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India Nippon Electricals Ltd.

BSE: 532240 Sector: Auto
BSE 00:00 | 29 Nov 358.05 -14.85






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OPEN 372.10
52-Week high 458.15
52-Week low 319.40
P/E 15.19
Mkt Cap.(Rs cr) 810
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 372.10
CLOSE 372.90
52-Week high 458.15
52-Week low 319.40
P/E 15.19
Mkt Cap.(Rs cr) 810
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

India Nippon Electricals Ltd. (INDNIPPON) - Director Report

Company director report

Your Directors have pleasure in presenting the 35th Annual Report and Audited Accountsfor the year ended 31st March 2020.

1. Financial Highlights (on standalone basis)

(Rs. in lacs)

Particulars Year ended 31st March '20 Year ended 31st March '19
Total Income 50395 53955
Profit before depreciation exceptional items and taxes 8150 9164
Depreciation 941 773
Profit before tax & exceptional items 7209 8391
Exceptional items - -
Profit before tax 7209 8391
Taxation 1689 2440
Profit after tax 5520 5951
Balance in statement of profit and loss including general reserve 35433 31255
Total Comprehensive income available for appropriation Appropriation: 40953 37206
Dividends and Dividend Distribution tax 2932 1773
Surplus carried forward 38021 35433

2. Financial and Operational Performance

During the year 2019-20 your Company's sales performance was better than the overalltwo wheeler industry performance which saw a negative growth of 14% as against 2018-19. Asagainst this your Company registered a 9% decrease in sales. Challenges were faced bothin the domestic and export front while the Aftermarket segment saw a smart growth of 8%in terms of sales when compared to the previous year.

Profit before depreciation tax and exceptional items decreased by around 1 1 % overthe previous year which was the result of a combination of various factors like decreasein sales change in product sales mix non working days due to fluctuating market demandetc.

COVID-19 impact was felt during the end of the financial year and thereafter as theoperations in Hosur Pondicherry and Rewari plants were closed from 23rd March 2020 dueto the nationwide lock down. COVID-19 has significantly impacted the Industry and yourCompany. There are signs of recovery from July and your Company is hopeful that this trendwill sustain.

3. Management Discussion and Analysis

a. Overall economic view:

Growth of the Indian economy was moderated in 2019-20 due to global headwinds andchallenges in the domestic financial sector. The real GDP growth moderated to around 4.2%in 2019-20 as compared to 6.8% in 2018-19. The eight core infrastructure supportiveindustries viz. coal crude oil natural gas refinery products fertilizers steelcement and electricity remained stagnant for most part of the fiscal as compared to agrowth of 4.4% in 201 8-1 9. After growing rapidly in the first half of 2018-19 the NonBanking Financial Sector had decelerated sharply since then. The growth of loans fromNBFCs declined substantially to 3.4% during the year from 31.9% during its peak in2018-19. Sales of commercial vehicles decreased by 42 % as against an increase by 3.8 %last year.

Further the COVID-19 induced lock down measures in the month of March which isexpected to continue for a prolonged period on calibrated basis will have significantimpact on the forthcoming fiscal. However we are confident that the various measuresannounced by the Government to face the COVID-19 downturn including the Rs 20 lakh crorepackage which was designed to restart the economy and business protect jobs extend thesupport to those vulnerable and poor and informal sectors will mitigate the headwinds toa significant extent.

b. Industry structure and developments:

Within the two wheeler Industry that saw decline of 14% motorcycle declined by 13%while scooter and moped declined by 15% & 28% respectively. Three wheeler segment alsoshowed a negative growth of 12%. In many aspects 2019-20 was a challenging year bringingin many structural changes to the Industry which also brought in their own opportunitiesfor future growth. OEMs had to comply with certain additional safety equipmentrequirements including anti-lock/ combined braking systems driver side airbag speedwarning alarm rear parking sensors front seatbelt reminders and crash test standardsall leading to increased pricing across all models. The full effect of the new third partyinsurance norms for two wheelers introduced in 201 8 was felt in 2019-20. To top thismany of the twowheeler OEMs had launched BS VI regulations compliant products ahead ofgovernment timelines.

