Kirloskar Pneumatic Company Ltd.
|BSE: 505283||Sector: Engineering|
|NSE: KGKHOSLA||ISIN Code: INE811A01020|
|BSE 00:00 | 22 Oct||160.30||
|NSE 05:30 | 01 Jan||Kirloskar Pneumatic Company Ltd|
|Mkt Cap.(Rs cr)||1,029|
|Mkt Cap.(Rs cr)||1029.13|
Kirloskar Pneumatic Company Ltd. (KGKHOSLA) - Director Report
Company director report
TO THE MEMBERS
Your Directors have pleasure in presenting this Report with Audited Annual Accounts ofthe Company for the year ended 31st March 2018.
First time adoption
Your Company has for first time adopted Indian Accounting Standards (IND AS) whilepreparing its Financial Statements for the financial year 2017-18 and accordinglycorresponding previous years figures were restated with a transition date as 1stApril 2016. The Financial Statements are prepared in terms of the Companies (IndianAccounting Standards) Rules 2015 as amended and other accounting principles generallyaccepted in India.
The financial results forthe yearended 31st March 2018 are summarized below:
Your Company achieved total revenue of Rs. 6227.75 Million for the financial year2017-18 against last year's Rs. 5813.17 Million an increase of 7.13%. Your companyearned a net profit of Rs. 499.43 Million against last year's Rs. 537.80 Million whichincluded income of Rs. 101.48 Million from sale of Investments.
Pursuant to the Scheme of Arrangement and Amalgamation between Kirloskar RoadRailerLimited (the "Transferor Company I") Pneumatic Holdings Limited (the"Transferor Company II") Kirloskar Pneumatic Company Limited (the"Transferee Company") and their respective shareholders (the ''Scheme'')7007551 equity shares held by Pneumatic Holdings Limited in the Company got cancelled onaccount of cross holdings. Further 7007551 equity shares of Rs. 10/- each were allottedas on 30th May 2017 to the shareholders of Pneumatic Holdings Limited who were theshareholders on the record date i.e. 23rd May 2017 in the ratio of 53 fully paid equityshares of Rs. 10/- each of Kirloskar Pneumatic Company Limited for every 40 fully paidequity shares held by the shareholders in erstwhile Pneumatic Holdings Limited as on therecord date. As a result thereof there was no change in total paid-up share capital ofthe Company.
SCHEME OF ARRANGEMENT AND AMALGAMATION
In terms of the said Scheme all fractional entitlements have been consolidated inaggregating to 5821 equity shares which were allotted to the persons appointed asTrustees for this purpose. These 5821 equity shares were sold in the market. The net saleproceeds thereof at the rate of Rs. 1014/- per equity share in proportion to thefractional entitlement along with proportionate dividend at the rate of Rs. 10/- perequity share (received on 5821 equity shares in August 2017) has been paid to therespective shareholders of erstwhile Pneumatic Holdings Limited who were the Shareholdersas on the record date i.e. 23rd May 2017. This payment was made on 3rd March 2018.
During the year under review a Joint Venture Company namely Kirloskar AECOMPrivate Limited (hereinafter referred to as KAPL) was incorporated on10th February 2018 to carry on business of Air Quality Control Systems. This jointventure is with AECOM India Private Limited a group company of AECOM USA.
During the year under review KAPL has not started any commercial operations.
During the year under review the Company has paid for the expenses towardsincorporation of KAPL and the same being reflected in its financial statement as due fromKAPL.
Pursuant to the provisions of Section 2(41) of the Companies Act 2013 the financialyear of every company is 31st March of every year. However where a Company has beenincorporated on or after the 1st January of a year the first financial year of thatCompany means the period ending on 31st March of the following year and accordingly theFinancial Statements of that Company shall be made up. Therefore the first financial yearof KAPL will end on 31st March 2019 and accordingly its first Financial Statements willbe made up.
In view of the same please refer note 47 as it appears in the Financial Statement ofthe Company.
The Board of Directors have recommended a dividend of Rs. 12 /- (120%) per equity shareof Rs. 10/- each for the year ended 31st March 2018.
During the year under review your company has been appreciated for ENCON efforts by :
CII - 18th National award for excellence in energy management.
