The Directors have pleasure in presenting 26th Annual Report of the Companytogether with the Audited Financial Statements for the financial year ended 31stMarch 2018.
1. FINANCIAL HIGHLIGHTS
The Company's financial performance for the year ended 31st March 2018alongwith previous year's figures is summarized below:
| || || || ||( ` in Lakhs) |
| ||Standalone || |
|Particulars ||2017-18 ||2016-17 ||2017-18 ||2016-17 |
|Revenue from Operations ||102336.43 ||103693.41 ||106135.62 ||110537.21 |
|Other Income ||381.57 ||452.28 ||442.78 ||541.89 |
|Operating Profit before Finance Costs Depreciation Tax and Extraordinary items ||10055.27 ||11353.55 ||11429.79 ||12931.36 |
|Less: Finance Cost ||4615.67 ||6209.18 ||5101.83 ||6793.83 |
|Less: Depreciation and amortization expenses ||2137.00 ||2321.01 ||2279.04 ||2445.54 |
|Profit before Exceptional Expenses and Tax ||3302.60 ||2823.36 ||4048.92 ||3691.99 |
|Profit before tax ||3302.60 ||2823.36 ||4048.92 ||3691.99 |
|Less: Tax Expenses ||1020.56 ||812.43 ||1291.16 ||1098.53 |
|Profit for the year ||2282.04 ||2010.93 ||2757.76 ||2593.46 |
|Other comprehensive income for the year net of tax ||(1.08) ||(21.91) ||(1.36) ||(24.33) |
|Total comprehensive income for the year net of tax ||2280.96 ||1989.02 ||2756.40 ||2569.13 |
|Profit for the year attributable to || || || || |
|Equity holders of the parent Company ||2282.04 ||2010.93 ||2742.87 ||2576.68 |
|Non-controlling interest ||- ||- ||14.89 ||16.78 |
|Total comprehensive income for the year attributable to || || || || |
|Equity holders of the parent Company ||2280.96 ||1989.02 ||2741.52 ||2552.42 |
|Non-controlling interest ||- ||- ||14.88 ||16.71 |
|Earnings per Share (in `) Not Annualised || || || || |
|Basis (`) ||3.55 ||3.63 ||4.27 ||4.65 |
|Diluted (`) ||3.55 ||3.63 ||4.27 ||4.65 |
2. State of Company's Affairs The company has witnessed an improved financialperformance in the fourth quarter driven by growth across all business segments. It hasnoted a very positive business trend marked by stronger H2 FY18 compared to H1 FY18. TheH2 FY18 revenues were 33% higher compared to H1 FY18; strong growth was displaced acrossall segments with switchgear sales up 58% Lighting up 32% Metering up 27% and Wires& cables up 26%. On an absolute basis H2 FY18 EBITDA and PAT grew by 23% and 42%respectively compared to H1 FY18. LED trade sales displayed growth on YoY basis howeveroverall lighting revenues declined due to high base effect of last year when we hadexecuted some bulk LED sales.
The overall order book was up 43% on YoY basis to
` 531 crore led by 67% growth in metering orders. This places the company in a verystrong position with an improved revenue visibility in FY19. Further tenders for over 7mnmeters are currently being evaluated by a couple of states. It is to expect a double-digitgrowth in all business segments. Switchgear business shall continue to maintain currentmomentum driven by renewed management focus. Lighting business growth will be driven byimproved LED trade sales and new LED products recently launched. The increased efforts onadvertising & marketing front should help to generate healthy growth in the tradebusiness across all segments strengthening the HPL brand and product recall in the mindof the customers.
3. Subsidiaries/ Joint Ventures/ Associates
As on 31st March 2018 the company is having only one subsidiary namelyHimachal Energy Private Limited and two Joint Ventures (JVs) namely HPL Electric &Power Pvt. Ltd. Shriji Designs (JV) and HPL Electric & Power Pvt. Ltd. Trimurthi Hitech Co. Pvt. Ltd. - Shriji Designs (JV). These JVs are established asAssociation of Person (AOP) and not registered under the Companies Act and accordingly arenot Associate Companies as per section 2(6) of the Companies Act 2013.
The annual accounts of the subsidiary Company is available on the website of theCompany i.e. www. hplindia.com.