BS VI requirements called for usage of high grade materials and it pushed up materialcosts. BS VI transition while paving way for new opportunities also resulted in phasingout of few electronic products. From the beginning itself the transition from BS IV to BSVI was challenging as the Supreme Court had insisted on a clean departure on vehicleregistration from 1st April 2020. Fast and efficient product and component developmentbecame very critical to meet the shorter lead time lines given by customer for roll out ofnew products. With the COVID lockdown coming at the end of March managing obsolescence inthe supply chain has been also a challenge for the industry and there have beendiscussions in the courts on the same.

c. Performance review:

Your Company was largely able to contain the impact of deceleration in the Industrydue to a combination of higher value of BS VI products efforts taken to increase presencein new segments/ products like Sensors robust growth in after-market sales and increasein share of business from customers and product lines. We continued to grow our footprintin export markets and are on the verge of securing more such orders. Timely introductionof many BS VI products with short lead time cost management initiatives investment instate-of-the-art equipments resulting in more efficient production processes hadcontributed to enhanced overall operational and financial performance. Increasedcompetition and obsolescence of products like CDI as well as the volatile nature ofdemand post COVID will put pressure on profits. However your company has a robust costreduction system in place to help mitigate its effects.

Efforts taken by us in implementing alternate sourcing strategy & offering value-added solutions to customers have started to yield results in terms of resilience ofsupply chain to shocks cost efficiency and competitiveness to enter into new productsegments. Earlier diversification measures have started to yield results as the companywas able to bag order from new customers in the commercial vehicle segment. In spite ofthe negative growth both at the industry and Company level your company was able tofurther increase its market share. Strong working capital management has lead to betterfinancial performance and improved free cash flow. Your Company had ceased operations atone of its Units located at Kolhapur Maharashtra with effect from 23rd May 2020 forcost optimization.

On the setting up of the Advanced Engineering Centre construction activities wereinterrupted due to the lock down and we expect the tech center to be operational byDecember 2020.

To face the challenge posed by COVID-19 your Company had put in place various measureslike active monitoring of suppliers' employees' and customers' situation and engages withthem to ensure their availability for smooth operations. In case of any disruptionalternate sourcing options had been developed. Your Company had also demonstrated utmostcare to its employees by ensuring various employee friendly measures like arrangingtransportation giving work from home option provisioning of all Personal ProtectiveEquipments to protect against infection and continuous training to habituate the Employeesto work in line with relevant guidelines and Standard Operating Procedures.

d. Business outlook Opportunities and Threats:

While your Company had developed a roadmap for future products much depends upon theseverity and duration of the COVID-19 pandemic which has fundamentally altered both theeconomic outlook and consequentially the prospects for the industry as a whole. Aprolonged economic slump may result in fall in rural and urban incomes leading tosuppressed demand though we are confident that newer areas will compensate for suchdownside. However since mobility is critical to any economy we do not foresee aprolonged downturn in demand for mobility beyond the immediate future and in fact we areseeing a recovery already towards the end of Q1 of the ongoing fiscal. Significant upsidemay lie in altered composition of demand in mobility due to the requirement of socialdistancing which may be the most significant driver of change with people rethinkingtheir transport modes to avoid infection. Emerging trends like Shared mobility may beimpacted though the impact is uncertain.

Personal vehicle use may pick-up in the short term which could lead to revival in thecore segment where the Company operates. Further remote working may discourage consumersfrom investing heavily in personal transportation which may place two wheelers at anattractive position. However these evaluations are only based on current situation andwill be constantly reviewed by the Company as it evolves which may lead to significantlydifferent outcomes.

Your Company had ascertained electronic products holds much promise for the future andis working to enhance its capabilities and capacities. Development of products forelectric vehicle and non-automotive segments and increase global presence for existingproducts will be key. The establishment of tech center in Hosur which is expected to beoperational by Q4 of 2020-21 is a step in that direction. Your Company is also closelywatching the market trends for opportunities to improve our position during thesechallenging times. On the electrification front progress on transformation to electricvehicles may get hampered in the short term due to COVID-19 though the overall trendremains firmly intact.

