Your Directors are pleased to present the Thirty Eighth Annual Report along with theaudited financial statements for the financial year ended 31st March 2020:
(` in Lakhs)
|FINANCIAL RESULTS ||2019-20 ||2018-19 |
|Total Income ||57733.57 ||86220.74 |
|PBIDT ||5883.89 ||8181.57 |
|Profit Before Tax (PBT) ||3080.77 ||5771.62 |
|Less: Provision for Tax ||-519.74 ||1927.54 |
|Profit After Tax (PAT) ||3600.51 ||3844.08 |
|Add: Profit brought forwarded from previous year ||6500.84 ||6230.63 |
|Other Comprehensive Income ||-48.34 ||-25.02 |
|Total Comprehensive Income || || |
|available for Appropriation ||10053.01 ||10049.69 |
|Appropriations: || || |
|General Reserve ||- ||2500.00 |
|Dividend on Equity Shares ||870.01 ||870.01 |
|Distribution Tax on Dividend ||178.84 ||178.84 |
|Surplus Carried to Balance Sheet ||9004.16 ||6500.84 |
The Board of Directors taking in to consideration the operational performance anduncertainties faced by the automotive sector do not recommend any dividend for thefinancial year 2019-20.
TRANSFER TO RESERVES
No transfer to the General Reserves has been proposed for the financial year 2019-20.
The paid up quity share capital as on 31st March 2020 was Rs 1740.02 Lakhs.
During the year the Company recorded Revenue from Operations by way of Net Sales of Rs566.76 Crores as against Rs 856.27 Crores in 2018-19 a reduction of about 34%. OurExports business registered a growth of 25% compared with previous year and stood at Rs112.43 Crores. Profit After Tax made during the year is Rs 36.01 Crores as against Rs38.44 Crores in 2018-19. The production during the year was 52175 MT compared to theprevious year's 92533 MT. The overall reduction in Turnover and Profit Before Tax was dueto slow down in the economy especially in the auto sector. This has resulted in poorperformance of most of the auto component industries Nelcast being no exception to this.
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 headwinds 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. During the year theMedium and Heavy Commercial Vehicle industry and Tractor industry registered a negativegrowth of 45% and 11% respectively which has severely impacted the auto componentindustry. The Commercial Vehicle industry expected a strong year due to pre-buying in theyear 2019-20 due to the BS-VI emission norm introduction but due to demand slowdown lowfreight rates and uncertainty of recovery these expectations did not materialise. Due todelayed monsoon and flooding the Tractor industry witnessed a negative growth in thefinancial year 2019-20. Due to Covid-19 lockdown was imposed by the Government of Indiaand respective State Governments in March 2020 and the company had to shut down itsmanufacturing operations and partially resumed operations in its facilities subsequentlywith minimum workforce as per the guidelines issued by the Ministry of Health and FamilyWelfare. The Company has taken steps to build in all the safety and precautionary measuresacross all its facilities and locations. The impact of COVID-19 will be felt in theFinancial Year 2020-21 as it is expected to further drag the slowness in the auto industryand the revival is bound to be slow. However the Tractor industry expects a strong growthin the year 2020-21 due to good rainfall in the previous year increased Minimum SupportPrices credit availability positive farm sentiment and normal monsoon expected in thecurrent year. The long-term outlook remains positive for the Automotive Industry with mostmajor global players having a base in India for manufacturing global sourcing andengineering.
CONSOLIDATED FINANCIAL STATEMENTS
The Company has prepared Consolidated Financial Statements of Nelcast Limited and itssubsidiary NC Energy Limited as at 31st March 2020 in accordance with theprovisions of Section 129(3) of the Companies Act 2013 and SEBI Listing Regulations andprepared in accordance with the Indian Accounting Standards prescribed by the Institute ofChartered Accountants of India. As required by the Listing Regulations the auditedConsolidated Financial Statements are circulated with the Annual Report.
SUBSIDIARIES ASSOCIATES AND JOINT VENTURES
In terms of Section 129(3) of the Companies Act 2013 read with Rule 5 of the Companies(Accounts) Rules 2014 the salient features of the financial statements of subsidiarycompany is set out in the prescribed form AOC-1 which is annexed with this report asAnnexure-A. The Company will make available the audited annual accounts and relatedinformation of its subsidiary upon request by any of its shareholders and it has alsobeen placed on the website of the Company. The annual accounts of the subsidiary companywill also be kept for inspection by any member at the Registered Office of the Companyand its subsidiary company. The consolidated financial statements presented by theCompany which form part of this annual report include financial results of itssubsidiary company.
