders witnessed a healthy growthreflecting the technology push and continued traction in transformers and systemintegration. The order backlog at the end of the year stood at Rs 4954.8 crore (December31 2019 was Rs 5100.7 crore) which continued to provide visibility to the future revenuestreams. The revenue from operations for your Company for the financial year endedDecember 312020 stood at Rs 3438.9 crore (December 31 2019 was Rs 3236.5 crore)reflecting stability of operations in an uncertain market situation. Profit before tax wasRs 136.3 crore (December 312019 was Rs 220.7 crore) mainly impacted due to unprecedentedCOVID-19. Accordingly net profit after tax was Rs 99.8 crore (December 31 2019 was Rs165.4 crore). The earnings per share for the financial year ended December 31 2020 stoodat Rs 23.55 (December 31 2019 was Rs 44.69).
For detailed analysis of the performance including industry overview changes andoutlook please refer to the Management's Discussion and Analysis Report provided inAnnexure - A forming part of this Report.
There has been no change in the nature of business during the financial year underreview.
Impact and action plan
COVID-19 came as an unprecedented global crisis. It disrupted life changing the wayone lives works and interact with each other. In India the first case was reported onJanuary 30 2020 while the disease had already claimed many lives in neighboring China andwas rapidly spreading across the globe. To curtail the spread of the infection within itsborder India had imposed a strict nationwide lockdown and promulgated health and safetyregulations shutting factories banning all kinds of travel mandating social distancingand quarantines.
In this period of uncertainty your Company's prime focus was to collaborate and managethe crisis for its employees customers partners and the community and build its spiritand strength. Your Company adopted a three-pronged approach:
Protecting our people
Preserving business continuity and
Preparing for the new norm
Protecting our people
Your Company's priority was to keep its employees customers and partners safe.
In accordance with the Ministry of Home Affairs ("MHA") national lockdownrequirements from March 25 2019 operations across plants project sites and offices wereclosed. Besides energizing the network of your Company location specific crisis teams anexclusive helpline for employees was started to support its employees' and their families'emotional welfare. Medical assistance was arranged at employees' fingertips through athird party primary and preventive care service provider even as they worked from home.
Voluntary COVID-19 testing medical reviews and checks were organized at variouslocations. As operations were permitted to resume by the various governing authoritiesyour Company capped the number of employees working at a particular time at all plants andoffices; made arrangements for sanitized transportation to factories and demarcated workand common areas to ensure strict adherence to social distancing. At project sitesprocesses were put in place to ensure secure and safe lodging facilities for migrantworkforce.
Employees were provided protective gear like masks face shields gloves andsanitizers; mandated to take all safety precautions and maintain absolute transparency inhealth declarations. All employees were encouraged to download the Aarogya Setu applaunched by the Government of India. This is followed until date.
In addition to all this most employees voluntarily donated one-day salary to the PMCARES Fund. This donation was matched by your Company totaling Rs 1.24 crore as a markof solidarity in this time of crisis.
Preserve business continuity
Your Company maintained business continuity by amplifying customer engagement throughtechnology and leveraging digital solutions for product service and training and evencommissioning of certain projects. Your Company implemented cost control measures toconserve cash and recovered lost production days by strategically planning shifts androtations to enable maximum capacity utilization of shop floors while ensuring socialdistancing implementing a six-day workweek to compensate for productivity loss; and
focusing on collections and liquidity. Your Company was able to preserve cash byproactively identifying and postponing non-essential spends and optimizing externalresources and personnel expenses.
All through your Company's ambition was to prepare for the new norm in the bestpossible manner and build back better.
Prepare for the new norm
Backed by your Company's resilience and zest for innovation your Company quicklyadapted to the new norm. Besides switching to Remote Factory Acceptance Tests (RFAT) wherepossible your Company conducted numerous virtual technical webinars attended by overthousands of participants from utilities industries transport and infrastructure segmentacross countries and launched its flagship customer event Energy and Digital World. YourCompany continued engagement with industry leaders through virtual industry events andspecific one-on-one CEO connects that helped it keep a finger on the pulse across variousverticals.
Your Company also remained a trusted partner for training top talent and had suchrequests from various customers. Your Company conducted workshops for hundreds ofcustomers from about two dozen utilities devoted efforts toward developing future talentfor its high-growth segments and ran more than 60 separate training programs for overthousand people totaling ~3500 man-days in training.
While the blow of the pandemic couldn't be completely blunted your Company was able tosee some semblance of normalcy by the third quarter. The closure of factories and sites -your Company and its customers' - for half the second quarter reflected in your Company'sbusiness performance in the April-June period. Further details on this have been shared insubsequent sections.
By December 2020 the count of fresh COVID-19 cases had come down and dry run ofvaccination had started in some states. With the economy gradually opening up the ReserveBank of India revised its forecast of economic growth for the current fiscal year(2020-21) to (-) 7.5 percent compared to its earlier forecast of (-) 9.5 percent. Whileyour Company has made every effort to swiftly adapt to the new norm the closures willlikely have an impact on its performance which can only be gauged in the quarter endingJune 30 2020.
5. Scheme of Arrangement:
A Scheme of Arrangement ("Scheme") was entered into between (i) ABB IndiaLimited ("INABB"/"Transferor") and (ii) your Company("Company"/"Transferee") and their respective shareholders andcreditors pursuant to the provisions of Section 230 to 232 and other applicableprovisions of the Companies Act 2013 ("Act") which provided for inter alia theDemerger of the Power Grids
Business of INABB ("Demerged Undertaking") and the consequent issuance ofequity shares by your Company to the shareholders of INABB as per the share entitlementratio.