Aggressive cost reduction measures introduction of new products in the aftermarketrestructuring the product portfolio and digitalization in many areas are expected toincrease both the top line and profitability of your Company.

e. Human resources and industrial relations:

The long-term wage settlement for the units at Hosur and Puducherry were finalized andthe settlement will be in force till 2022 for Hosur Unit and till 2023 for PuducherryUnit. The wage settlement for the Unit located at Rewari is under negotiation and isexpected to be completed during the year. The industrial relations in all the units of thecompany continue to be harmonious and cordial.

f. Risks and concerns:

The COVID-19 pandemic along with the geopolitical tensions between India and China hasthe potential to significantly alter the macro economic conditions. Government programslike Atmanirbhar Bharath have focused heavily at localization and we expect this to openup opportunities for capable Indian companies. Customers are also eager to find alternatesuppliers to China and your company is looking for ways to benefit from this trend. Whilepersonal mobility may recover the overall economy will likely recover gradually.

g. Disclosure on Financial Ratios is given as part of the Corporate GovernanceReport which is annexed to and forms part of the Board's Report.

h. Risk management policy:

Your Company takes cognizance of each business risk and has a risk management plan andpolicy in line with the overall objectives of the Company. The Company tracks the ever-changing business risks and evaluates their impact on business results. Mitigation planand counter measures are prepared and monitored to keep the impact minimal. Your Companyhad also formulated Risk Management Policy to identify and address the various risks.

I. Internal Audit and Internal Control Systems:

Your Company views internal audit as a continuous process to keep the managementregularly appraised on the existence adequacy and effectiveness of the internal controlsystems/ processes in the company. Based on the annual review and feedback received fromthe units and statutory auditors audit plan is prepared and updated every year andapproved by the Audit & Risk Management Committee. Internal auditors independentlyverify and test the adequacy and operating effectiveness of internal control systems andthis provides assurance to the Audit Committee of continued compliance. The internal auditreports are also shared with statutory auditors.

Your Company improves internal control systems and accuracy of information on costs inreal time through the effective use of ERP system which will help to analyse and exercisebetter control.

4. Internal Financial Controls

The company has established internal financial framework including internal controlsover financial reporting and anti-fraud framework.

The framework is reviewed regularly by the management and strengthened from time totime to ensure adequacy and effectiveness of internal financial controls. During the yearyour Company had carried out a re-assessment of the Internal Financial Controls frameworkidentified opportunities for improvements and adopted best practices in various areasrelated to both entity level and operational controls. While Internal Controls overFinancial Reporting is certified by the Statutory Auditors the Chief Financial Officerand the Managing Director certify the adequacy of overall Financial Controls to the Audit& Risk Management Committee and Board on periodic basis.

5. Changes in Shareholding of Promoters and amendments to Articles of Association

During the year Mahle Electric Drives Japan Corporation (MEDJ) one of the Promoterentities and Joint Venturer of the Company (the other current Joint Venturer being LucasIndian Service Limited (LISL)) holding 4641000 equity shares (which was 20.52% of theCompany's equity share capital) proposed an inter-se transfer of 3428570 shares (74% ofits shareholding in the Company and 15.156% of the equity share capital of the Company) toits another group Company Mahle Holding (India) Private Limited (MHIL). This was anexempted transfer under the SEBI (Acquisition of Shares & Takeovers) Regulations 2011and was proposed due to internal re-alignment of Mahle Group structure. A Deed ofAdherence dated 17th December 2019 (DOA) was executed between MEDJ MHIL LISL and yourCompany to bring MHIL into the fold of the Joint Venture Agreement (JVA) and to enableMEDJ to continue exercising rights under the JVA.

Consequent to the execution of DOA MEDJ actually transferred 3000000 shares to MHILon 24th December 2019 with the result that MHIL held 13.26% of your Company's ShareCapital and MEDJ continued to hold 7.25%. Your Company proposes to substitute the Articlesof Association to align it with the revised constitution of the Joint Venturers and toalso bring it upto date with the changes brought in by the Companies Act 2013 andamendments thereto as also the Memorandum of Association. The Directors feel that thisbusiness is necessary and unavoidable and hence seek the approval of Members as per thedetails given in the Notice convening the forthcoming Annual General Meeting.