Kirloskar Group ENCON award
- 3rd prize to Hadapsar plant in energy efficient unit - large plant category
- 3rd prize to Saswad plant in energy efficient unit - medium plant category During theyear under review your Company has also received:
Awards in the 31st National Convention on Quality Concepts - NCQC 2017 organisedby QCFI
- 3 Nos. "Excellence Award Trophy"
Awards in the 32nd National Convention on Quality Concepts - CCQC 2017 organisedby QCFI
- 1 No. "Gold Trophy"
- 2 Nos. "Silver Trophy"
Awards in the 13th Kaizen Competition - Maharashtra State Level 2017organised byCII
- 1 No. "Appreciation Award"
CII HR Excellence Award
- Significant Achievement in HR Excellence at the 8th CII HR ExcellenceAward Confluence. PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
No Loans Guarantees covered under the provisions of Section 186 of the Companies Act2013 are given / provided / made during the reporting year except expenditure incurred forformation of KAPL which are receivable from it.
During the reporting year your Company has agreed to subscribe for 160000/- (50%)equity shares of KAPL but amount has not been paid till 31st March 2018.
i. CHANGES IN COMPOSITION OF THE BOARD OF DIRECTORS
During the reporting year Mr Krishnamurthi Venkataramanan appointed as an IndependentDirector in the last Annual General Meeting held on 27th July 2017.
Mr D R Swar Director retires by rotation at the ensuing Annual General Meeting andbeing eligible offers himself for re-appointment.
ii. CHANGES IN KMP
During the year under review there was no change in the Key Managerial Personnel.
iii. DECLARATION FROM INDEPENDENT DIRECTORS
Your Company has received necessary declarations from all its Independent Directorsstating that they meet the criteria of independence as provided in Sub-section (6) ofSection 149 of the Companies Act 2013 and SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.
iv. BOARD EVALUATION
The annual evaluation framework for assessing the performance of Directors comprises ofthe following key areas:
a) Attendance for the meetings participation and independence during the meetings.
b) Interaction with Management.
c) Role and accountability of the Board.
d) Knowledge and proficiency.
e) Strategic perspectives or inputs.
The evaluation involves assessment by the Nomination and Remuneration Committee andBoard of Directors. A member of the Nomination and Remuneration Committee and Board doesnot participate in the discussion of his / her evaluation.
v. DIRECTORS APPOINTMENT AND REMUNERATION POLICY
The Board has on the recommendation of the Nomination and Remuneration Committee frameda 'Remuneration Policy' for selection and appointment of Directors and for theirremuneration. The Remuneration Policy is annexed as Annexure "1". The same isavilable on the website of the company namely www.kirloskarkpcl.com
vi. NUMBER OF MEETINGS OF THE BOARD
A calendar of meetings is prepared and circulated in advance to the Directors. Duringthe year five Board Meetings were convened and held the details of which are given inthe Report on Corporate Governance. The intervening gap between the meetings was withinthe period prescribed under the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015.
vii. COMPOSITION OF AUDIT COMMITTEE
The composition of the Audit Committee forms part of the Report on CorporateGovernance.
viii.DIRECTORS RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information andexplanation obtained by them the Directors in terms of clause (c) of Sub-section (3) ofSection 134 state that:
a) In the preparation of the annual accounts the applicable Indian AccountingStandards (IND AS) have been followed and there have been no material departures;
b) Accounting policies as mentioned in the financial statements have been selected andapplied consistently and made judgments and estimates that are reasonable and prudent soas to give a true and fair view of the state of affairs of the company as at 31st March2018 and of the profit of the company for the year ended on that date;
c) Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the company and for prevention and detection of fraud and other irregularities;
d) The annual accounts have been prepared on a going concern basis;
e) Proper internal financial controls have been laid down for the company and that suchinternal financial controls are adequate and are operating effectively; and
f) Proper systems to ensure compliance with the provisions of all applicable laws arein place and that such systems are adequate and operating effectively.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All related party transactions which were entered into during the financial year wereon an arm's length basis and in the ordinary course of business. There are no materiallysignificant related party transactions made by the Company with Promoters Directors KeyManagerial Personnel or other designated persons which may have a potential conflict withthe interest of the Company at large.
The statement that the transactions are at arm's length and in the ordinary course ofbusiness is supported by a certificate from the Managing Director. The Company has alsoobtained the certificate from a Chartered Accountant on periodical basis.