The Scheme was approved by your Board of Directors pursuant to its resolution datedMarch 5 2019 and the Board of Directors of INABB pursuant to its resolution dated March5 2019. Pursuant to an order dated June 27 2019 passed by the National Company LawTribunal Bengaluru Bench ("NCLT") meetings of the equity shareholders and thecreditors of INABB were convened. The equity shareholders and the creditors of INABBapproved the Scheme at court convened meetings each held on August 9 2019. The NCLTapproved the Scheme on November 27 2019. The Appointed Date of the Scheme was April12019 and the Effective Date was December 12019.
The Scheme provided for the transfer by way of a demerger of the Demerged Undertakingand the consequent issue of equity shares by your Company to the shareholders of INABB inaccordance with the share entitlement ratio and various other matters consequential orintegrally connected therewith including the re-organisation of the share capital of theTransferee pursuant to Sections 230 to 232 of the Act the SEBI circulars and incompliance with the Income Tax Act 1961
6. Board of Directors' response to observations qualifications and adverse remarks inAuditor's Report
The Statutory Auditors ("Auditors") have qualified their opinion in relationto the matters specified in Notes 38 of the Financial Statements for the year endedDecember 312020 ("Statements").
a. Qualified Opinion:
We have audited the accompanying Ind AS financial statements of ABB Power Products andSystems India Limited ("the Company") which comprise the Balance sheet as atDecember 31 2020 the Statement of Profit and Loss including the statement of OtherComprehensive Income the Cash Flow Statement and the Statement of Changes in Equity forthe year then ended and notes to the Ind AS financial statements including a summary ofsignificant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matters described in the Basisfor Qualified Opinion' section of our report the aforesaid Ind AS financial statementsgive the information required by the Companies Act 2013 as amended ("the Act")in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India of the state of affairs of the Company as atDecember 312020 its profit including other comprehensive income its cash flows and thechanges in equity for the year ended on that date.
b. Basis for Qualified Opinion:
We draw attention to Note 38 (a) to the accompanying Ind AS financial statementsregarding the Scheme of Arrangement (Scheme') for demerger of the power gridbusiness of ABB India Limited with the Company with an appointed date of April 01 2019and approved by the National Company Law Tribunal (NCLT') vide its order datedNovember 27 2019. As per the applicable accounting standard Ind AS 103 since thisdemerger was a common control business combination the financial information necessitatedrestatement by the transferee at carrying amounts not from the appointed date but from thebeginning of the preceding period in the financial statements which happens to be the dateof incorporation i.e. February 19 2019. Accordingly the Company was required as per IndAS 103 to give effect to the business combination from February 19 2019 (date of itsincorporation). However the Company had recognized the impact of the business combinationonly from April 01 2019 (i.e. the appointed date specified in the scheme) and has notrestated and disclosed financial results for the period from February 19 2019 to March31 2019 in the comparative period ended December 31 2019. However there is no impactof the same on the Company's Ind AS financial statements of the year ended December312020. Our opinion on the current year's statement is qualified because of the possibleeffect of this matter on the comparability of the current period's figures and thecorresponding figures.
This matter was also qualified in the comparative period by the preceding auditor.
c. Board's response to qualification in Auditor's Report:
The Statutory Auditors ("Auditors") have qualified their opinion in relationto the matters specified in Notes 38 of the Financial Statements for the financial yearended December 31 2020 ("Statements"). The Board's response to thequalifications are as follows.
As per the applicable accounting standard Ind AS 103 (standard') since thisdemerger is a common control business combination the financial information necessitatesrestatement by the Company at carrying amounts not from the appointed date but from thebeginning of the preceding period in the financial statements which happens to be the dateof incorporation i.e. February 19 2019. Consequentially the Company is required to giveeffect to the business combination from February 19 2019 (date of its incorporation).However the Company has recognised the impact of the business combination only from April1 2019 (i.e. the appointed date specified in the scheme of arrangement). The Company isof the view that due to incoherence between the appointed date i.e. April 1 2019 anddate of incorporation i.e. February 19 2019 and requirements of Ind AS 103 such a one-offsituation has arisen. Further in addition to what has been stated in Note 38 (a) of theStatements we wish to state that in anticipation of reorganisation of ABB India Limited'sbusiness by way of said Scheme the Company was incorporated. Such date of incorporationis not in control of the Company. The Registrar of Companies issued the certificate ofincorporation on February 19 2019. The management confirms that during the periodbetween February 19 2019 and March 312019 no active business was undertaken other thanthe initial paid up share capital. In light of the above there is no impact on thefinancial statements of the Company as at December 312020 as affirmed by the Auditors.Thus the statement of profit and loss (including other comprehensive income) statementof changes in equity and statement of cash flows for the period do not contain the impactof the transactions of the demerged undertaking from February 19 2019 to March 31 2019.
