Dear Share Holders
Your Directors are pleased to present the 36th Annual Report of the company along withthe Audited financial Statements for the financial year ended March 31 2020.
Rs in Lakhs
|Particulars ||(2019-20) ||(2018-19) |
|Net Sales ||12584.07 ||19044.07 |
|Other Income ||42.89 ||94.75 |
|Captive Consumption ||210.90 ||424.15 |
|Total Income ||12837.86 ||19562.97 |
|Profit before Depreciation Interest and Taxes ||1251.96 ||3220.93 |
|Less: Depreciation ||890.00 ||912.58 |
|Profit before Interest and Taxes ||361.96 ||2308.35 |
|Less: Interest and Finance Charges ||1174.71 ||1289.73 |
|Profit/ (Loss) before Taxes ||(812.75) ||1018.62 |
|Less: Provision for Taxes ||344.33 ||342.08 |
|Profits/ (Loss) after Taxes ||(468.42) ||676.54 |
|Other Comprehensive Income ||(57.30) ||(27.85) |
|Total Comprehensive Income/ (Loss) ||(525.72) ||648.69 |
The turnover decreased by 34% during the year.
3 During the year the Company recorded Revenue from Operations by way of Net Sales ofRs.125.85 Crores as against Rs.190.45 Crores in 2018-19 a reduction of about 34%.
3 The Machine Tool Division has registered a de-growth in terms of sales value ascompared to the previous year; primarily lead by the General Purpose machinery divisionwhich itself showed a sharp fall down of around 45% as compared to previous year. GPMMachines export sale has also shown considerably lower numbers in comparison to previousfinancial year. Sale of SPM machines registered marginal fall during the year in terms oftotal sales value.
3 The Component division had also shown a decreased movement in comparison to previousyear.
3 The overall reduction in Turnover and the loss suffered by the Company was due to theslowdown of the economy especially in Auto sector. This has resulted into poor performanceof the Company.
IMPACT OF COVID-19 AND FUTURE COURSE OF ACTIONS
The spread of COVID-19 virus caused global disruption with negative impact on humanhealth business enterprises and the global economy in general. The rapid outbreak of theCOVID-19 pandemic during Q4 of FY 2019-20 has severely impacted the physical andfinancial health of people across India and to prevent the contagion in the Countryphases of nationwide lockdown was announced by the Government of India ("GOI").
Based on the directive given by the GOI for closure of activities to control COVID-19pandemic your Company suspended its production across all its factory locationsmanufacturing plants since March 23 2020 and resumed operations in its plants duringsecond week of May 2020 in a phased manner after obtaining necessary approvals from therelevant authorities. Your Company has been abided and compliant to the Ministry of HomeAffairs and State Government guidelines on administration and social distancing.
During this uncertain period your Company has implemented detailed business continuityplans with its partners and suppliers in an effort to secure the continuation ofoperations while caring for the health safety and well-being of its employees.
As a result of COVID-19 the demand for your Company's products has seen a drasticslowdown and has hampered the supply chain for the automotive industry as a whole. This inturn has an impact on the supply chain of your Company and could pose challenges relatingto procurement of raw materials in the foreseeable future.
Your Company is taking a number of measures to mitigate substantial negative impactincluding manpower cost control and in close collaboration with customers banksfinancial institutions suppliers and employees. These actions are an acknowledgement ofcurrent events as well as uncertainty around the timing and showing path of recovery.
Your Company is prepared to focus its efforts on securing supplies manufacturing andlogistics for growth amidst this crisis and also has plans to develop its market for itsproducts to enhance visibility of demand and customer needs. Liquidity and other risks arebeing monitored on an on-going basis. The Company has taken Cash flow control and overheadcontrol measures to manage the operations. Weekly review mechanism adopted to review theaccount receivables and measures taken to control the capital expenditure.
However with a good monsoon the rural demand is expected to be robust and thereforewe foresee business from customers catering to this sector.
