The Board of Directors hereby submits the report on the business and operations of your Company along with the audited financial statements for the financial year ended March 312020.
Summary of Financial Performance
Key highlights of the financial performance of the Company during the financial year ended March 312020 are as follows:
|( Rs in crores)|
|Depreciation and Amortization Expense||40.12||23.05|
|Profit Before Finance Cost and Tax||140.39||127.76|
|Profit Before Tax (PBT)||114.27||104.90|
|Total Comprehensive Income / (Losses)||-0.11||-0.44|
|Profit After Tax (PAT)||78.51||68.87|
|Transfer to General Reserve||15.00||15.00|
|Corporate Dividend Tax||5.02||4.36|
|Balance carried to Balance Sheet||338.17||285.36|
|Earnings per Share (Basic) (In H)||3.71||3.27|
Operational and Financial Performance
Despite the challenging business environment throughout the year your Company delivered a consistent performance throughout the preceding three quarters. The rapid pace of the unprecedented Coronavirus (Covid-19) outbreak in India followed by the countrywide lockdown unfortunately halted the run rate of the Company's performance in the last quarter just at a time when the business was poised for a quantum seasonal uplift. What was emerging as a continuation of the moderate growth slowed down in pace by the year end. Revenue from operations for the financial year 201920 was Rs 2061.82 crores higher by 10.6% over the previous year's revenue of Rs1864.40 crores. Earnings before Interest Depreciation and Tax increased by 20.13% at Rs180.36 crores as against Rs150.14 crores in the previous year. Depreciation was higher by 74.06% at Rs 40.12 crores as against Rs 23.05 crores during the previous year due to progressive capitalization and accounting of leased assets (Rights of Use Assets) under IND AS 116 implemented w.e.f. April 01 2019. The net Finance Cost without considering accounting of lease assets under IND AS 116 reduced by 7.57% at Rs 21.13 crores as against Rs 22.86 crores during the previous year. Profit After Tax for the year increased by 14% at Rs 78.51 crores as against Rs 68.87 crores in the previous year.
Digitisation: During the financial year under review your Company has started its ambitious journey of Digitisation of processes under the umbrella program titled e-Wings that denotes the wings of transformation to the new era. This journey is aimed to bring cultural change in the Company as all the projects under Digitisation are focused on improving the business efficiency and harness growth. The endeavour is to digitise all the business processes in order to build a much agile and best-in-class organisation.
Awards & Recognition
Your Company has been certified as a Great Place To Work in February 2020 for the period February 2020 to January 2021 by Great Place to Work Institute. This goes to prove the confidence all employees have in your Company and commends on the efforts taken by the management towards building an impeccable performance-based organization.
Your Company also emerged #1 among consumer durables brand in the Fortune Next500 companies during the financial year 2019-20.
Transfer to General Reserve
During the year under review the Company transferred Rs15 crores to the General Reserve of the Company.
Based on market capitalization as on March 31 2019 your Company falls under the top 500 listed companies as per the list published by the National Stock Exchange of India Limited (NSE) & BSE Limited (BSE). Accordingly pursuant to Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 as amended (Listing Regulations) the Board of Directors of your Company have adopted a Dividend Distribution Policy. The policy lays down in the interest of transparency to its shareholders a broad framework and factors which the Board would consider for deciding the distribution of dividend to its shareholders and/ or plough back of the profits into business operations of the Company. This policy forms part of this Report as Annexure - A and is available on the Company's website at https://www.orientelectric.com/images/ investors/dividend-distribution-Policy.pdf
Pursuant to the approval of the Board of Directors on January 28 2020 your Company paid an interim dividend of H0.65 per equity share of face value of Rs1 each to the shareholders who were on the register of members as on February 07 2020 being the record date fixed for this purpose.
The Board of Directors is pleased to recommend a final dividend of H0.50 per equity share of face value of Hi each for the financial year ended March 31 2020 subject to the approval of shareholders at the ensuing Annual General Meeting (AGM) to be held on August 07 2020. The total dividend for the financial year ended March 31 2020 aggregates to Rs1.15 per equity share of face value of Rs1 each.
The Register of Members and Share Transfer Books of the Company will remain closed from Saturday August 012020 to Friday August 07 2020 both days inclusive for determining the entitlement of the shareholders to the final dividend for the financial year ended March 31 2020 and for annual book closure.
Your Company has been consistently declaring dividends over the last three years. Dividend per share declared is in line with the Dividend Distribution Policy of the Company. Details of dividend(s) declared by the Company during the last three financial years is as follows:
Financial Year 2019-20
Financial Year 2018-19
Financial Year 2017-18
|Type of Dividend||Dividend per share (H)||Dividend paid / Payable ( Rs crores)||Dividend Distribution Tax ( Rs crores)||Dividend per share (H)||Dividend Paid ( Rs crores)||Dividend Distribution Tax ( Rs crores)||Dividend per share (H)||Dividend paid ( Rs crores)||Dividend Distribution Tax ( Rs crores)|
*Final Dividend for the financial year 2019-20 is subject to approval by shareholders in the ensuing AGM and will be paid to the entitled shareholders as on book closure date within stipulated timeline post approval by the shareholders at the AGM.