6. Corporate Social Responsibility

Your Company constituted the Corporate Social Responsibility Committee (CSR Committee)and laid down the CSR policy which is available on the Company's website. In terms ofSection 135 of the Companies Act 2013 and the rules framed thereunder a list of projects/ programmes to be undertaken towards CSR was recommended by the CSR Committee. Based onthe recommendation the Board has approved the projects / programs for the year 2019-20.However your Company had also identified projects/ programmes that deserve CSR supportduring the course of the year for which ratification of the CSR Committee had been taken.Your Company had made contribution towards COVID-19 related initiatives after the end ofthe financial year which will form part of the forthcoming financial year's CSR spending.As a result your Company is fully compliant with the requirement to spend 2% of theaverage 3 year's profit computed in the prescribed manner for the year 2019-20.

The Annual Report on CSR containing the particulars of the projects / programmeseligible for CSR spending is given by way of an annexure attached to this Report.

7. Subsidiary Company and Associate Company and the Consolidated Financial Statements

7.1 Subsidiary company

Your subsidiary company PT Automotive Systems Indonesia has been granted approvalfrom the Capital Investment Coordinating Board (BKPM) in 2017 for a further period ofthree years and a permanent license was granted by BKPM in 2020 to explore businessopportunities. However as mentioned in the previous report the manufacturers of twowheelers in that country have their own sources for the products in the subsidiary's rangeof manufacture and the Company is evaluating different options of exiting the country.Financial position of the subsidiary is provided in AOC-1 as required under Section 129(3) of the Companies Act 2013 as part of the financial statements.

7.2 Associate company

Your Company had disposed off its investment in Synergy Shakthi Renewable EnergyPrivate Limited (SSREPL) during the year to Lucas TVS Limited. While deciding on thissale the Directors and the Audit & Risk Management Committee had taken into accountthe various options available before the Company given the continuous non operationalstatus of SSREPL since 2017-18. Efforts taken to dispose off the business as a whole didnot yield results due to the unattractive proposition of the bio-mass renewable energybusiness. Further any proposal to commence a new business under SSREPL would entailadditional infusion of capital by the Company and fresh commitment which was found to beunviable especially at a time when cash needs to be conserved to meet the challenges inits core business.

Since the sale transaction was proposed with a Related Party two valuation reportswere obtained from reputed valuers- M/s. KPMG engaged by Lucas TVS Limited and M/s. Ernst& Young Merchant Banking Services LLP engaged by the Company. Your Company had writtendown the investment it had made in SSREPL from Rs.18 Crore to its fair value over theyears and the carrying value of investment was Rs.1.36 Crore as of December 2019. Hencethe proposal was to ensure that the transaction was done on arm's length basis based onindependent valuation which could also provide benefits in terms of tax savings without inanyway compromising minority shareholder interests.

Based on the valuation reports SSREPL shares were valued at Rs. 1.09 per share. TheAudit & Risk Management Committee and the Board approved the sale of 18000000equity shares of Rs.10 each held by the Company in SSREPL constituting 40% of the paid-upequity share capital of SSREPL to Lucas TVS Limited at the meeting held on 27th March2020. Consequently it was treated as an associate till the effective date of sale i.e.30th March 2020 when the transfer deed was executed. Hence details in AOC-1 are not beingprovided as part of the financial statements.

7.3 Consolidated financial statements

The Consolidated Financial Statements of the Company prepared in accordance with theprovisions of Section 1 29 (3) of the Companies Act 2013 read with the Companies(Accounts) Rules 2014 and Regulation 33 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015. Pursuant to the provisions of Section 1 36 of theCompanies Act 201 3 the audited financial statements of the subsidiary have been placedon the website of the Company at and the same will be made availableto the Members on receipt of a request from them.

