TO THE SHAREHOLDERS
Your Directors have pleasure in presenting the Twenty Sixth Annual Report together withthe Audited Balance Sheet & Profit and Loss Account for the year ended 31.03.2019.
|The operating results for the year 2018-2019 are given below : ||(Rs. In lakhs) |
|Profit before Interest and Depreciation and Other adjustments ||882.52 |
|Less : Interest ||171.01 |
|Depreciation ||264.68 |
| ||435.69 |
|Net Profit before Tax ||446.83 |
|Provision for Tax : || |
|Current Tax ||93.03 |
|Deferred Tax (income) / expenses ||43.57 |
|IT for earlier year ||11.16 |
| ||147.76 |
|Net Profit after Tax ||299.07 |
|Amount brought forward from previous year ||2531.43 |
|Amount available for appropriation ||2830.50 |
|Appropriations || |
|Add : Transfer from Revaluation Reserve ||1.31 |
|MAT credit adjustment ||16.37 |
|Surplus carried over to Balance Sheet ||2848.18 |
The Company's gross income for the financial year ended 31st March 2019 was Rs.5990.78 lacs compared to Rs.6467.03 lacs in the previous year. The profit before tax forthe Company is Rs. 446.83 lacs as against Rs. 1221.99 lacs in the previous year. Thedepreciation for the year is Rs.264.68 lacs compared to Rs.268.54 lacs in the previousyear. After providing Taxation the Company's net profit stands at Rs.299.07 lacs againstRs.775.04 lacs in the previous year.
An amount of Rs 2848.18 lacs is to be carried over to Balance Sheet.
The Net worth of the company is at Rs.5031.50 lacs as on 31.03.2019 as againstRs.4716.06 lacs in the previous year.
The Company has not declared any interim dividend during the year under review.
The Board of Directors has recommended a dividend of Rs 9.00 per preference shares on400000 9% Redeemable Non-Convertible Non-Cumulative Preference shares of Rs 100/- eachaggregating to Rs 36.00 lacs on 30.05.2019 for the financial year 31st March 2019 whichif approved in the ensuing Annual General Meeting will be paid to all the preferenceshareholders whose name appear in the Registrar of Members as on 16th September 2019
The Board of Directors has recommended a final dividend of Rs 1.50 per Equity shares on9083182 Equity shares of Rs 10/- each aggregating to Rs 136.24 lacs on 30.05.2019 forthe financial year 31st March 2019 which if approved in the ensuing Annual GeneralMeeting will be paid to all the equity shareholders whose name appear in the Registrar ofMembers as on 16th September 2019
Company lost market share in certain items due to very low prices offered by Chinesecompanies during the first six months of the year. After the price reduction offered bythe Company sales have increased on those items and expect to regain the share of themarket during the near financial year both in export and domestic market.
Company has completed the merger and amalgamation of the associated supply companieswhich will reduce the operating costs during the financial year.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
TRENDS & DEVELOPMENT
Domestic market has been improving for the products manufactured by our Company. Theexport market has also showing some strength amidst the competition by China.
We hope to generate sizable volume of business this year and the new products developedand likely to be introduced during the second half of the year will also help us to havestrong domestic market revenue.
Mr A V Palaniswamy Director who retires by rotation and being eligible offeredhimself for reappointment.
KEY MANAGEMENT PERSONNEL
Mr. A.V. Palaniswamy Managing Director Mrs Panath Anitha Whole Time Director MrJayaram Govindarajan Whole Time Director Mr. J. Saravanan Chief Financial Officer andMr. S. Aravinthan Company Secretary of the Company are the Key Management Personnel asper the provisions of the Companies Act and rules made there under.
Mr Jayaram Govindarajan was re-appointed as the Whole Time Director with effect from14.12.2018
SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES
The company does not have any Subsidiary Joint Venture or Associate Company.
Pursuant to the provisions of Section 129(3) of the Act a statement containing salientfeatures of the Financial Statements of your Company's Subsidiaries Associates and JointVentures in Form AOC-1 is attached to the Financial Statements of your Company as Annexure1.