7. Change in the financial year:
Your Company was incorporated on February 19 2019 with first financial year commencingon February 19 2019 and ending on March 31 2020. Your Company subsequently made anapplication to the Regional Director South East Region Ministry of Corporate AffairsHyderabad on November 5 2019 to change your Company's first financial year from February19 2019 to December 31 2019. Pursuant to an order bearing no. F.No:10/19/Karnataka/RD(SER)/2(41) of 2013/2019/6328 dated December 12 2019 passed by the Regional DirectorSouth East Region Ministry of Corporate Affairs Hyderabad your Company's financial yearcommenced on January 1 and ended on December 31 of a given year.
Subsequent to the transfer of shares held by promoters from ABB Asea Brown Boveri Ltd.to ABB Ltd and then to Hitachi ABB Power Grids Ltd. given that the financial year ofHitachi ABB Power Grids Ltd. is April - March the Board of Directors at their meetingheld on February 26 2021 has approved the change in financial year of your Company toApril-March and that the current financial year will be from January 012021 to March 312022 (15 months) and thereafter all financial years shall commence on April 01 and end onMarch 31 every year.
8. Material changes and commitments if any affecting the financial position of theCompany having occurred since the end of the year and till the date of this report anddisclosures:
Other than those mentioned in this Report there have been no material changes andcommitments which affect the financial position of your Company which have occurredbetween the end of the financial year to which the financial statements relate and thedate of this Report.
9. Annual Return:
As per provisions of Section 92 (3) of the Act read with Rule 12 of the Companies(Management and Administration) Rules 2014 as amended from time to time the copy of theAnnual Return in the Form MGT-7 is hosted on website of your Company at:
10. Board Meetings held during the period:
During the financial year under review five (5) meetings of the Board of Directorswere held. The details of board meeting dates are furnished in Corporate governance reportforming part of this Annual report.
11. Independent Directors and compliance on criteria of independence by the IndependentDirectors:
The following Independent Directors were appointed during FY 2019 and the Board is ofthe view that they have adequate expertise experience and proficiency.
Mr. Mukesh Butani holds a bachelor's degree in commerce from Mumbai University. Heis a certified chartered accountant from the Indian Institute of Chartered Accountants. Hefounded BMR Legal Advocates a tax law firm in India. He has expertise in taxation laws.
Ms. Akila Krishnakumar is an alumnus of Birla Institute of Technology and Sciences.She was previously the president - global technology and country head of Sun Gard whichwas acquired by Fidelity National Information Services Inc. She has expertise in diversebusiness profiles.
Ms. Nishi Vasudeva holds a bachelor's degree in economics from Delhi University andis an alumnus of Indian Institute of Management Kolkata. She was the Chairperson andManaging Director of Hindustan Petroleum Corporation Limited till March 2016. She hasexpertise in diverse business profiles. All Independent Directors of your Company havegiven declarations to your Company under Section 149 (7) of the Act that they meet thecriteria of independence as provided in Sub-Section 6 of Section 149 of the Act and alsounder the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015(Listing Regulations). All Independent Directors of your Company have also givendeclarations to your Company under Rule 6 of Companies (Appointment and Qualification ofDirectors) Rules 2014. In the opinion of the Board they fulfil the conditions ofindependence as specified in the Act and the Listing Regulations and are independent ofmanagement. The Independent Directors have affirmed compliance with the Code of Conductas on December 31 2020. The Independent Directors also affirmed compliance under Sec 150with regard to Independent Directors databank enrollment and examination in FY 2021.During the financial year a separate meeting of the Independent Directors was held onDecember 14 2020.
12. Management Discussion and Analysis Report (MDAR):
The Management Discussion and Analysis Report (MDAR) is annexed as Annexure A to thisreport.
13. Nomination and Remuneration Policy of the Company:
The Board of Directors have re-constituted the Nomination and Remuneration Committee("NRC") at their meeting held on February 26 2021. The Remuneration Policy ofyour Company for appointment and remuneration of the Directors Key Managerial Personneland Senior Management of the Company along with other related matters have been providedin the Corporate Governance Report. The nomination and remuneration policy is available onthe website of the Company: https://www.hitachiabb-powergrids.com/in/en/investor-relations/ board-of-di rectors.
As and when need arises to appoint Director the Nomination and Remuneration Committee(NRC) of the Company will determine the criteria based on the specific requirements. NRCwhile recommending candidature to the Board takes into consideration the qualificationattributes experience and independence of the candidate. Director(s) appointment andremuneration will be as per NRC Policy of the Company.
A Statement of Disclosure of Remuneration pursuant to Section 197 of the Act read withRule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is provided in Annexure - B forming part of this report.
14. Dividend distribution policy:
As required under Regulation 43A of the Listing Regulations your Company has a policyon dividend distribution. This policy can be accessed on your Company's website athttps://www.hitachiabb-powergrids.com/in/en/investor-relations/corporate-governance-policies
15. Particulars of loans guarantees or investments under Section 186 of the Act:
During the financial year under review your Company has not granted any LoanGuarantees or made investments within the meaning of Section 186 of the Act.
16. Amount if any proposed to be transferred to Reserves:
For the financial year under review your Company has proposed not to transfer anyamount to the General Reserves.
17. Conservation of energy technology absorption foreign exchange earnings and outgo:
The particulars as prescribed under Section 134 of the Act read with Rule 8(3) of theCompanies (Accounts) Rules 2014 relating to Conservation of Energy TechnologyAbsorption Foreign Exchange Earnings and Outgo are given in Annexure - C forming part ofthis report.