A statement containing the salient features of the financial statement of a company'ssubsidiary or subsidiaries associate company or joint venture or ventures in Form AOC-1is annexed as Annexure I.
4. Consolidated Financial Statement
In accordance with the provisions of the Companies Act 2013 ("the Act") andInd AS 110 Consolidated Financial Statement read with Ind AS - 28 Investments inAssociates and Ind AS 31 Interests in Joint Ventures the audited consolidatedfinancial statement is provided in this Annual Report.
5. Material Changes affecting the Company
There have been no material changes and commitments affecting the financial position ofthe Company between the end of the financial year and date of this report. There has beenno change in the nature of business of the Company.
During the period under report the company do not propose to transfer any amount tothe General Reserve.
The Directors are pleased to recommend a dividend of ` 1.00 per equity share (10%) forthe financial year ended 31st March 2018 subject to the approval of theshareholders at the ensuing Annual General Meeting of the Company.
The dividend distribution would results in cash outgo of ` 77517640 (including taxon dividend of
` 13217154). The dividend would be payable to all those Shareholders whose namesappear in the Register of Members as on 20th September 2018.
8. Credit Rating
During the year under report India Rating & Research Pvt. Ltd. has revised thecompany's rating to IND A/ IND A1 with Stable outlook from IND A/IND A1 with positiveOutlook.
9. Public deposits
During the period under report the Company has not accepted any deposit within themeaning of Sections 73 and 74 of the Companies Act 2013 read together with the Companies(Acceptance of Deposits) Rules 2014.
10. Directors and Key Managerial Personnel and change therein
During the period under report Mr. Virender Kumar Bajaj (DIN: 07401106) anIndependent Director ceased to be a director of the company w.e.f. 14thJanuary 2018. The Board places on record its appreciation towards valuable contributionmade by Mr. Virender Kumar Bajaj during his tenure as an Independent Director of thecompany.
The Board on the recommendation of the Nomination
& Remuneration committee by way of circulation appointed Mr. Hargovind Sachdev(DIN: 08105319) as an Additional (Independent) Director w.e.f. 13th April 2018to hold office upto the date of the ensuing Annual General Meeting. The company hasreceived consent in writing from Mr. Hargovind Sachdev to act as director in the formDIR-2 and intimation in the Form DIR- 8 to the effect that he is not disqualified U/s 164(2) of the companies Act 2013 to act as Director.
In the opinion of the Board Mr. Hargovind Sachdev is a person of integrity and possessrelevant expertise and experience and therefore his appointment requires the approval ofthe members at the ensuing Annual General Meeting.
Pursuant to the provisions of Section 152 of the Companies Act 2013 and otherapplicable provisions of the Act Mr. Vinod Ratan Gupta (DIN: 07401017) Whole- timeDirector of the Company who retires by rotation at the ensuing Annual General Meeting andbeing eligible offers himself for re-appointment.
The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence prescribed under the Act and theSEBI Listing Regulations.
During the period under report Mr. Neeraj Kumar ceased to be the Chief FinancialOfficer of the Company w.e.f 12th August 2017 and Mr. Sudhir Barik wasappointed as the Chief Financial Officer of the Company w.e.f 14th August2017.
Brief details of the directors being recommended for appointment/re-appointment asrequired under SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015have been furnished in the Notice dated 2nd August 2018 convening the 26thAnnual General Meeting. Appropriate resolutions for their appointment/re-appointment areproposed for approval of the members at the Annual General Meeting.
11. Number of meetings of the Board
During the period under report the Board of Directors of the Company met 4 (Four)times on 22nd May 2017; 14th August 2017; 14thNovember 2017 and 12th February 2018. Particulars of attendance of eachdirector are mentioned in the Corporate Governance Report.
12. Formal Annual Evaluation
Pursuant to the provisions of Section 178 of the Companies Act 2013 read withCompanies (Amendment) Act 2017 and SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Nomination and remuneration committee has laid down the manner foreffective evaluation of performance of Board its committees and individual directors andaccordingly the performance of the Board; its committees and individual directors wereevaluated by the Board.
While evaluating the performance of Board the Board had considered the composition andstructure of the Board in terms of size experience diversity effectiveness of the boardprocess dissemination of information etc.