8. Dividend

Your Company had declared and paid two interim dividends worth Rs. 6.75 per shareduring the year under review comprising of first interim dividend for 2019-20 of Rs. 3.00per share and second interim dividend for 2019-20 of Rs. 3.75 per share (on Face value ofRs. 5 each). Your directors recommend consideration of the same as the final dividend forthe year. The final dividend for the year will absorb a sum of Rs. 1526.95 lakhs besidesan additional outgo on dividend distribution tax of Rs. 313.89 lacs.

9. Public Deposits

Your Company has not accepted any deposits falling within the ambit of Section 73 orSection 76 of the Companies Act 201 3 read with Companies [Acceptance of Deposits] Rules2014.

10. Conservation of Energy Technology Absorption and Foreign Exchange Outgo andEarnings

Details of Conservation of Energy technology absorption and Foreign Exchange outgo andearnings are given as Annexure to the Report.

11. Business Responsibility Report:

Securities and Exchange Board of India had extended the requirement for BusinessResponsibility Reporting for top 1 000 listed companies from the earlier top 500 listedcompanies in terms of market capitalization as of 31st March 2020. Your Company fallsunder the said criteria. In terms of this requirement a detailed Business ResponsibilityReport for the year 2019-20 describing the initiatives taken from an environment socialand governance perspective is given as Annexure to this Report and will also be availableon the Company's website viz. report_2020.pdf.

12. Particulars of Employees

Information required under Section 197 of the Companies Act 201 3 and Rule 5(2) madethereunder as amended is given as Annexure to this report. In terms of second proviso toSection 136(1) of the Companies Act 2013 the Annual Report excluding the aforesaidAnnexure is being sent to the Members of the company. Any shareholder interested inobtaining a copy of said Annexure may write to the Company Secretary

The Comparative Analysis of the remuneration paid to Directors and Key ManagerialPersonnel with the Company's performance is given as an Annexure to the Report.

13. Annual Return

Extract of Annual Return is given as an Annexure to this report. Further copy of theAnnual Return filed for the year 2018-19 has been posted in the Company's

14. Corporate Governance

Pursuant to the Listing Regulations 2015 the 'Report on Corporate Governance' isenclosed with this report as an Annexure. A certificate from the Secretarial Auditors ofyour Company regarding compliance of the conditions of the Corporate Governance asstipulated by the SEBI (LODR) Regulations 2015 is given as Annexure to this report. Thecertificate required from Managing Director / CFO is also given as Annexure to thisreport.

15. Directors' Responsibility Statement

As required under Section 134 (5) of the Companies Act 2013 the Board of Directorshereby confirm: -

i. That in the preparation of the Annual Accounts the applicable accounting standardshad been followed along with proper explanation relating to material departures;

ii. That the Directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of the affairs of the Company at the end of theFinancial Year and of the profit of the Company for that period;

iii. That the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;

iv. That the Directors had prepared the Annual Accounts on a going-concern basis;

v. That the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively;

vi. That the directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

16. Directors & Key Managerial Personnel (KMP)

During the year Members had at their meeting held on 16th August 2019 taking intoaccount the recommendations of the Nomination and Remuneration Committee and the Boardapproved the re-appointment of the Independent Directors for their second term as per thefollowing table:

Name of the Director Date of Original appointment Re-appointed upto
Mr V Balaraman 27th August 2014 AGM 2022
Mr K G Raghavan 27th August 2014 AGM 2023
Mr R Vijayaraghavan 27th August 2014 AGM 2023
Dr Jayshree Suresh 27th August 2014 AGM 2022

Mr. Anant Jaivant Talaulicar was appointed as an Independent Additional Director at themeeting of the Board of Directors held on 6th April 2019 for a period of four years fromthat date which was also approved by the Members as Independent Director at their meetingheld on 16th August 2019. Consequential changes in Committees were made details of whichare given in the Report on Corporate Governance given as an Annexure to this report.

Further Mr T Momose Director of the Company will be retiring by rotation at theensuing Annual General Meeting and is eligible for reappointment. A brief resume of Mr TMomose who is proposed to be re-appointed and other relevant information have beenfurnished in the Notice of the Annual General Meeting including the resolutions for thesame. The Directors recommend this business for approval.