18. Risk Management:
Your Company has constituted a Risk Management committee on December 24 2019 andadopted a Risk Management Policy as required under Companies Act 2013 and ListingRegulations. The Risk Management committee was re-constituted by the Board of Directors attheir meeting held on February 26 2021. The Committee oversees the Risk Managementprocess including risk identification impact assessment effective implementation of themitigation plans and risk reporting. The purpose of the Committee is to assist the Boardof Directors in fulfilling its oversight responsibilities with regard to enterprise riskmanagement. The details and the process of Risk Management are provided as part ofManagement's Discussion and Analysis which forms part of this Report.
19. Corporate Social Responsibility initiatives:
The Board of Directors had constituted a Corporate Social Responsibility (CSR)Committee as required under the Act for implementing various CSR activities and adoptedrevised CSR Policy at its meeting held on April 30 2020 and then in the meeting held onNovember 10 2020. Composition of the Committee and other details are provided inCorporate Governance Report which forms part of this Report. Promote gender equality andempowering of women in engineering workforce endorse education employability &healthcare social impact projects support national disaster management and othergovernment initiatives and aid in sustainable development goals are the focal area underthe CSR Policy. Your Company has implemented various CSR projects directly and / orthrough implementing partners and the projects undertaken by your Company are inaccordance with Schedule VII of the Act. During the financial year under review yourCompany had partially spent the required amount on CSR activities and could not spend thestatutorily required amount due to COVID-19 pandemic and balance unspent amount will bespent in current year FY 21. However the unspent amount has been transferred to adedicated bank account. Detailed report on CSR activities as required under the Companies(Corporate Social Responsibility Policy) Rules 2014 is provided in Annexure - D formingpart of this Report. The CSR Committee was reconstituted by the Board of Directors attheir meeting held on February 26 2021.
20. Annual evaluation of Board its Committees and Individual Directors:
The Board of Directors has carried out an annual evaluation of its performance itsCommittees and Directors for FY 2020 in FY 2021 pursuant to the requirements of the Actand the Listing Regulations.
Further the Independent Directors at their exclusive meeting held in FY 2021reviewed the performance of the Board its Chairman and Non-Executive Directors and otheritems as stipulated under the Listing Regulations.
21. Audit Committee:
The details pertaining to composition of the Audit Committee and terms of reference areincluded in the Corporate Governance Report which forms part of this Report. The Boardhas accepted all recommendation of Audit Committee made during the financial year underreview.
22. Related Party Transactions:
The Board of Directors have adopted a policy on Related Party Transactions at itsmeeting held on December 24 2019. The objective is to ensure proper approval disclosureand reporting of transactions as applicable between your Company and any of its relatedparties.
Transactions with related parties as per requirements of Indian Accounting Standardhave been disclosed in the accompanying financial statements. Your Company's Policy onRelated Party Transactions as adopted by your Board can be accessed on your Company'swebsite. Link for the same is: https://www.hitachiabb-powergrids.com/in/en/investor-relations/corporate-governance- policies
ABB Asea Brown Boveri Ltd was holding 10 percent or more shares in your Company as onDecember 312020. The details of transactions with promoter/promoter group holding 10percent or more shares have been disclosed in the accompanying financial statements.
Related Party Transaction under the provisions of Section 188 of the Act requiringdisclosures to be made in Form No. AOC-2 pursuant to Section 134 of the Act read with Rule8 of the Companies (Accounts) Rules 2014 is attached as Annexure - E to this Report.
All contracts or arrangements were entered into only with prior approval of the AuditCommittee except transactions which qualified as omnibus transactions as permitted underlaw.
23. Reporting of frauds:
There was no instance of fraud during the financial year under review which requiredthe Statutory Auditors to report to the Audit Committee and/or Board under Section 143(12)of the Act and Rules framed thereunder.
24. Transfer to Investor Education and Protection Fund:
As your Company was incorporated on February 19 2019 and that no dividend wasrecommended/declared during the financial year ended December 31 2019 and as on financialyear ended December 31 2020 there is no unclaimed dividend during the financial yearunder review no dividend amount was transferred as required under Section 124 of the Actto the Investor Education and Protection Fund ("IEPF") established by theCentral Government.
Pursuant to the Scheme of Arrangement (entered into between your Company ABB IndiaLimited and their respective Shareholders and Creditors) approved by NCLT vide its orderdated November 27 2019 your Company on December 24 2019 allotted equity shares to theshareholders of ABB India Limited. Out of 42381675 Equity shares allotted 107421Equity Shares were directly allotted to the IEPF account as a consequence of issue ofEquity Shares by your Company to the shareholders of ABB India Limited in accordance withthe Share Entitlement Ratio.
As explained above as no dividend was declared since incorporation of your Company noryour Company was required to transfer any dividend amount to IEPF other details likeamount of unclaimed/unpaid dividend and the corresponding shares were not applicable forthe financial year under review. Also redemption amount of preference shares amount ofmatured deposits for companies other than banking companies along with interest accruedthereon amount of matured debentures along with interest accrued thereon applicationmoney received for allotment of any securities and due for refund along with interestaccrued sale proceeds of fractional shares arising out of issuance of bonus sharesmerger and amalgamation resultant benefits on shares transferred to the IEPF year wiseamount of unpaid/unclaimed dividend lying in the unpaid account upto the year and thecorresponding shares which are liable to be transferred to the IEPF and the due datesfor such transfer the amount of donation if any given by the Company to the IEPF suchother amounts transferred to the IEPF if any during the financial year under review arenot applicable. 9266 Equity Shares arising out of fractional shares were sold on July 272020 and out of that 73.20 equity shares were pertaining to IEPF and net amount Rs49932.30/- (after deduction of taxes) was deposited into IEPF account on August 3 2020.