The automotive industry in India has been witnessing a slowdown and 2019-20 was achallenging year for the Company in terms of Sales as well as Profit. The Indianautomotive and related industries witnessed several head winds in the Financial year2019-20 due to slowdown in the economy and regulatory changes such as emission norms axleload & other norms which hindered the industry's performance.
The impact of COVID-19 will be felt in the Financial Year 2020-21 as it is expected tofurther drag the slowness in the auto industry and the revival is bound to be slow.However the Tractor industry expects a strong growth in the year 2020-21 due to goodrainfall in the previous year increased Minimum Support Prices credit availabilitypositive farm sentiment and normal monsoon expected in the current year. The long-termoutlook remains positive for the Automotive Industry with most major global players havinga base in India for manufacturing global sourcing and engineering.
Your directors are confident of putting in an improved performance over the previousyear.
1. The CNC machines division is expected to post substantial growth with improvingmarket conditions. While the current capacity utilization is at its peak the company ismaking significant improvements in productivity improvement and further increase incapacity utilization thus squeezing the assets to the maximum. With Europe showing signsof recovery and situation in Russia easing there would certainly be an uptick in theExport performance as well.
2. The SPM order book reflects a reasonable growth. Almost all the orders are from theexisting customers only for capacity expansion and not for any new products.
3. On the component division front the Connecting Rod production is in stabilizationmode. With a reasonable monsoons prediction the Tractor industry in particular and theAuto sector in general are expected to do well and thereby help us increase the overallrevenues.
In view of inadequacy of profit your director's regrets to recommend any dividend forthe financial year ended 31st March 2020.
TRANSFER TO GENERAL RESERVE
The Company does not propose to transfer any amount to General Reserve for theFinancial year 2019-20.
The paid-up Equity Share Capital as on 31st March 2020 was Rs. 1789.67 Lakhs
SUBSIDIARIES ASSOCIATES AND JOINT VENTURES
The company does not have any Subsidiary company either in India or abroad.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
The Corporate Governance Report annexed to this Board's Report contains the compositionof the Board of Directors of the Company.
Mr. M. Krishna Swamy Director of the company retires by rotation at the ensuing AnnualGeneral Meeting and being eligible offer themselves for re-appointment.
The detailed profile of the above directors is given at Notice and Explanatorystatement calling the Annual General Meeting.
As required by SEBI (LODR) Regulations 2015 with the Stock Exchanges the informationon the particulars of the Directors seeking re-appointment are given in the notice to theAGM.
Mr. M. Lokeswara Rao Managing Director Mr. V. Sudhakara Reddy Chief Financialofficer Mr. Matru Prasad Mishra Company Secretary hold the office of Key ManagerialPersonnel.
There is no change in Key Managerial Personnel during the said financial year 2019-20.
Noting of Appreciation of Services:
The Board places on record the appreciation for guidance and valuable services providedby Mr. A. Vijay Kumar non-executive independent director who resigns from the office ofDirector with effect from 28th Feb 2020 on account of his preoccupancy. The Board alsoplaces on record the appreciation for guidance and valuable services during his tenure.The Board wishes him good health fortune and carrier in the days to come.
The Board also noted down the resignation of Mrs. Bhavana Rao from the Company's Boardw.e.f. 29/11/2019 and Board noted down the same and wishes her good health fortune andcarrier in the days to come.
The Independent Directors have fulfilled the criteria of Independence as defined underSection 149(6) and requisite declarations in terms of Section 149(7) of the Companies Act2013 have been received. During the year under review a separate meeting of independentdirectors was held on 13th February 2020. A separate meeting of Independent Directors ofthe Company without the attendance of Non-Independent Directors was held during theyear as required under Schedule IV to the Companies Act 2013 (Code for IndependentDirectors) and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015. All the directors of the Company have disclosed their interest to theCompany pursuant to Sec 184(1) of Companies Act 2013.