Representative Office in Dubai
With the objective to facilitate business in the Middle East and Africa for its products and also engaging in active business development of new geographies in the international markets the Company is maintaining a representative office (Branch Office) in Dubai Multi Commodity Centre free trade zone of Dubai.
Directors and Key Managerial Personnel
Based on the terms of appointment Non-Executive and NonIndependent Directors are subject to retirement by rotation. Mr. Chandra Kant Birla Non- Executive Director and Chairman of the Company who was appointed on January 19 2018 in the current term is liable to retire by rotation and being eligible offers himself for re-appointment. The Board of Directors recommends the re-appointment of Mr. Chandra Kant Birla as a Non- Executive Director liable to retire by rotation at the ensuing AGM of the Company.
His brief profile and other details as required under the provisions of the Companies Act 2013 (the Act) and Rules made thereunder Secretarial Standard issued by the Institute of Company Secretaries of India and Listing Regulations are provided in the Notice to the AGM.
During the year Mr. Desh Deepak Khetrapal Non-Executive Director of the Company has been re-designated as NonExecutive Vice Chairman of the Company with effect from October 22 2019.
Mr. Rakesh Khanna Managing Director & CEO Mr. Saibal Sengupta Chief Financial Officer and Mr. Hitesh Kumar Jain Company Secretary are the whole-time Key Managerial Personnel of the Company in terms of Section 203 of the Act.
Board of Directors and its committees
During the year under review the Company had six Directors on its Board comprising of Executive Non-Executive and Independent Directors including one Woman Independent Director. The Board has constituted following Committees as per regulatory requirements:
During the financial year 2019-20 five meetings of the Board of Directors were held. The gap between the two meetings was within the limits prescribed under the Act and Listing Regulations.
Composition of the Board and its Committees details of the terms of reference of the Committees and attendance of Directors in the meetings of the Board and Committees are provided in the Corporate Governance Report for the financial year 2019-20.
The Audit Committee as on March 31 2020 comprises of three Independent Directors and one Non-Executive NonIndependent Director. Details on the role and terms of reference of Audit Committee meetings held during the year etc. are provided in the section 'Board Committees' in the Corporate Governance Report which forms part of this Annual Report. During the year under review all recommendations made by the Audit Committee to the Board of Directors were accepted by the Board.
Director's Responsibility Statement
Pursuant to Section 134(3)(c) of the Act the Board of Directors to the best of their knowledge belief and ability confirm the following:
a. In the preparation of the Annual Accounts for the financial year ended March 31 2020 the applicable Accounting Standards have been followed along with proper explanation relating to material departures;
b. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;
c. The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d. The Directors have prepared these Annual Accounts on a going concern basis;
e. The Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
f. The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Declaration by Independent Directors
The Company has received necessary declarations from each Independent Director under Section 149 of the Act and Regulation 25 of the Listing Regulations confirming that he / she meets the criteria of independence laid down in Section 149 of the Act and Regulation 16(1)(b) of the Listing Regulations.
Independent Directors of the Company have got their name included in the data bank of Independent Directors being maintained by the Indian Institute of Corporate Affairs at Manesar notified under sub-section (1) of Section 150 of the Act as the Institute for the creation and maintenance of data bank of Independent Directors.
Familiarization Programme for Independent Directors
The Company believes that a Board which is well informed and familiarised with the Company its affairs and the industry which it belongs to can contribute significantly for effective discharge of its role of trusteeship in a manner that fulfils stakeholders' aspirations and societal expectations. In pursuit of this the Directors of the Company are updated on changes / developments in the domestic / global corporate and industry scenario including those pertaining to statutes / legislations & economic environment and on matters affecting the Company to enable them to take well informed and timely decisions.
Pursuant to Regulation 25(7) of Listing Regulations conducting familiarization programmes for the Directors in the Company is a continuous process whereby Directors are informed either through presentations at the Board or committee meetings board notes interactions or otherwise about industry outlook business operations future strategies business plans competitors market positions products & new launches internal and operational controls over financial reporting budgets analysis on the operations of the Company etc. Pursuant to Regulation 46 of Listing Regulations the details required are available on the website of your Company and can be accessed at the web link: https://www.orientelectric.com/images/investors/ familiarisation-programme.pdf.
Performance Evaluation of the Board its Committees and Individual Directors including Independent Directors
Pursuant to applicable provisions of the Act Listing Regulations and Directors' Performance Evaluation Policy the Board in consultation with its Nomination & Remuneration Committee has formulated a framework containing inter-alia the process format attributes and criteria for performance evaluation of the entire Board of the Company its Committees individual Directors including Independent Directors and the Chairman of the Board. The framework is monitored reviewed and updated by the Board in consultation with the Nomination and Remuneration Committee based on the need and new compliance requirements.
Evaluation of the Board and its Committees is based on various aspects of their functioning such as adequacy of the constitution and composition of the Board and its Committees matters addressed in the meetings processes followed at the meeting Board's focus regulatory compliances Corporate Governance etc. Similarly for evaluation of individual Director's performance various parameters like Director's profile contribution in Board and Committee meetings execution and performance of specific duties obligations regulatory compliances governance etc. are considered.