Web-addresses of the Company where details of shares transferred to IEPFauthority is captured: https://www.hitachiabb-powergrids.com/in/en/investor-relations/iepf
Details of Nodal Officer: Mr. Poovanna Ammatanda General Counsel and CompanySecretary.
25. Particulars of employees including remuneration of directors and employees:
The information on employee particulars as required under Section 197(12) of the Actread with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 as amended from time to time are given in Annexure - F formingpart of this report. In terms of Section 136 of the Act the Report and FinancialStatements are being sent to the Members and others entitled thereto excluding thisAnnexure. This Annexure shall be provided to Members on a specific request made in writingto the Company. The said information is available for electronic inspection by the Membersof the Company on any working day upto the date of the 2nd Annual General Meeting.
26. Directors' Responsibility Statement:
To the best of knowledge and belief and according to the information and explanationsobtained by us your Directors make the following statements in terms of Section 134(3)(c)and 134(5) of the Act that:
a. in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;
b. they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at December 31 2020 and of the profit and loss ofthe Company for the year ended on that date;
c. 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;
d. they have prepared the annual accounts on a going concern basis;
e. they have laid down internal financial controls to be followed by the Company andthat such internal
financial controls are adequate and were operating effectively; and
f. they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
27. Disclosure on confirmation with the Secretarial Standards:
Your Directors confirm that the Secretarial Standards issued by the Institute ofCompany Secretaries of India have been duly complied with.
28. Corporate Governance Report and Certificate:
As required under Regulation 34(3) read with Schedule V (C) of the Listing Regulationsa report on Corporate Governance and the certificate as required under Schedule V (E) ofthe Listing Regulations from M/s. V. Sreedharan & Associates Practicing CompanySecretaries regarding compliance of conditions of Corporate Governance are provided inAnnexure - G and Annexure - H respectively forming part of this report.
29. Secretarial Audit:
Pursuant to provisions of Section 204 of the Act read with Rule 9 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 and amendments theretoyour Company engaged the services of M/s. BMP & Co. LLP Company SecretariesBengaluru to conduct the Secretarial Audit of your Company for the financial year endedDecember 31 2020. The Secretarial Audit Report in Form MR-3 and Secretarial Compliancecertificate is provided in Annexure - I forming part of this report.
30. Business Responsibility Report:
As required under Regulation 34 of the Listing Regulations the Business ResponsibilityReport forms part of the Annual Report.
31. Whistle Blower Policy/Vigil Mechanism:
Your Company has adopted a vigil mechanism/whistle blower policy for DirectorsEmployees and third parties to report their concerns about unethical behaviour actual orsuspected fraud or violation of the Company's Code of conduct leak of unpublished pricesensitive information and related matters. The mechanism provides for adequate safeguardsagainst victimization of whistle blowers who avail of the mechanism. The whistle blowersmay also access their higher level/supervisors and/or the Audit Committee.
The Whistle Blower Policy/Vigil Mechanism is available on your Company's website:https://www.hitachiabb- powergrids.com/in/en/investor-relations/corporate-governance-policies
32. Directors and Key Managerial Personnel:
During the financial year under review there were no changes in the constitution ofthe Board. The Board is duly constituted with a mix of Executive Non-Executive andIndependent Directors. The appointment of Mr. Frank Duggan Chairman and Non-ExecutiveDirector Mr. Venu Nuguri Managing Director Mr. Mukesh Hari Butani IndependentDirector Ms. Akila Krishnakumar Independent Director Ms. Nishi Vasudeva IndependentDirector were regularized and appointed by the members during the financial year underreview.
However subsequent to the transfer of shares held by promoters from ABB Asea BrownBoveri Ltd. to ABB Ltd and then to Hitachi ABB Power Grids Ltd. the Board of Directorsat their meeting held on February 25 2021 have appointed Mr. Achim Michael Braun(DIN:08596097) as Additional Director (Non-Executive and NonIndependent) and subsequentlyas Chairman of the Board and of your Company and Mr. Ismo Antero Haka (DIN:08598862) asAdditional Director (Non-Executive and Non-Independent Director) of your Companyrepresenting Hitachi ABB Power Grids Ltd and Mr. Venu Nuguri the current ManagingDirector and Chief Executive Officer was also nominated representing Hitachi ABB PowerGrids Ltd and this was taken note of in the board meeting held on February 25 2021. BothMr. Achim Michael Braun and Mr. Ismo Antero Haka have been appointed liable to retire byrotation and subject to approval of the Shareholders in the ensuing Annual GeneralMeeting. Accordingly the proposal for regularisation of their appointment is included inthe Notice of Annual General Meeting for approval of the Shareholders of the Company.Necessary notice under Section 160 of the Act has been received from Members proposing thecandidature of the aforesaid Directors of the Company. At the meeting of the Board ofDirectors held on February 26 2021 Mr. Venu Nuguri Managing Director was designated asManaging Director and Chief Executive Officer. Mr. Mukesh Butani Ms. Akila Krishnakumarand Ms. Nishi Vasudeva continued as Non-Executive and Independent Directors during thefinancial year under review.