During the year four meetings of the Board of Directors were held. The details of themeetings are furnished in the Corporate Governance Report which is attached to thisreport.
COMPANY'S POLICY RELATING TO DIRECTORS APPOINTMENT PAYMENT OF REMUNERATION ANDDISCHARGE OF THEIR DUTIES
The provisions of Section 178(1) of the Companies Act 2013 relating to constitution ofNomination and Remuneration Committee are applicable to the Company and hence the Companyhas devised a policy relating to appointment of Directors payment of managerialremuneration Directors quali?cations positive attributes independence of Directors andother related matters as provided under Section 178(3) of the Companies Act 2013. Thesaid policy is posted on the Company's website www.lokeshmachines.com.
AUDITORS Statutory Auditors
As per the provisions of Section 139 142 and other applicable provisions if any ofthe Companies Act 2013 (the Act) and the Companies (Audit and Auditors) Rules 2014(including any statutory modification(s) or re-enactment thereof for the time being inforce) and pursuant to recommendation of the Audit Committee and the Board of DirectorsM/s. K.S.Rao & Co. Chartered Accountants Hyderabad (ICAI Firm Regn. No.003109S) hasbeen appointed as Statutory Auditors of the Company for a term of five years fromconclusion of 33rd Annual General Meeting till the conclusion of 38th Annual GeneralMeeting at such remuneration plus reimbursement of out of-pocket travelling and livingexpenses etc. as may be mutually agreed between the Board of Directors of the Companyand the said Auditors.
The Board has appointed M/s. DZR & Co Cost Accountants for conducting the audit ofcost records of the Company for various segments for the financial year 2019-20 asrecommended by the Audit Committee. As required under section 148 and Rule 14 of theCompanies (Audit and Auditors) Rules 2014 a resolution is being placed at the ensuing AGMfor ratification of remuneration payable to said Cost Auditors.
M/s. L.D. Reddy & Co. Practicing Company Secretaries was appointed to conduct theSecretarial Audit of the Company for the financial year 2019-20 as required under Section204 of the Companies Act 2013 and Rule 9 there-under. The Secretarial Audit Report for FY2019-20 forms part of this Report as Annexure.
Reply to the observations of Secretarial Auditor:
Company has appointed Ms. M. Likhitha (DIN: 08765043) as Non-Executive(Non-Independent) director of the Company w.e.f. 18/06/2020. She has also been consideredas Woman director of the Company w.e.f 18/06/2020 under respective sections of CompaniesAct 2013 and SEBI (LODR) Regulations 2015. Company has filed necessary forms on MCA forher appointment and intimated to both the stock exchange regarding the same.
Your Company is law abiding entity and filed the necessary forms and returns withRegulatory authorities. However there was some delay filings occurred during the year.Management is taking measures to avoid the delay filings in future.
The Company is regular in complying the regulatory compliances under RelevantActs/Regulations. The gratuity amount was due during the last week of March 2020. But dueto unprecedented effect of Covid-19 and the country wide lockdown Company was unable topay the gratuity amount and renew the policy thereof. However management has takenmeasures to pay for the gratuity amount and renewal of policy thereof. The Company will becautious for compliance of the said laws/acts.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The details are provided in the Management Discussion and Analysis Report attached tothis report. The Internal Auditors reviews the efficiency and effectiveness of the systemsand procedures. The Audit Committee approves and reviews the internal audit plan for theyear.
The Directors have devised proper systems and processes for complying with therequirements of applicable Secretarial Standards issued by the Institute of CompanySecretaries of India and that such systems were adequate and operating effectively.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT-9 is annexedwith this report in Annexure.
As per recent MCA notification dated 28th August 2020 pursuant to Sec 92(3) of theCompanies Act 2013 as amended once the Annual Return of the Company will be preparedsuch Annual Return shall be published on Company's Website i.e. www.lokeshmachines.comunder "Investor center" tab.