All Related Party Transactions have been placed before the Audit Committee for theirapproval and to the Board as and when required.
In certain cases prior omnibus approval of the Audit Committee is obtained on a yearlybasis. The transactions entered into pursuant to the omnibus approval so granted arereviewed by the Audit Committee on a quarterly basis.
The policy on Related Party Transactions as approved by the Board is uploaded on theCompany's website.
The disclosures as per Indian Accounting Standards (IND AS) for transactions withrelated parties are provided in the Financial Statement of the Company.
The provisions related to the Risk Management Committee of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 are not applicable to the Company. Howeverthe Company has a Corporate Risk Management Committee and Segment Level Risk Committees.
The Company has a Risk Management framework to identify evaluate business risks andopportunities. To strengthen the risk management framework Company has segment level riskcommittees and Corporate Risk Management Committee. This framework seeks to minimizeadverse impact on the business objectives and enhance the Company's competitive advantage.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The scope of the Internal Audit is decided by the AuditCommittee and the Board. To maintain its objectivity and independence the Board hasappointed an external Auditor which reports to the Audit Committee of the Board on aperiodic basis.
The Internal Auditor monitors and evaluates the efficacy and adequacy of internalcontrol systems in the Company its compliance with operating systems accountingprocedures and policies for various functions of the Company. Based on the report ofInternal Auditor process owners undertake corrective action wherever required in theirrespective areas and thereby strengthen the controls further. Audit observations andactions taken thereof are presented to the Audit Committee of the Board on periodic basis.
During the reporting year Internal Financial Controls laid down by the Board weretested for adequacy & effectiveness and no reportable material weakness in the designor operations were observed. The Company has policies and procedures in place for ensuringproper and efficient conduct of its business safeguarding of assets prevention anddetection of frauds and errors accuracy and completeness of accounting records and timelypreparation of reliable financial information. Statutory Auditors have also certifiedadequacy of internal financial controls system overfinancial reporting.
The Auditors of the Company M/s P G Bhagwat Firm Registration No. 101118W CharteredAccountants Pune were appointed for a period of five years in 41st Annual GeneralMeeting subject to ratification at the Annual General Meeting. The requisite certificatepursuant to Section 139(1) of the Companies Act 2013 has been received by the Companyfrom M/s P G Bhagwat Chartered Accountants. Resolution seeking Members ratification forthe appointment of M/s P G Bhagwat Chartered Accountants is included at Item No. 4 ofthe Notice convening the 43rd Annual General Meeting.
The Board of Directors had on the recommendation of the Audit Committee appointed M/sSudhir Govind Jog a proprietary firm of Cost Accountant to audit the cost accounts of theCompany for the financial year 2018-19 on a remuneration of Rs. 0.6 Million.
As required under the Companies Act 2013 the remuneration payable to the cost auditoris required to be placed before the Members in a general meeting for their ratification.Accordingly a resolution seeking Members' ratification for the remuneration payable toM/s Sudhir Govind Jog a proprietary firm of Cost Accountant for the year ended on 31stMarch 2019 is included at Item No. 5 of the Notice convening the 43rd Annual GeneralMeeting.
c) SECRETARIAL AUDIT
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed M/s SVD & Associates a partnership firm of Company Secretaries in Practiceto undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit isannexed herewith as Annexure "2".
The Institute of Company Secretaries of India had revised Secretarial Standards onmeetings of the Board of Directors (SS-1) and Secretarial Standards on General Meetings(SS-2) with effect from 1st October 2017. The Company is in compliance with the revisedSecretarial Stantards.
The Company endeavors to maximize the wealth of the shareholders by managing theaffairs of the Company with pre-eminent level of accountability transparency andintegrity. A report on Corporate Governance including the
relevant Auditors' Certificate regarding compliance with the conditions of CorporateGovernance as stipulated in Regulation 34 (3) read with Part E of Schedule V of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 along with ManagementDiscussion and Analysis is annexed and forms part of the Annual Report.
EXTRACT OF ANNUAL RETURN
The extract of Annual Return as provided under Sub-section (3) of Section 92 of theCompanies Act 2013 is annexed as Annexure "3".
CORPORATE SOCIAL INITIATIVES
As part of its initiatives under Corporate Social Responsibility (CSR) the Company hasundertaken projects in the areas of Promoting Education Health and Sanitation. Theseprojects are largely in accordance with Schedule VII of the Companies Act 2013.