Mr. Frank Duggan and Mr. Sanjeev Sharma resigned as Directors w.e.f. February 25 2021due to the reconstitution of the Board of Directors. Your Directors place on record theirsincere appreciation of the valuable contribution made by them.
During the financial year under review as on December 31 2020 and as on date Mr.Venu Nuguri Managing Director and Chief Executive Officer Mr. Ajay Singh ChiefFinancial Officer and Mr. Poovanna Ammatanda General Counsel Company Secretary andCompliance Officer are the Key Managerial Personnel of the Company.
Details of Directors Key Managerial Personnel and Composition of various Committees ofthe Board are provided in the Corporate Governance Report forming part of this report.
During the financial year under review your Company did not accept any deposit withinthe meaning of the provisions of Chapter V - Acceptance of Deposits by Companies of theAct read with the Companies (Acceptance of Deposits) Rules 2014.
34. Share Capital and Debt structure:
There was no change in the share capital during the financial year under review.
Out of 42381675 equity shares allotted on December 24 2019 your Company allotted9266 Equity shares (pursuant to fractional entitlements of Members of ABB India Limitedas per share entitlement ratio) and the shares were allotted to APPSIL Fractional SharesTrust 2019 which was constituted specifically to hold the shares on behalf of the entitledshareholders of fractional shares in accordance with the Scheme of Arrangement and thesame was sold in the market in FY 2020. The sale proceeds were distributed amongst theentitled shareholders.
Pursuant to a resolution passed by the members of your Company on November 26 2019 andsubject to the provisions of the Act and the Articles of Association the Board isauthorised to borrow money as and when required from including without limitation anybank and/or other financial institution and/or foreign lender and/or anybodycorporate/entities/and/or authorities either in Rupees or in such other foreigncurrencies as may be permitted by law from time to time as may be deemed appropriate bythe Board for an aggregate amount not exceeding a sum of Rs 5000 crores for the Companynotwithstanding that money so borrowed together with the monies already borrowed by theCompany if any (apart from temporary loans obtained from the Company's bankers inordinary course of business) may exceed the aggregate of the paid-up capital of theCompany its free reserves and securities premium. It is now proposed to increase thislimit to Rs 6000 crores and the same is being proposed to the members seeking theirapproval at the forthcoming Annual General Meeting.
Your Company is debt free as on December 31 2020 and established credit limits withbanks. During the financial year under review your Company had borrowed from ABB IndiaLimited and the outstanding loan was Rs 347.62 crores as on December 31 2019 which hasbeen paid completely during the financial year under review.
Your Company did not have any debt instrument fixed deposit programme or any scheme orproposal for mobilization of funds. Hence during the financial year ended December312020 it had not obtained any credit rating for this purpose.
However CRISIL has assigned its CRISIL AAA/Stable/ CRISIL A1+' ratings to thebank facilities of the Company wef January 04 2021 as follows:
|Total Bank Loan Facilities Rated ||Rs 5000 Crore |
|Long Term Rating ||CRISIL AAA/Stable (Assigned) |
|Short Term Rating ||CRISIL A1 + (Assigned) |
There was no issue of preference shares debenture warrants or other convertiblesecurities during the financial year under review. Your Company has not issued any shareswith differential voting rights bonus shares sweat equity shares employees stock optionnor bought back any share during the financial year under review. No shares were held inthe trust for the benefit of employees during the financial year under review. There hasbeen no revision of financial statement or report. There was no instance of Statementindicating deviations if any in the use of proceeds from the objects stated in the offerdocument or explanatory statement to the notice for the general meeting.
35. Adapting to the new norm:
To adapt to the new norm your Company revised how your Company engaged with itscustomers and helped them as much as possible to stay on track with their projecttimelines and maintain business continuity.
Your Company amplified customer engagement through technology. To maintain businesscontinuity your Company leveraged digital solutions for de-risking factory acceptancetests product service and training and even commissioning of certain projects. YourCompany carried out close to a dozen Remote Factory Acceptance Tests (RFATs) for leadingindustry players in diverse sectors.
The High Voltage business unit provided a major state- owned power transmission companya virtual tour of your Company's high and low voltage technologies. Your Company'sTransformers business unit enabled India's largest steel exporter to remotely inspect itsthree-phase transformers for an upcoming project. Your Company's Grid Automation businessunit conducted RFATs to speed up activity for a leading utility service provider for itsprojects in Gujarat and Maharashtra and readied Substation Automation Systems for anupcoming metro rail line among others. Your Company's resilience assured its customers ofon-time delivery equipment reliability and quality and won it big-ticket projects.
Ensuring that your Company's customer engagement stayed high your Company conductednumerous virtual technical webinars attended by over thousands of participants fromutilities industries transport and infrastructure segment across countries. Your Companylaunched its flagship customer event Energy and Digital World with over 600 customersattending virtual inaugural event.
Your Company will be solidifying its presence in the power sector and expanding itsfootprint and product portfolio to support India's talent and manufacturing capabilities.Your Company will be investing towards expanding its GIS product line to help the Indiantransmission and distribution sector - poised to register a CAGR of 5.5 percent for thenext five years - meet present and future demand of substation systems. Within that yourCompany will augment the grid integration technology such as regulating device used onalternating current electricity transmission networks and power quality products alone toenable power transfer with the lowest environmental impact.