The employee relations have remained cordial throughout the year and industrial harmonywas maintained. Measures for the safety training and development of the employeescontinued to receive top priority. The Directors wish to place on record theirappreciation of the valuable contribution made by the employees of the Company at alllevels towards the performance and growth of the Company.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIESACT 2013
The Company has not given any loans or guarantees covered under the provisions ofSection 186 of the Companies Act 2013. The details of the investments made by Company aregiven in the financial statements.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The CSR Policy of the Company and details about the initiatives taken by the Company onCSR during the year as per the Companies (Corporate Social Responsibility Policy) Rules2014 have been disclosed as part of this report in Annexure attached hereof. Furtherdetails of composition of the Corporate Social Responsibility Committee and other detailsare provided in the Corporate Governance Report which forms part of this report.
INTERNAL COMPLAINT COMMITTEE
The Company has in place a policy for prevention prohibition and redressal againstsexual harassment of women at workplace to protect women employees and enable them toreport sexual harassment at workplace. An Internal Committee has been constitutedconsisting of optimum number of women for the said purpose.
PERFORMANCE ANNUAL EVALUATION MADE BY THE BOARD OF ITS OWN PERFORMANCE AND OF ITSCOMMITTEES AND INDIVIDUAL DIRECTORS
As required under the provisions of Schedule IV of the Companies Act 2013 theperformance evaluation of independent directors has been done by the entire Board ofDirectors excluding the director being evaluated. The evaluation of all the directors andthe Board as a whole was conducted based on the criteria and framework adopted by theBoard.
The Nomination and Remuneration Committee has defined the evaluation criteriaprocedure and time schedule for the Performance Evaluation process for the Board itsCommittees and Directors.
Directors were evaluated on aspects such as attendance and contribution at Board/Committee Meetings and guidance/ support to the management outside Board/ CommitteeMeetings.
The equity shares of the Company are listed with Bombay Stock Exchange Limited (BSE)and National Stock Exchange of India Limited (NSE). There are no arrears on account ofpayment of listing fees to the said Stock Exchanges
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to Section 134 (5) of the Companies Act 2013 Your Directors' confirm that:
In preparation of annual accounts for the financial year ended 31st March 2020 theapplicable Accounting Standards have been followed along with proper explanation relatingto material departures; The Directors have selected such accounting policies and appliedthem consistently and made judgments and estimates that are reasonable and prudent so asto give true and fair view of the state of affairs of the Company at the end of thefinancial year ended 31st March 2020 and of the profit of the Company for the financialyear; The Directors have taken proper and sufficient care for their maintenance ofadequate accounting records in accordance with the provisions of the Companies Act forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
i. The Directors had prepared the annual accounts on a going concern' basis; ii.The directors had laid down internal financial controls to be followed by the company andthat such internal financial controls are adequate and were operating effectively; andiii. The directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
OTHER DISCLOSURES: Board Meetings
During the year under review five Board Meetings were held on 13th May 2019 25th May2019; 14th August 2019; 12th November 2019 and 13th February 2020.
Committees of Board
Your company has the following committees namely:
1. Audit Committee
2. Nomination and Remuneration Committee
3. Stakeholders Relationship Committee
The constitution of all the committees is as per the Companies Act 2013 and SEBI(LODR) Regulations 2015. The details of the Constitution of Committees are mentioned inCorporate Governance Report which forms part of this Annual Report.
Corporate Governance Report
Your Company has complied with the requirements of Regulation 34(3) read with ScheduleV of SEBI (LODR) Regulations 2015 and provisions of the Companies Act 2013 Report onCorporate Governance including Auditor's Certificate on compliance with the code ofCorporate Governance has been annexed with this report.
CERTIFICATE FROM COMPANY SECRETARY IN PRATICE
L. Dhanamjaya Reddy Practicing Company Secretary has issued a certificate as requiredunder the Listing Regulations confirming that none of the directors on the Board of theCompany has been debarred or disqualified from being appointed or continuing as directorof companies by the SEBI/ Ministry of Corporate Affairs or any such statutory authority.The certificate is enclosed as Annexure.