Pursuant to the provisions of Section 136 of the Act the Financial Statements of yourCompany Financial Statements along with relevant documents are available on the websiteof your Company.
DIRECTORS' RESPONSIBILITY STATEMENT
Your Directors further report that
(i) in the preparation of annual accounts the applicable accounting standards have beenfollowed and there were no material departures;
(ii) the accounting policies selected have been applied consistently prudent judgmentsand estimates have been made to give a true and fair view of the state of affairs of thecompany as at 31st March 2019 and of the Profit of the company and the cash flow statementfor the year ended 31.03.2019.
(iii) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;
(iv) the annual accounts have been prepared on a going concern basis.
(v) the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively Internal financial control means the policies and procedures adopted by theCompany for ensuring the orderly and efficient conduct of its business including adherenceto Company's policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information.
(vi) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
CODE OF CONDUCT
All Directors and senior management of the Company have affirmed Compliance with theCode of Conduct of National Fittings Limited for the financial Year ended 31st March 2019.
DECLARATION OF INDEPENDENT DIRECTORS
The Independent Directors have submitted their disclosures to the Board that theyfulfill all the requirements as stipulated in Section 149(6) of the Companies Act 2013 soas to qualify themselves to be appointed as Independent Directors under the provisions ofthe Companies Act 2013 and the relevant rules.
NUMBER OF BOARD MEETINGS
During the year 5 (Five) Board Meetings were convened and held the details of whichare given in Corporate Governance Report.
POLICY ON DIRECTOR'S APPOINTMENT AND REMUNERATION INCLUDING CRITERIA FOR DETERMININGQUALIFICATIONS POSITIVE ATTRIBUTES INDEPENDENCE OF A DIRECTOR KEY MANAGEMENT PERSONNELAND OTHER EMPLOYEES
The company shall have such person on the Board who complies with the requirements ofthe Companies Act 2013.
Directors/KMPs shall be persons of sound integrity and honesty apart from knowledgeexperience etc in the respective fields.
Composition of the Board shall be in compliance with the requirements of the CompaniesAct 2013. No person less than the age of 21 years shall be appointed as the director ofthe Board.
The Executive Directors are paid with remuneration as approved by the members but arenot paid sitting fees.
Independent directors are not entitled for ESOPs
Managing Director Whole Time Director Company Secretary and Chief Financial Officershall be the Key Management Personnel (KMPs) of the Company.
All persons who are Directors KMPs members of Senior Management and all the employeesshall abide by the code of conduct.
MANNER IN WHICH FORMAL ANNUAL EVALUATION HAS BEEN MADE BY THE BOARD OF ITS OWNPERFORMANCE AND THAT OF ITS COMMITTEES AND INDIVIDUAL DIRECTORS
1. Nomination and Remuneration Committee of the Board prepared and sent through itsChairman Draft feedback form for evaluation of the Board and independent directors.
2. Independent Directors at a meeting of themselves considered and evaluated theBoard's performance performance of the Chairman and other non-independent Directors.
3. The Board subsequently evaluated performance of the Board the Committees andIndependent Directors.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIESACT 2013
Investments made by the Company under Section 186 of the Companies Act 2013 during theyear under review are given in para 2.2 of Notes forming part of the financial statements.
There were no loans guarantees made by the Company under Section 186 of the CompaniesAct 2013 during the year.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES
There were no materially significant related party transactions entered by the Companywith its promoters Directors Key Management Personnel and other persons which may have apotential conflict with the interest of the Company.
All the related party transactions that were entered during the financial year were inthe ordinary course of the business of the Company
All the related party transactions are placed before the Audit Committee for approval.For the business transactions with the related parties which are of repetitive nature aswell as for the normal business transactions which cannot be foreseen prior omnibusapproval from the Audit Committee are obtained and accordingly required disclosures aremade to the Committee on quarterly basis in terms of the approval of the Committee.
The Policy on materiality of related party transactions and also on dealing with therelated party transactions as approved by the Audit Committee and Board of Directors isuploaded on the Company's web-site and the link for the same ishttps://www.nationalfitting.com.
The particulars of Contracts or Arrangements with the related parties made underSection 188 of the Companies Act 2013 are furnished in Annexure - 2 and are attached tothis report.