The performance of the committees were evaluated by the board taking into considerationthe factors such as composition of the committee; effectiveness of committee meetings;independence of the committee from the Board and contribution in decision making by theBoard etc.
The performance evaluation of all the individual directors including the IndependentDirectors was carried out after taking into account their individual contribution to theboard and committee meetings such as preparedness on the issues to be discussed effectivecontribution in the discussion on the various agenda items etc. Therefore the outcome ofthe performance evaluation for the period under report was satisfactory and reflect howwell the directors board and committees are carrying their respective activities.
The independent directors in its separate meeting without the attendance ofnon-independent directors and members of management reviewed -
(a) the performance of non-independent directors and the Board as a whole;
(b) the performance of the Chairperson of the company taking into account the views ofexecutive directors and non-executive directors;
(c) assess the quality quantity and timeliness of flow of information between thecompany management and the Board that is necessary for the Board to effectively andreasonably perform their duties.
13. Policy on Appointment and Remuneration of Directors and Key Managerial Personneland other employees
The Company has framed a Nomination and Remuneration Policy pursuant to Section 178 ofthe Companies Act 2013 and Regulation 19(4) of Securities Statutory Reports and ExchangeBoard of India (Listing Obligations and Disclosure Requirements) Regulations 2015(Specified in Part D of the Schedule II).
The detailed Nomination & Remuneration Policy is annexed as Annexure II and formspart of this Report and is also available on the website of the Company atwww.hplindia.com.
14. Extract of Annual Return
The extract of Annual Return in Form MGT-9 is annexed as Annexure III.
The equity shares of the Company are listed on the National Stock Exchange of IndiaLtd. and BSE Limited. The listing fee for the financial year 2018-19 has been paid to boththe Stock Exchanges.
16. Audit Committee
The details pertaining to the composition of the Audit Committee are included in theCorporate Governance Report which is a part of this Annual Report.
17. Vigil mechanism
Pursuant to the provisions of Companies Act 2013 and SEBI Listing Regulations theCompany has established a robust vigil Mechanism for directors and employees to report tothe management instances of unethical behavior actual or suspected fraud or violation ofthe Company's code of conduct. The Vigil Mechanism Policy provided that the companyinvestigates in such incidents when reported in an impartial manner and shall takeappropriate action as and when required to do so. The policy also provides the mechanismfor adequate safeguard against the victimization of Director(s)/employees who avail themechanism and also provide for the direct access to the Chairman of the Audit Committee inexceptional cases. A vigil Mechanism policy is available on the website of the companyi.e. www.hplindia.com.
18. Risk Management
The Company has in place a robust risk management policy to anticipate identifymeasure manage mitigate monitor and report the risk and uncertainties that may have animpact to achieve the business objective of the company. The Company recognizes theserisks which need to be managed and mitigated to protect the interest of the stakeholdersto achieve business objectives and enable sustainable growth. The risk managementframework is aimed at effectively mitigating the Company's various business andoperational risks through strategic actions. The risks are reviewed for the change in thenature and extent of the major risks identified since the last assessment. It alsoprovides control measures for risk and future action plans.
An extensive program of internal audits and regular reviews by the Audit Committee iscarried out to ensure compliance with the best practices.
19. Policy on Material Subsidiary
TheCompanyhasframedaPolicyonMaterialSubsidiary under Regulations 16(c) of SEBI (ListingObligations and Disclosures Requirements) Regulations 2015 which is available on thewebsite of the company i.e. www.hplindia.com.
20. Corporate Social Responsibility (CSR)
It is the responsibility of the corporations operating within society to contributetowards social and environmental development that will help in creating a positive impacton society at large.
The Corporate Social Responsibility committee comprises of Mrs. Madhu Bala Nath asChairperson Mr. Lalit Seth Mr. Rishi Seth and Mr. Jainul Haque as members of thecommittee.
The company discharges its CSR obligations by making contribution through its TrustSeth Inder Narain Foundation towards supporting projects in Eradicating hunger povertyand malnutrition promoting health care; promoting education including special educationand employment enhancing vocation skills especially among children women elderly and thedifferently abled and livelihood enhancement projects. The company also extends itsobjective towards CSR in supporting the rural development projects.