Your Company has contributed an amount of Rs. 5 Million byway of donation to the CorpusFund of Kirloskar Institute of Advanced Management and Studies for promoting education.
Your Company has provided preventive eye care to 18079 school students from nearby 19schools and junior colleges in the vicinity of Hadapsar Plant and Saswad Plant. Freespectacles were given for the needy thus improving vision of 1857 students. Additionally786 teachers from 13 schools underwent preventive health check as a part of School HealthInitiative project.
Sanitation being a national agenda your Company has taken initiative to createawareness about WaSH (water sanitation and hygiene) among 18034 school students from 28nearby schools by deploying 156 employee volunteers and training these volunteers toimplement various WaSH modules throughout the academic year.
To create awareness about HIV AIDS amongst different sections of the society yourCompanys DISHA project reached out to 37112 members of the general communityincluding secondary school and junior college students.
CSR Policy in brief:
The focus of CSR activities will be on Education Environment and Health.
While devising projects care should be taken to promote the education health andsanitation protect the environment and minimize adverse impact if any on the society atlarge.
The Company is committed to uphold the interests of all the stakeholders byimplementing the various guidelines like business excellence models.
The Company shall spend at least 2% (two percent) of the average net profitscalculated in accordance with the provisions of the Companies Act 2013 and Rulesthereunder made by it in three immediately preceding financial years in every financialyear.
Any income or surplus arising out of CSR activities undertaken by the Company will formpart of the corpus earmarked for CSR activities.
Any surplus arising out of any ofthe CSRactivities carried out by the Company will notbe treated as part of the business profits of the Company.
The Annual Report on CSR activities is annexed herewith as Annexure "4".
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withRule 8 of the Companies (Accounts) Rules 2014 is annexed herewith as Annexure"5".
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant material orders passed by the Regulators / Courts which wouldimpact the going concern status of the Company and its future operations.
VIGIL MECHANISM/WHISTLE BLOWER POLICY
The Company has established a vigil mechanism for Directors and Employees to reporttheir genuine concerns details of which have been given in the Report on CorporateGovernance.
Your Company has discontinued accepting fixed deposits since 2001-02. As such as of31st March 2018 there are no fixed deposits outstanding.
PARTICULARS OF EMPLOYEES
Disclosures with respect to the remuneration of Directors and Employees as requiredunder Section 197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 have been annexed asAnnexure "6" to this Report.
In accordance with the provisions of Section 197(12) of the Companies Act 2013 andRule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 the names and other particulars of Employees are available at the Registered Officeof the Company during working hours for a period of 21 days before the Annual GeneralMeeting and shall be made available to any shareholder on request.
DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION ANDREDRESSAL) ACT 2013
Your Company has formulated 'Prevention of Sexual Harassment of Women at WorkplacePolicy' and the highlights are communicated to all Employees and also displayed across allits locations as well as on its intranet and the website.
The Internal Committee (IC) is formed as per the requirement of the law. IC meets everyquarter and submits the minutes of meeting to the employer i.e. Managing Director. Duringthe reporting year five such meetings were conducted and two complaints were raised anddisposed off.
During the reporting year to create ongoing awareness your Company has
included a PoSH Awareness Module in its employee induction program.
nine workshops were conducted in 2017-18 for 250 participants.
e-learning Module for 85 participants.
Your Company has taken several initiatives for Human Resource development andretention. Manpower is classified under Frontend Internal and Support functions forbetter customer reach and support. Assessment of
Values & Leadership Competencies identifying training needs through the 70-20-10format career counseling and Management Development Programs are some of the initiativesadopted by your Company. Training programmes are designed to enhance skills knowledge andbehaviour. Employees are motivated through empowerment and rewards for good performance.Adoption of 5S across the Company has led to a clean and healthy environment. The Companyhas a benchmark score on 17 out of the 24 engagement drivers.
Your Company has 761 permanent employees on its rolls as on 31st March 2018.
The Directors wish to convey their appreciation to all your Company's Employees fortheir enormous personal efforts as well as their collective contribution to your Company'sperformance. The Directors would also like to thank the shareholders customers dealerssuppliers bankers and all other stakeholders for their continued support and theirconfidence in its management.