The company issued 400000 9% Redemable Non-convertible Non-Cumulative PreferenceShares of Rs 100/- each and 5460192 Equity Shares of Rs 10/- each allotted in pursuanceto the Scheme of Amalgamation. No Bonus Shares were issued. The Company has not issued anySweat Equity Shares and not provided any Employee Stock Option Scheme. The Company has notbought back any of its securities during the year under review.
INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY
The Company has implemented adequate procedures and internal controls which providereasonable assurance regarding reliability of financial reporting and preparation offinancial statements.
The Company also assures that internal controls are operating effectively.
MATERIAL CHANGES AND COMMITMENTS
There were no material changes and commitments affecting the financial position of thecompany which have occurred between the end of the financial year and the date of thereport.
RISK MANAGEMENT POLICY
Potential risk for the business of the Company and steps to be adopted by the Companyto handle the risks has been reviewed regularly. Following are the few risks and themethods to be adopted by the Company to handle them.
1) Market Risk
Input costs have increased another 20% resulting in the total cost increase by 10-12%.The increased competition from China and other companies using China as a manufacturingbase has resulted in reduction of selling price nearly 20% from last year prices. Costincrease and the reduction in selling price has eroded our margins substantially. Exportmarket is becoming more and more unviable.
Company has increased domestic market share after the price reduction and is beingapproved by major contractors for projects as against Chinese product supplies.
2) Exchange Risk
Indian currency did not depreciate enough to offset the input cost increase and to meetthe low cost products from China in the international markets. China has depreciated theircurrency nearly 10% during the last six months due to USA duty on Chinese imports intoUSA.
Power cost has increased marginally due to less availability of wind power.
4) Manpower Requirement
Company continues to rely on expat labour from northern belt for nearly 70% of workforce due to non-availability of local labour in production areas. Cost of manpower hasnearly doubled in the last two years. Company has installed more automated machineoperations to reduce manpower.
Company has taken steps to diversify the product base into pumps for domestic andinternational market requirements. Design will be attractive enough to get an acceptableshare of the domestic and export market. Developed models are under testing and will beinto production line during the current year. Company will provide the major componentslike casting in Iron and Stainless Steel. Machining and assembly will be done by outsidesources and will be entered into the production line during the year.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
A Board level Committee of CSR has been constituted and the Board has adopted a CSRPolicy as recommended by the Committee.
Your Company completed the construction of a school building at a Government MunicipalSchool at Madhapur village at a cost of Rs 34.56 lacs.
The Annual Report on the Company's CSR activities is furnished in Annexure 3 andattached to this report.
EXTRACTS OF ANNUAL RETURN
Pursuant to Section 134(3)(a) and Section 92 (3) of the Companies Act 2013 read withthe corresponding rules the extract of the Annual Return as at March 31 2019 in Form MGT9 is hosted on the website www.nationalfitting.com
There were no significant and material orders passed by the regulators or courts ortribunals impactingthe going concern status and company's operations in future.
Your Company is in compliance with the Corporate Governance guidelines as laid out inthe Securities Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 (SEBI Listing Regulations). All the Directors and the Senior Managementpersonnel have affirmed in writing their compliance with and adherence to the Code ofConduct adopted by the Company.
The annual report of the Company contains a certificate by the Managing Director interms of SEBI Listing Regulations on the compliance declarations received from theDirectors and the Senior Management personnel.
The Statutory Auditors of the Company have examined the requirements of CorporateGovernance with reference to SEBI Listing Regulations and have certified the complianceas required under SEBI Listing Regulations. The Certificate in this regard is attached asAnnexure 4 to this Report.
The Chief Executive Officer / Chief Financial Officer (CEO/CFO) certification asrequired under SEBI Listing Regulations is attached as Annexure 5 to this Report. RelatedParty disclosures/transactions are detailed in Note 2.29 of the Notes to the financialstatement.
Company has a policy on prohibition prevention and redressal of Sexual Harassment ofwomen at work place and matters connected therewith. During the year ended 31st March2019
The Company has constituted an Internal Control Committee for prevention of sexualharassment of women at work place.