The Board of Directors have approved the CSR Policy of the Company as formulated andrecommended by the CSR Committee which is available on the website of the Company i.e.www.hplindia.com. A report on Corporate Social Responsibility is annexed as
21. Particulars of Contracts or Arrangements with related Parties
All transactions entered into with related parties as defined under the Companies Act2013 and Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 during the financial year ended 31st March2018 were in the ordinary course of business and at arm's length basis. As per theprovisions of Section 188 of the Companies Act 2013 and Rules made thereunder read withRegulation 23 of Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements)
Regulations 2015 the Company had obtained the necessary prior approval of the AuditCommittee for such transactions.
None of the transactions with any of the related parties were in conflict with theinterest of the Company rather they synchronize and synergies with the Company'soperations.
The Company has framed a Policy on Related Party Transactions in accordance withSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 and as per the amended provisions of the Companies Act 2013. The Policyintends to ensure that proper reporting; approval and disclosure processes are in placefor all transactions between the Company and related parties. The policy is available onthe website of the company i.e. www.hplindia.com and the Details of Related PartyTransactions are annexed as per Form AOC-2 in Annexure V.
A) Statutory Auditors
As per the provisions of Section 139(1) of the Act the Company has appointed M/s.Kharabanda Associates Chartered Accountants (Regn. No. 003456N) as Statutory Auditors fora period of 5 (Five) years in the Annual General Meeting of the company held on 28thSeptember 2017.
Statutory Auditors Report
There are no observations (including any qualification reservation adverse remark ordisclaimer) of the Auditors in their Audit Report that may call for any explanation fromthe Directors. Further the notes to accounts referred to in the Auditors' Report areself-explanatory.
B) Cost Auditors
Pursuant to the provisions of Section 148 of the Companies Act 2013 read withCompanies (Cost Records and Audit) Rules 2014 and other applicable provision of the Actthe company is required to maintain the cost records as specified by the CentralGovernment and accordingly such accounts and records were made and maintained and M/sBikram Jain & Associates Cost Accountants (Firm Registration No. 101610) has beenre-appointed as Cost Auditor of the Company to conduct audit of Cost Records maintained bythe Company for the financial year 2018-19.
The company has received his consent and certificate under Section 139 141 and 148 ofthe Companies Act 2013 read with the Companies (Audit and Auditors) Rules 2014 to thiseffect.
The remuneration payable to the Cost Auditor of the Company has been proposed for therati_cation by the members of the Company and shall form part of the notice of the 26thAnnual General Meeting.
C) Secretarial Auditors
Pursuant to the provisions of Section 204 of the Companies Act 2013 read withcorresponding rules made there under M/s. AVA Associates Company Secretaries has beenre-appointed as Secretarial Auditors of the Company to conduct Secretarial Audit of theCompany for the financial year 2018-19.
Secretarial Audit Report
The Secretarial Audit Report for the FY 2017-18 as submitted by Secretarial Auditors inForm MR-3 is annexed to this Report as Annexure VI.
There are no observations (including any qualification reservation adverse remark ordisclaimer) of the Secretarial Auditors in their Secretarial Audit Report that may callfor any explanation from the Directors.
23. Particulars of Loans Guarantees or investments
The investment made by the company in the subsidiary company in the form of equityshare capital is disclosed in the notes to the Audited Financial Statements forming partof this Annual Report. The company has not given any loans guarantees or provided anysecurity in connection with a loan to any body corporate or person as per section 186 ofthe Companies Act 2013 during the period under report.
24. Particulars of remuneration of Directors/ KMP/ Employees
The information required to be disclosed in the Director's Report pursuant to Section197 of the Companies Act 2013 read with Rule 5 of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is set out in Annexure VII to thisreport.
25. Research and Development:
HPL with its passion for innovation has under taken many initiatives to accelerate thebusiness growth curve in the upward direction. Company has been regularly investing ininfrastructure and its R&D centers to make world class products meeting stringentQuality standards. All the R&D labs in various units have been focusing on design anddevelopment of innovative products in the field of Switchgear Lighting and Metering etc.to meet the growing technological challenges of the times.