Mr. Arvind Balaji Managing Director Mr. Elango Srinivasan Chief Financial Officerand Mr. G Venkatram Company Secretary are KMPs in terms of Section 2(51) and Section 203of the Companies Act 2013.

16.1 Declaration by independent directors as required u/s 149:

Declaration of Independence comprising all the requirements of Companies Act 2013 andSEBI Listing Regulations were received by the Company and was taken on record by theBoard after verifying the veracity of the declarations from Mr V Balaraman Mr K GRaghavan Mr R Vijayaraghavan Dr Jayshree Suresh and Mr Anant Jaivant Talaulicar.Further a report by Practising Company Secretary highlighting that none of the Directorsof the Company are debarred or disqualified is given as part of the report on CorporateGovernance.

16.2 Terms of appointment of independent directors of India Nippon Electricals Limited:

During the year consequent to the amendments in the criteria of appointment/re-appointment of Independent Directors your Company had issued revised terms ofappointment for all the Independent Directors. The same is available on the website of thecompany viz. www.

16.3 Number of meetings of the board

Seven meetings of the Board were held during the year. For details of the meetings ofthe Board please refer to the report on Corporate Governance which is an Annexure tothis report.

16.4 Separate meeting of Independent Directors & Board evaluation

A separate meeting of the Independent Directors of the Company as required under theprovisions of the Companies Act 2013 and SEBI Listing Regulations for the financial year201 920 was held on 27th June 2020 as the originally scheduled meeting on 27th March2020 was not held due to a combination of strict lock down imposed by the Government dueto COVID-19 and the relaxation given by the Ministry of Corporate Affairs exempting theholding of separate meeting of Independent Directors for the financial year 2019-20 incase the meeting was yet to be held as on the date of lock down imposition.

Your Company had instituted a robust system of Board evaluation based on set ofquestionnaires specifically designed for individual directors Board as a whole andCommittees of the Board. Board was evaluated on the following parameters:

• Strategy

• Performance Management & Succession Plan

• Execution Investments M&A and Financial Controls

• Talent Management

• Risk Management

• Core Governance & Compliance

• Review of Information

• Monitoring of Committee

Committees were evaluated on the following parameters:

• Functions and Duties

• Management Relations

• Support to the Committee

• Overall

Individual Directors were evaluated as per the parameters specified in the Nominationand Remuneration Policy Guidelines on the same scale as applicable to Board andCommittees.

Feedback of Directors in the form of ratings for all the parameters was presented atthe Independent Directors meeting held on 27th

June 2020 who provided feedback to the Board on areas where Board and the Committeescan enhance their performance. Board noted and discussed the feedback at the meeting heldon the same day and completed the evaluation process of Board Committees and theDirectors.

16.5 Policy on directors' appointment and remuneration including criteria fordetermining qualifications positive attributes independence of directors key managerialpersonnel and other employees

On 6th April 2019 your Company adopted a revised Nomination and Remuneration PolicyGuidelines which details the principles underlying Directors/ Key Managerial Personnelappointment remuneration etc and the summary of the said policy is presented as part ofthe Corporate Governance Report. The policy can be accessed at Additional details including various ratios required under the Companies Act2013 is given as separate Annexure to this report.

17. Auditors

17.1 Statutory Auditors

Pursuant to Section 139 of the Companies Act 2013 and Rules made thereunder M/sDeloitte Haskins & Sells LLP Chartered Accountants were appointed for a period offive years from the conclusion of the 32nd Annual General Meeting held on 24th August 2017until the conclusion of the 37th Annual General Meeting to be held in the year 2022. Sincethe requirement of ratification has been done away with no ratification is proposed forapproval of Members.

17.2 Cost Auditor

The Company maintains Cost records as required under the Companies Act 2013 andrelevant Rules/ Orders made thereunder. Pursuant to the Companies (Cost Records and Audit)Rules 2014 the Company filed the Cost Audit Report with the Ministry of CorporateAffairs for the financial year 2018-19 in XBRL format. Mr. K Suryanarayanan who wasappointed as Cost Auditor for the financial year 2019-20 has submitted his report pursuantto the Companies (Cost Record and Audit) Rules 2014.