No complaint was received under the policy.
TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND
The Company has unclaimed dividend amounting to Rs. 7991960/-
Pursuant to the provisions of Section 124 (5) of the Companies Act 2013 unclaimeddividend of Rs 193280/ which remained unpaid or unclaimed for a period of 7 years andhave been transferred to the Investor Education and Protection Fund in this financialyear.
The details of the unpaid and unclaimed dividend lying with the Company have beenuploaded on the website of Ministry of Company Affairs.
Pursuant to the provisions of Section 124 (6) of the Companies Act 2013 78780 equityshares accompanying dividend which remained unpaid or unclaimed for a period of 7 yearshave been transferred by the Company to the Investor Education and Protection Fund in thisfinancial year.
The Company has neither accepted nor renewed any deposits during the financial year.
PARTICULARS OF EMPLOYEES
The information required under Section 197 of the Act read with rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are givenbelow:
(i) & (ii) The ratio of the remuneration of each Director to the median and meanremuneration of the employees of the company for the financial year and the percentageincrease in remuneration of each director Chief Financial Officer Chief ExecutiveOfficer Company Secretary or Manager if any in the financial year:
|Name of Directors/Key Management Personnel ||Ratio to Median Remuneration (times) ||% Increase / Decrease in Remuneration |
|Mr A V Palaniswamy Managing Director ||12.16 ||3.92 |
|Mr Jayaram Govindarajan ||6.19 ||3.85 |
|Mr. Dhananjayan ||0.09 ||33.33 |
|Mr. Selvakumar ||0.38 ||175 |
|Mr R Alagar ||0.81 ||- 21.11 |
|Mrs A PanathAnitha ||1.88 ||11.41 |
|Mr J Saravanan (Chief Financial Officer) ||3.55 ||6.84 |
|Mr S Aravinthan (Company Secretary) ||2.90 ||6.86 |
iii) The percentage increase in the median remuneration of employees in the financialyear: 9%
iv) The number of permanent employees on the rolls of the Company: 81
v) Explanation on the relationship between average increase in remuneration and companyperformance:
On an average employees received an increase of 20% during the financial year 2018-19.The remuneration components include a fair proportion of fixed and variable pay. Theincrease in remuneration is in line with the market. In order to ensure that remunerationreflects Company performance the performance pay is also linked to organizationperformance apart from an individual's performance.
vi) Comparison of the remuneration of the key managerial personnel against theperformance of the Company:
| ||(In Lacs) |
|Aggregate remuneration of key managerial personnel (KMP) in FY 2018-19 ||6217300 |
|Revenue ||580350534 |
|Remuneration of KMPs (as % of revenue) ||1.07 |
|Profit before Tax (PBT) ||44682696 |
|Remuneration of KMP (as % of PBT) ||13.91 |
vii) Variations in the market capitalization of the Company price earnings ratio as atthe closing date of the current financial year and previous financial year:
| || || ||(In Lacs) |
|Particulars ||As at 31.03.2019 ||As at 31.03.2018 ||% decrease |
|Closing price of share at BSE (Rs.) ||113.05 ||201.8 ||-43.98 |
|Market Capitalisation (Rs.) ||10268.53 ||18329.86 ||-43.98 |
|Price Earnings ratio ||34.34 ||23.45 ||45.20 |
|Net worth ||5031.50 ||4716.06 ||6.69 |
viii) Comparison of the each remuneration of the Key Managerial Personnel against theperformance of the company:
| ||Mr. A V Palaniswamy Managing Director ||Mr.Jayram Govindarajan Whole Time Director ||Mrs. A Panath Anitha Woman Director ||Mr. J Saravanan Chief Financial Officer ||Mr. S Aravinthan Company Secretary |
|Remuneration in FY2018-19 ||2650000 ||1350000 ||410100 ||774600 ||632600 |
|Revenue ||580350534 ||580350534 ||580350534 ||580350534 ||580350534 |
|Remuneration as % of Revenue ||0.46 ||0.23 ||0.07 ||0.13 ||0.11 |
|Profit before Tax (PBT) ||44682696 ||44682696 ||44682696 ||44682696 ||44682696 |
|Remuneration (as % of PBT) ||5.93 ||3.02 ||0.92 ||1.42 ||1.73 |
There are no variable components of remuneration paid to the directors.
ix) The ratio of the remuneration of the highest paid director to that of the employeeswho are not directors but receive remuneration in excess of the highest paid directorduring the year; Nil
The Company affirms that remuneration is as per the remuneration policy of the Company.