Your Company will be investing in its transformers business building up the tractiontransformers capacity and increasing its product portfolio of high-voltage class bushingsthrough facility expansion for meeting imminent demand from locomotives both domesticallyas well as abroad. Your Company will simultaneously be investing in equipment and machinesto support research and development activities for the buildout of various high- voltageglobal products critical to India's energy revolution as well as progress under theMake-in-India initiative. Already your Company has made India the manufacturing base offive global products with the largest installed base in the power sector nationally.
Besides commensurately increasing headcount to support new projects and increasedproduction your Company will be enhancing its remote monitoring analytics and servicesby expanding its customer experience center in Bengaluru. The center will augmentreal-time connectivity with energy assets and systems at various sites a part of theCompany's strategy to have more digitally enabled products and systems to grow in theareas of digitalization services.
Your Company is at the forefront of power technology revolution contributing to theGovernment's renewable energy targets through products and systems that reduce carbonemissions. As a global leader in power technologies the Company is committed to makeadoption of alternate energy easier faster and more efficient.
36. Significant and material orders passed by the regulators or courts or tribunalsimpacting the going concern status of the Company:
During the financial year under review no significant and material orders were passedby the regulators or courts or tribunals impacting the going concern status of yourCompany.
With regard to listing process of your Company's equity shares and in terms of the SBIcircular no. CFD/DIL3/ CIR/2017/21 dated March 10 2017 as amended vide SEBI circulardated Jan 3 2018 ("SEBI Circular") your Company was required to list theequity shares of your Company with BSE Limited and National Stock Exchange of IndiaLimited within 60 days of the date of the receipt of the order approving the Scheme ofArrangement. SEBI vide letter dated March 13 2020 notified to the Company the delay incompliance with the SEBI Circular and to ensure compliance in future.
37. Internal financial control systems and their adequacy:
The details on Internal financial control systems and their adequacy are provided inthe Management's Discussion and Analysis which forms part of this Report.
38. Disclosure as per the Sexual Harassment of Women at Work place (PreventionProhibition and Redressal) Act2013:
Your Company has zero tolerance towards sexual harassment at the workplace and hasadopted a policy on prevention prohibition and redressal of sexual harassment atworkplace in line with the provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and the Rules there under. As requiredunder law an Internal Complaints Committee has been constituted for reporting andconducting inquiry into the complaints made by the victim on the harassments at the workplace. During the financial year under review one case was reported which wasinvestigated and closed.
39. Statutory Auditors:
Pursuant to provisions of Section 139 of the Act read with the Companies (Audit andAuditors) Rules 2014 M/s. S. R. Batliboi & Associates LLP Chartered Accountants(Registration No. 101049W/ E300004) were appointed as Statutory Auditors for a period offive years to hold office from the conclusion of first Annual General Meeting until theconclusion of sixth Annual General Meeting at such remuneration as may be mutually agreedamongst by the Board of Directors and the Statutory Auditors.
40. Cost Audit and Cost Auditor of the Company:
In terms of the provisions of Section 148 of the Act read with the Companies (CostRecords and Audit) Rules 2014 the Board of Directors on the recommendation of the AuditCommittee appointed M/s. Ashwin Solanki & Associates Cost Accountants (RegistrationNo: 100392) as Cost Auditor of the Company for the financial year ending December 312020 on a remuneration as stated in the Postal Ballot Notice dated April 30 2020 whichwas approved by the members during the financial year under review for conducting theaudit of the cost records maintained by your Company.
The Board of Directors on the recommendation of the Audit Committee has appointedM/s. Ashwin Solanki & Associates Cost Accountants (Registration No: 100392) as CostAuditor of your Company for the financial year 2021-22 for conducting the audit of thecost records maintained by the Company.
A certificate from M/s. Ashwin Solanki & Associates Cost Accountants has beenreceived to the effect that their appointment as Cost Auditor of the Company if madewould be in accordance with the limits specified under Section 141 of the Act and Rulesframed thereunder and they are not disqualified to be appointed as Cost Auditor.
A resolution seeking Members' approval for remuneration payable to Cost Auditor formspart of the Notice of the 2nd Annual General Meeting of your Company and same isrecommended for your consideration. Cost Audit and Compliance reports for the year 2019were filed with the Registrar of Companies within the prescribed time limit.
41. Listing of the equity shares of the Company:
Your Company received listing and trading approval for 42381675 Equity Shares of Rs2 each from the BSE Limited ("BSE") and the National Stock Exchange of IndiaLimited ("NSE") on March 25 2020. The equity shares of your Company commencedtrading on BSE and NSE from trading hours on March 30 2020. The Stock Code of EquityShares of your Company are NSE Symbol: POWERINDIA BSE Scrip code: 543187 (POWERINDIA) andISIN: INE07Y701011
42. Shifting of registered office of the Company:
The registered office of your Company was shifted from 21st Floor World Trade CenterBrigade Gateway No. 26/1 Dr. Rajkumar Road Malleshwaram Bengaluru - 560055 to 8thFloor Brigade Opus 70/401 Kodigehalli Main Road Bengaluru - 560092 w.e.f. March 162020.