The Board has re-appointed Mr. K Suryanarayanan as cost auditor for the financial year2020-21 at a remuneration of Rs. 3.16 lacs. The ratification of his remuneration isincluded as an item in the Notice of the Annual General Meeting as required under Section148 (3) of the Companies Act 201 3 read with Rule 1 4 of the Companies (Audit andAuditors) Rules 2014.

17.3 Secretarial Auditor & the Secretarial Audit Report

Ms. B Chandra Practicing Company Secretary was appointed as Secretarial Auditor by theBoard of Directors for the financial year 2019-20 whose report is attached separately tothis report. Ms. B Chandra Practicing Company Secretary was re-appointed as SecretarialAuditor for carrying out the secretarial audit issuing the annual Compliance Report underSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and theCertificate on Corporate Governance Compliance for the financial year 2020-21.

17.4 Qualification/reservation/adverse remark in Audit Report

The Secretarial Auditor had made an observation which does not amount to aqualification/ reservation/adverse remark regarding pending resolution of a Compliancefiling with IEPF due to technical glitches about which suitable details are given as partof the report on Corporate Governance which is annexed to this report.

18. Particulars of contracts or arrangements with related parties

During the year the Audit & Risk Management Committee had accorded omnibusapproval to Related Party Transactions which were foreseen repetitive in nature and arenot carried out under agreements with related parties. The Audit & Risk ManagementCommittee reviews on a quarterly basis the details of Related Party Transactions enteredpursuant to the aforementioned omnibus approval as well as transactions carried on underagreements with related parties. All the existing and proposed transactions with relatedparties are in the ordinary course of business and on arm's length basis and the detailsof 'material' related party transactions are disclosed in form AOC-2 which is annexed toand forms part of this report.

The Company has a policy on Related Party Transactions and the same is displayed on theCompany's website viz. policies/.

19. Particulars of loans guarantees or investments u/s 186:

The company has not given any loans or guarantee as specified under Section 186 of theCompanies Act 2013. The details of investments are given in Note no. 5 on Accounts for thefinancial year 2019-20. The same is within the prescribed limits under provisions ofSection 186 of the Companies Act 2013.

20. Prevention of sexual harassment of women at workplace:

As per the requirements of the Sexual Harassment of women at workplace (PreventionProhibition & Redressal) Act 2013 and Rules made thereunder your Company hasconstituted Internal Complaints Committee. Your Company has also enabled a Complaintshotline where any affected women employees can lodge their Complaints for attention of theInternal Complaints Committee/ Ethics Committee for Redressal. During the year underreview your Company has not received any reportable or established complaint of sexualharassment from any of the women employees of the Company.

21. Material changes and commitments

Operations in Hosur Pondicherry and Rewari plants which were closed from 23rd March2020 due to the lock down had partial resumption of operations as per the table belowbased on approvals granted by the State Governments and the notifications issued byMinistry of Home Affairs:

Plant location Concerned State Government approval date Date of resumption
Hosur 5th May 2020 7th May 2020
Pondicherry 30th April 2020 5th May 2020
Rewari 4th May 2020 5th May 2020

The resumption of operations as stated above was initially utilized for training theemployees and other stakeholders on COVID-19 related Standard Operating Procedures.However as the demand situation improved along with resumption of export activitiescommercial operations were commenced on all the plants thereafter. The Company had minimalsales in the month of April 2020 due to COVID-19 and there has been gradual increase sincethen. This may significantly impact the financial performance of your Company in the firsthalf of 2020-21.

22. Acknowledgements

Your Directors also acknowledge the continued support received from Lucas TVS LimitedLucas Indian Service Ltd Mahle Electric Drives Japan Corporation Mahle Holding (India)Pvt Ltd. and also wish to thank the customers employees vendors and the Governments atthe Centre and in the States of Tamil Nadu Haryana Maharashtra and Puducherry Bank ofBaroda ICICI Bank Ltd Axis Bank Ltd and SIPCOT for the assistance rendered by them fromtime to time.

For and on behalf of the Board of Directors
Place : Chennai T K BALAJI
Date : 20th August 2020 DIN No.:00002010