During the year two new products were developed viz. Automatic TransferSwitch(40~125A) & Double Break type MCCB(up to 250A). ATS (40~125A) was successfullydeveloped and commercialized too during the FY 2017-18. Double Break type MCCB (up to250A) is in the tooling stage after successful development of prototypes. Once fullytested and productionized it will cater to a whole new range of requirements. Theproducts are user friendly from application point of Statutory Reports view safe &maintenance free. As such these products were "Star of attraction" in HPL stallduring Elecrama'18 exhibition held this year. The R&D team has been continuouslyworking on improving the reliability and life cycle of HPL products. Most of the productsare "CE" marked. All the plants are RoHS compliant to meet the demands of thenew era of business globally.
Timely delivery of new products under development is of primary focus of R&Ddepartment. It works on a cohesive approach to narrow the gap between Design andManufacturing by investing money in 3D model prototypes before commencing toolmanufacturing. This saves a lot of time energy and money while developing new productsthereby increasing the efficiency of the company.
Company is continuously working on many more smart engineering electrical products tomeet the future demand.
26. Conservation of Energy Technology Absorption foreign Exchange Earnings and Outgo
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated under Section 134(3)(m) of the Companies Act 2013 readwith Rule 8 of the Companies (Accounts) Rules 2014 is attached as Annexure VIII to thisreport.
27. Corporate Governance Report
The Company is committed to maintain the highest standards of Corporate Governance andadhere to the Corporate Governance requirements set out by Securities and Exchange Boardof India. The Company has also implemented several best corporate governance practices asprevalent globally. The report on Corporate Governance as stipulated under the Securitiesand Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 forms an integral part of this Report. The requisite certificate from M/s. KharabandaAssociates Statutory Auditors of the Company confirming compliance of conditions ofcorporate governance is also annexed to the Corporate Governance Report.
28. Directors' Responsibility Statement
Pursuant to Section 134(3) (c) and 134(5) of the Companies Act 2013 the Directorsconfirm that:
a. in the preparation of the annual accounts the applicable accounting standards hadbeen followed alongwith proper explanation relating to material departures; b. thedirectors had 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 the end of the financial year and of the profitof the Company for that period;
c. the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
d. the Directors had prepared the annual accounts on a going concern basis;
e. the Directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and
f. the Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
29. Disclosure under the sexual harassment of women at workplace (PreventionProhibition and Redressal) Act 2013
The Company has always believed in providing a safe and harassment free workplace forevery individual working in the Company premises through various interventions andpractices. The Company always endeavors to create and provide an environment that is freefrom discrimination and harassment including sexual harassment.
The Company has in place robust policy on prevention of sexual harassment at workplacewhich is applicable to all employees of the company as per the provisions of SexualHarassment of woman at work place (Prevention prohibition and Redressal) Act 2013.
During the year under report the company has not received any complaints pertaining tosexual harassment.
30. Significant/material orders passed by the regulators
There are no significant/material orders passed by the Regulators or Courts orTribunals impacting the going concern status of the Company and its operations in future.
31. Internal Control Systems and adequacy of Internal Financial Controls
The Company has adopted policies and procedures for effective internal controls system.This ensures that all transactions are authorized recorded & timely preparation ofreliable financial information the safeguarding of its assets the prevention anddetection of frauds and errors. The Company has an Internal Control System commensuratewith the size scale and complexity of its operations.
32. Management Discussion and Analysis Report
Management Discussion and Analysis Report for the year under report as stipulatedunder the Companies Act 2013 and Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 is also presented in a separatesection forming part of this Annual Report.
33. CEO and CFO Certificate
CEO and CFO Certificate as prescribed under Schedule II part B of Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 is annexed to the Corporate Governance Report forming part of this Annual Report.
34. Disclosure of commission paid to managing or whole time directors
There is no commission paid or payable by the company to the managing director or theWhole-time directors.
The Board of Directors acknowledges the continued co-operation assistance and supportthe Company has received from various Government Departments Banks/ financialInstitutions and shareholders. The Board also places on record its appreciation for thesincere services rendered by employees of the company at all levels and the support andco-operation extended by the valued business associates and the continuous patronage ofthe customers of the Company.
For and on Behalf of the Board For HPL Electric & Power Limited
Date: 2nd August 2018 Chairman and Managing Director Place: Noida DIN:00312007