The information required under Section 197 of the Act read with Rule 5(2) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2015 are givenbelow:
During the period under review there was no employee drawing remuneration in excess ofthe limits prescribed under Section 197 of the Companies Act 2013 and Rule 5(2) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014.
M/s V Krish & Associates Chartered Accountants Chennai were appointed asStatutory Auditors of the Company from the conclusion of the 25th Annual General Meetingheld on 10.05.2019 until the conclusion of 28th Annual General Meeting.
The report of the Statutory Auditors for financial year ended 31st March 2019 is givenalong with the Financial Statements which is annexed to and forms part of this report.
SECRETARIAL AUDIT REPORT
Pursuant to the requirements of the Companies Act 2013 the Company has appointed Mr MR L Narasimha B.Com FCS Practicing Company Secretary (Cop No: 799) as the SecretarialAuditor for the financial year 2018-19 whose report on 30th May 2019 is attachedseparately to this report. Annexure 6.
EXPLANATION OR COMMENTS OR QUALIFICATIONS RESERVATIONS OR ADVERSE REMARKS ORDISCLAIMERS MADE BY THE AUDITORS AND THE PRACTICING COMPANY SECRETARY IN THEIR REPORTS
There were no qualifications reservations or adverse remarks made by the StatutoryAuditors and there are few qualifications in the Secretarial Audit Report of thePracticing Company Secretary which are self explanatory.
CONSERVATION OF ENERGY
a) Company has replaced most of the less efficient machines with newer and less powerconsuming equipments in all the areas of manufacturing.
b) Long term contract has been executed with wind energy suppliers there by reducingcosts and less dependency on fossil fuel energy. Nearly 80% of the energy requirement willbe from wind energy.
TECHNOLOGY ABSORPTION INDUSTRIAL RELATIONS
Company has taken steps to introduce newer technology machines in production andinspection areas to increase productivity and reduce rejection levels.
Computer generated models for tooling data collection and manufacturing processes havebeen introduced to improve productivity.
FOREIGN EXCHANGE EARNINGS AND OUTGO
Foreign exchange inflow (actual) : Rs. 431931230/-
Foreign exchange used (actual) : Rs. 5513939/-
Relationship with the employees/labor was cordial during the year under review.
Your Directors take this opportunity to thank M/s. Bank of India for the supportextended during the period. Your Directors also wish to thank all the suppliersemployees Government Departments/Agencies and others for their valuable contribution andassistance during the year.
| || |
FOR AND ON BEHALF OF THE BOARD
|Place : Coimbatore ||Sd/- A.V. PALANISWAMY ||Sd/- JAYARAM GOVINDARAJAN |
|Date : 30.05.2019 ||DIN No. 01817391 ||DIN No. 02178416 |
| ||Managing Director ||Director |
Form No. AOC - 1
Pursuant to first proviso to Sub-Section (3) of Section 129 of the Companies Act 2013read with rule 5 of Companies (Accounts) Rules 2014
Statement containing salient features of the Financial Statement of Subsidiaries.
- Not Applicable
Form No. AOC - 2
(Pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) ofthe Companies (Accounts) Rules 2015)
A. Details of contracts or arrangements or transactions not at arm's length basis
There were no contracts or arrangements or transactions entered in to during the yearended March 31 2019 which were not at arm's length basis.
B. Details of material contracts or arrangement or transactions at arm's length basis
Since no material related party contract / transaction exists disclosure under thissection is not applicable:
|Name of the Related Party Nature of Relationship ||Not Applicable |
|Duration of Contract/ Arrangement/ Transaction ||Not Applicable |
|Salient Terms of Contracts or arrangements or transaction including the value If Any ||Not Applicable |
|Date of approval by the Shareholders ||Not Applicable |
|Amount ||Not Applicable |