QUALITY AND CUSTOMER SATISFACTION
The Company adheres to IATF 16949 quality standards and continuously strives to achieveworld class quality by strictly adhering to the quality norms. The Company has also beenawarded ISO 14001 & ISO 45001 certifi cations for implementing Health Safety &Environmental Management Systems.
The Company is a supplier to several leading OEM customers like Tata Motors AshokLeyland TAFE Eicher Tractors (TMTL) Volvo-Eicher Commercial Vehicles SAME TractorsEscorts Tractors International Tractors (ITL) Daimler India Caterpillar etc. Tier Icustomers like Automotive Axles American Axles Dana Rane Madras Rane-TRW ZF IndiaSimpson & Co. etc. and Export customers like Meritor American Axles Daimler DanaComer ZF Industries etc. the Company is closely working with several of our customers interms of new product development improvement in quality etc. to improve our products.
The Company has not accepted any public deposits during the year and as such no amounton account of principal or interest on deposits from public was outstanding as at 31stMarch 2020.
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.
Your Directors record their profound grief on the sad demise of our Deputy ManagingDirector Mr. P. Vijaya Bhaskar Reddy on 24th November 2019. The Company wishesto place on record his valuable contribution to the Company for more than thirty sixyears. The Board further expresses their heartfelt condolences for his untimely death andwishes to put on record their sincere and deep appreciation of his invaluable guidance andcontribution to the Company's growth over the years.
Ms. P. Divya Director is due to retire by rotation and being eligible offers herselffor reappointment.
Mr. S.K. Sivakumar has been appointed as Chief Financial Officer of the company duringthe year.
Mr. P. Deepak Managing Director and Mr. S.K. Sivakumar Chief Financial Officer &Company Secretary hold the offi ce of Key Managerial Personnel.
The Independent Directors have fulfi lled 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 11th February 2020.
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 qualifications 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.nelcast.com.
DIRECTORS' RESPONSIBILITY STATEMENT
In accordance with the provisions of Section 134(5) of the Companies Act 2013 theBoard of Directors to the best of their knowledge and ability confirm that:
a) in preparation of the annual accounts the applicable accounting standards had beenfollowed along with proper explanations relating to material departures if any;
b) the Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year ended 31stMarch 2020 and of the profit of the Company for that period;
c) the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
d) the Directors had prepared the annual accounts on a going concern basis;
e) the Directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively;
f) the Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
The Company has been pro-active in following the principles and practices of goodCorporate Governance. The Company has taken adequate steps to ensure that the conditionsof Corporate Governance as stipulated in the Listing Regulations are complied with letterand spirit. A certificate issued by the auditors of the Company regarding compliance ofconditions of Corporate Governance is also annexed to this report. The matters relating toCorporate Governance as per the Listing Regulations are attached to this report. Themanagement's discussion and analysis report as required by the Listing Regulations is alsoannexed which forms part of this report.
CERTIFICATE FROM COMPANY SECRETARY IN PRATICE
L. Dhanamjaya Reddy Practicing Company Secretary has issued a certificate as requiredunder the Listing Regulations confi rming 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 with this section as Annexure-B.
BUSINESS RESPONSIBILITY REPORT
In terms of Regulation 34 of the Listing Regulations the Business ResponsibilityReport for the year 2019-20 describing the initiatives taken from an environment socialand governance perspectives in the prescribed format is given as Annexure-C to thisReport and is also available on the Company's website www.nelcast.com.
RELATED PARTY TRANSACTIONS
All transactions entered by the Company with related parties were in the ordinarycourse of the business and at Arm's Length basis. There are no materially significantrelated party transactions made by the Company with Promoters Key Managerial Personnel orother designated persons which may have potential conflict with interest of the Company atlarge. The details of the transactions with related parties are given in the financialstatements. The Related Party Transaction Policy is posted on the Company's websitewww.nelcast.com.