43. Postal ballot:
During the financial year under review your Company conducted postal ballot exercisethrough remote e-voting pursuant to Section 110 and other applicable provisions if anyof the Act read with Rule 22 and other applicable rules of the Companies (Management andAdministration) Rules 2014 ("Rules") and General Circular No.14/2020 datedApril 8 2020 read with General Circular No. 17/2020 dated April 13 2020 issued byMinistry of Corporate Affairs Government of India ("MCA Circulars") andpursuant to other applicable laws and regulations MCA circulars vide Postal Ballot Noticedated April 30 2020.
44. Subsidiary/Joint venture :
Your Company did not have any joint venture or subsidiary Company during the financialyear under review.
45. Branch offices:
Your Company has completed opening of branch office in Bangladesh during the year underreview. Opening of branch office in Sri Lanka and Nepal is in process.
46. Fractional shares:
Pursuant to Scheme of Demerger your Company had also allotted fractional sharestotaling to 9266 Equity shares (out of total 42381675 Equity shares allotted onDecember 24 2019) to APPSIL Fractional Shares Trust 2019 on December 24 2019. CatalystTrusteeship Limited ("Catalyst") was appointed subsequently on April 30 2020 asthe Trustee to handle fractional shares. 9266 Equity shares were sold on July 27 2020for gross amount totalling to Rs 8038718.30. The tax deducted at source aggregated to Rs1711516.05 and net amount for distribution was Rs 6327202.25. The distribution of netproceeds commenced from August 3 2020 through online/cheque mode.
Summary of distribution of fractional shares sale proceeds as on January 31 2021 wasas follows:
|20619 shareholders holding total fractional shares : 9266 Equity shares ||Amount ||No of shareholders/cheques/ Dollar DD |
|Gross amount arising out of sale of fractional shares ||Rs 8038718.30 ||20619 |
|TDS amount deducted ||Rs 1711516.05 ||20619 |
|Net amount arising out of fractional shares (post TDS) ||Rs 6327202.25 ||20619 |
|RTGS and NEFT remittance completed: ||Rs 5709760.12 ||18614 |
|18614 shareholders have been paid successfully ||(including 1st and 2nd tranche) ||(including 1st and 2nd tranche) |
|Balance shareholders cheques issued 2004 || || |
|Rejected online cases : 1138 Original DD cases : 867 (including 1 Dollar DD case) Total : 2005 ||Rs 617442.13 ||2004 cheques |
|Cheques deposited and processed (i.e. total amount and number of cheques encashed as on Jan 31 2021) ||Rs 406040.47 ||1277 cheques |
| || ||727 cheques |
|Cheques balance pending for depositing by respective holders ||Rs 211401.00 ||(out of this 338 cheques amounting to Rs 103007 has been received back by Kfin Technologies Private Limited Registrar and Share Transfer Agent as on January 31 2021) |
47. Open offer:
During the financial year under review a Letter of Offer was issued by the Promotergroup-ABB Switzerland Ltd (Acquirer 1) Hitachi Ltd (Acquirer 2) Hitachi ABB Power GridsAG (PAC 1) and ABB Ltd (PAC 2) dated September 02 2020 ("Open Offer") whichopened on September 9 2020 and closed on September 22 2020. The open offer was tenderedfor acquisition of 25 percent public shareholding of your Company. Total of 179 Equityshares were tendered by public shareholders. The Offer price per share was Rs 872.68 pershare. 179 equity shares were acquired under the said Open Offer and the consideration waspaid on September 30 2020 by the Acquirers.
48. New factories in pipeline:
Your Company actively worked toward increasing its market share in the HV segment. YourCompany made investment in portfolio expansion in the gas insulated switchgear (GIS) spacethrough the production of 145 kilovolt ELK04 GIS product line in Savli Gujarat a feederfactory module assembly and an HV test setup in Savli Gujarat to enable cost reduction ofELK03 420 kV GIS products through local production in new production lines in Vadodarafor various HV products to meet global and local demand as well as in factory expansionfor medium voltage power quality products in Peenya to integrate all presently fragmentedoperations under one roof to serve an ever-growing power quality market both domesticallyas well as overseas.
Your Company proposes to increase the capacity of medium voltage capacitors. This unitproposed to be in Doddaballapur Industrial Area Bengaluru will also cater to low andmedium voltage power quality panels and R&D. It will have state-of-the-art processesincluding robotic painting and automatic conveyor systems to address advance needs ofsafety and quality.
This expansion is to cater to an expanding transmission and distribution sector poisedto register a CAGR of 5.5 percent for next five years with growth in infrastructurerenewable & transportation. Further as per the recommendation from the Centralelectricity authority (CEA) all major utilities are likely to GIS from air insulatedswitchgear to conserve space meet power demand and ensure grid reliability andsustainability.
For your Company these investments will bring operational efficiency and improve ourmarket competitiveness. They will also generate additional volume and EBIT for yourCompany.
49. Transfer of shares from ABB to Hitachi:
31786256 equity shares aggregating 75 percent of the paid up capital of your Companywas transferred from ABB Asea Brown Boveri Ltd to ABB Ltd by way of dividend in kind andsubsequently from ABB Ltd to Hitachi ABB Power Grids AG as contribution in kind (asdisclosed by the shareholders) on February 05 2021.
The Board of Directors take this opportunity to thank your Company's parent companycustomers members suppliers bankers associates Central and State Governments andemployees at all levels for their support and co-operation extended to your Company duringthe financial year under review.
For and on behalf of the Board of Directors
For ABB Power Products and Systems India Limited
Achim Michael Braun
February 26 2021