NOMINATION AND REMUENRATION POLICY
On the recommendation of the Nomination and Remuneration Committee the Board ofDirectors has formulated a policy of the Company on directors' appointment andremuneration including criteria for determining qualifications positive attributesindependence of a director and other matters and to frame proper systems foridentification appointment of Directors & KMPs Payment of Remuneration to them andEvaluation of their performance.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
The information required pursuant to Section 197(12) of the Companies Act 2013 readwith Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 in respect of employees of the Company will be provided uponrequest. In terms of Section 136(1) of the Companies Act 2013 the reports and accountsare being sent to the members and others entitled theretoexcluding the information onemployees' particulars which is available for inspection by the members at the Registeredoffice of the Company during business hours on working days of the Company up to the dateof ensuing Annual General Meeting.
The Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are provided in the Annexure formingpart of the Annual Report.
With regard to the provisions of Section 136(1) read with its relevant provision of theCompanies Act 2013 the Annual Report excluding the aforesaid information is being sentto the members of the Company. The said information is available for inspection at theRegistered office of the Company during working hours and any member interested inobtaining such information may write to the Company Secretary at firstname.lastname@example.org can write at the registered office address of the Company
Board's response on Auditor's qualification reservation or adverse remark ordisclaimer made:
During the year there were no instances of frauds reported by auditors under Section143(12) of the Companies Act 2013.
The Company takes a very pragmatic approach towards insurance. Adequate cover has beentaken for all movable and immovable assets for various types of risks.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS:
There are no significant material orders passed by the Regulators /Courts/ Tribunalswhich would impact the going concern status of the Company and its future operations.
Management Discussion and Analysis
A brief note on the Management discussion and analysis for the year is enclosed asAnnexure to this report.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE OUTGO
Information required under section 134(3)(m) of the Companies Act 2013 read with Rule8 of the Companies (Accounts) 2014 is enclosed herewith as Rules in Annexure.
DEVELOPEMNT AND IMPLEMENTATION OF A RISK MANAGEMENT POLICY
The Company has been addressing various risks impacting the company policy of thecompany on risk management is provided elsewhere in this Annual Report in ManagementDiscussion and Analysis.
The Company has developed and implemented a risk management policy for the companyincluding identification therein of elements of risk which in the opinion of the Boardmay threaten the existence of the company.
In pursuant to the provisions of section 177 of the Companies Act 2013 a VigilMechanism for directors and employees to report genuine concerns has been established. Allpermanent employees of the Company are covered under the Whistle Blower Policy.
The Company has not accepted any deposits from the public.
RELATED PARTY TRANSACTIONS:
Related party transactions entered during the financial year under review are disclosedin Note No.39 of the Financial Statements of the Company for the financial year ended 31stMarch 2020. These transactions entered were at an arm's length basis and in the ordinarycourse of business. There were no materially significant related party transactions withthe Company's Promoters Directors Management or their relatives which could have had apotential conflict with the interests of the Company.
All transactions entered by the Company with Related parties were in the OrdinaryCourse of business and Arm's Length pricing basis. There are no materially significantrelated party transactions made by the Company during the year. The Audit Committeegranted approval at every quarterly held meeting and subsequently as per therecommendation of the Audit Committee it has been ratified by the Board of Directors.
Your Directors wish to place on record their appreciation for the support andco-operation extended by the Shareholders Bankers Financial Institutions GovernmentAuthorities Stock Exchanges Customers Suppliers and other associates.
Your Directors also wish to place on record their appreciation for the enthusiasticsupport received from the team of dedicated employees in the activities of your Company.
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On behalf of the Board
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For Lokesh Machines Limited
|Place: Hyderabad ||Sd/- ||Sd/- |
|Date : 02/09/2020 ||M. Srinivas ||M Lokeswara Rao |
| ||(Whole Time Director) ||(Managing Director) |