VIGIL MECHANISM/ WHISTLE BLOWER POLICY
The Company has adopted a Whistle Blower Policy to provide a formal mechanism to theDirectors and Employees to report their concerns about unethical behaviour actual orsuspected fraud or violation of the Company's Code of Conduct or ethics policy. The Policyprovides for adequate safeguards against victimization of employees who avail of themechanism and also provides direct access to the Chairman of the Audit Committee. It isaffirmed that no personnel of the Company have been denied access to the Audit Committee.
REMUNERATION POLICY OF THE COMPANY
The Company has adopted a Remuneration Policy for the Directors Key ManagerialPersonnel and other employees pursuant to Section 178(3) of the Companies Act 2013 andas per the Listing Regulations. The Company affi rms remuneration is as per theremuneration policy of the Company. The said policy is posted on the Company's websitewww.nelcast.com.
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 thereto excluding the information onemployees' particulars which is available for inspection by the members at the Registeredoffi ce 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 and the same will befurnished without any fee and at free of cost.
At the Annual General Meeting of the Company held on 3rd August 2017 M/s.K.Nagaraju & Associates Chartered Accountants (Firm Registration No.002270S) wereappointed as Statutory Auditors of the Company for a term of 5 (fi ve) consecutive yearsfrom conclusion of 35th Annual General Meeting till the conclusion of the 40thAnnual General Meeting. They have confi rmed that their appointment is in accordance withSection 139 read with Section 141 of the Companies Act 2013.
The Company has appointed M/s. L.D. Reddy & Co. Practicing Company Secretaries toconduct Secretarial Audit for the year 2019-20. The Secretarial Audit Report for thefinancial year ended 31st March 2020 is annexed with this report in Annexure-D.
As per Section 148 and other applicable provisions if any of the Companies Act 2013read with Companies (Audit & Auditors) Rules 2014 the Board of Directors of yourCompany has appointed M/s. Jayaram & Associates Cost Accountants as the Cost Auditorsof the Company for the year 2020-21 on the recommendations made by the Audit Committee.
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 systems andprocedures. The Audit Committee approves and reviews the internal audit plan for the year.
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-E.
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.
RISK MANAGEMENT POLICY
Risk Management is an essential element in achieving business goals and derivingbenefits from market opportunities while protecting the Company. The Company has anadequate Risk Management Policy commensurate with its size and operations. The RiskManagement Policy includes identifying types of risks and its assessment risk handlingmonitoring and reporting.
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-F. Further details ofcomposition of the Corporate Social Responsibility Committee and other details areprovided in the Corporate Governance Report which forms part of this report.
INTERNAL COMPLAINTS COMMITTEE
The Company has in place a policy for prevention prohibition and redressal againstsexual harassment of women at the workplace to protect women employees and enable them toreport sexual harassment at the workplace. An Internal Complaints Committee has also beenconstituted for this purpose. No complaints were received during the year.
PERFORMANCE EVALUATION OF THE BOARD ITS COMMITTEES AND DIRECTORS
Pursuant to the provisions of the Companies Act 2013 and under regulation 25 of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 during the yearthe Board has carried out an evaluation of its own performance performance of theDirectors as well as the evaluation of the working of its Committees.
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.
Areas on which the Committees of the Board were assessed included degree of fulfi lmentof key responsibilities adequacy of Committee composition and effectiveness of meetings.
The performance evaluation of the Independent Directors was carried out by the entireBoard excluding the Director being evaluated. The performance evaluation ofNon-Independent Directors was carried out by the Independent Directors who also reviewedthe performance of the Board as a whole. The Nomination and Remuneration Committee alsoreviewed the performance of the Board its Committees and of the Directors.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION RESEARCH AND DEVELOPMENT FOREIGNEXCHANGE EARNINGS AND OUTGO
The information pertaining to conservation of energy technology absorption researchand development foreign exchange earnings and outgo as required under Section 134(3)(m)of the Companies Act 2013 read with Rule 8(3) of the Companies (Accounts) Rules 2014 isgiven in the Annexure-G forming part of this Report.
The Directors place on record their sincere appreciation for the dedicated efforts ofthe employees and co-operation of associates suppliers and customers. We also express oursincere thanks to Company's Bankers namely State Bank of India Standard Chartered BankThe Hongkong and Shanghai Banking Corporation Ltd. Kotak Mahindra Bank Ltd. and HDFC BankLtd. for their trust and continued support.
| ||For and on behalf of the Board |
|Place: Chennai ||D. Sesha Reddy |
|Date : 19th June 2020 ||Chairman |