Further the performance of Chairman Non-Executive Directors Executive Directors and Independent Directors are evaluated on certain additional parameters depending upon their roles and responsibilities. For the Chairman the criteria includes demonstration of effective leadership contribution to the Board's work communication with the Board use of time and overall efficiency of Board meetings quality of discussions at the Board meetings process for setting Board agenda etc. For the Executive and Independent Directors preparedness at the Board meetings attendance at the Board meetings devotion of time and efforts to understand the Company and its business quality of contribution at the Board meetings application of knowledge and experience while considering the strategy effectiveness of follow-up in the areas of concern communication with Board Members Senior Management and Key Managerial Personnel etc.
Accordingly the annual performance evaluation of the Board its Committees and each Director including Independent Director was carried out for the financial year 2019-20 by the Board through a standard set of questionnaires and personal interaction. The Director being evaluated was not present during the discussion.
The Independent Directors had met separately on October 22 2019 without the presence of Non-Independent Directors and the members of Management and discussed inter-alia the performance of the Non-Independent Directors and the Board as a whole and the performance of the Chairman of the Company after taking into consideration the views of Executive and Non-Executive Directors. Nomination and Remuneration Committee annually reviews the implementation of performance evaluation criteria.
During the year under review the Company has not issued any new shares therefore there was no change in the Authorised Issued and Paid-Up share capital of the Company.
Orient Electric Employee Stock Option Scheme - 2019
During the financial year 2018-19 with the approval of its shareholders the Company had introduced 'Orient Electric Employee Stock Option Scheme-2019' (ESOP Scheme - 2019) as part of its Long Term Incentive Programme in line with growth objective of the Company and with the intention to attract motivate and retain high quality talent at the senior level. Under the ESOP Scheme - 2019 Stock Options can be granted to the eligible employees of the Company which upon exercise are convertible into an equal number of equity shares of the Company of the face value of Re. 1 each at a grant price to be decided by the Nomination and Remuneration Committee. The ESOP Scheme - 2019 is in line with SEBI (Share Based Employee Benefits) Regulations 2014 (ESOP Regulations) and Listing Regulations.
During the financial year 2019-20 the Board on the recommendation of the Nomination and Remuneration Committee granted 190443 new stock options to eligible employees. Further 145482 stock options granted earlier under the ESOP Scheme - 2019 of the Company were forfeited for the employee no more associated with the Company.
There is no change in the ESOP Scheme - 2019 during the financial year 2019-20. A certificate from the Auditors of the Company to the effect that the ESOP Scheme - 2019 is implemented in accordance with the ESOP Regulations and the resolutions passed by the shareholders would be available for inspection by the shareholders at the ensuing AGM. The details on ESOPs including those required as per Regulation 14 of ESOP Regulations are available on the website of the Company viz. http://www.orientelectric.com. Details of ESOPs are also available in the notes to accounts of the financial statements forming part of the Annual Report for the financial year 2019-20.
M/s S.R. Batliboi & Co. LLR Chartered Accountants (ICAI Firm Registration Number 301003E/ E300005) was appointed as the Statutory Auditor of the Company for a period of five years i.e. to hold office from the conclusion of the 1st AGM till the conclusion of 6th AGM of the Company to be held in the calendar year 2022. Pursuant to the Companies (Amendment) Act 2017 effective from May 7 2018 the requirement of ratification of appointment of Statutory Auditors by the shareholders of the Company at every AGM has been discontinued. The Company is accordingly not placing this matter for ratification before its shareholders at the forthcoming AGM.
Auditors' Report is unmodified i.e. it does not contain any reservation or qualification on the financial statement of the Company for the financial year 2019-20. Auditors Report is self-explanatory and therefore does not require further comments and explanation.
Pursuant to the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directors has on the recommendation of the Audit Committee appointed M/s A. K. Labh & Co. Practicing Company Secretaries (C.R No. 3238) as the Secretarial Auditor of the Company for the financial year 2020-21. Pursuant to Section 139 and 141 of the Act and relevant Rules prescribed thereunder the Company has received a certificate from the Secretarial Auditor inter- alia confirming that their appointment is within the limits laid down by the Act and rules made thereunder is as per the term provided under the Act they are not disqualified for being appointed as Secretarial Auditor under the provisions of applicable laws and also that there are no pending proceedings against them involving matters of professional misconduct.
The Secretarial Audit Report for the financial year 201920 is annexed as Annexure B and forms an integral part of this Report. There is no qualification reservation or adverse remark in the Secretarial Audit Report.
Annual Secretarial Compliance Report
The Company has undertaken an audit for the financial year 2019-20 for all applicable Securities and Exchange Board of India (SEBI) compliances as per circular dated February 08 2019 issued by SEBI. The Annual Secretarial Compliance Report issued by Mr. A. K. Labh (C.P No. 3238) Practicing Company Secretary for the financial year 2019-20 has been submitted to the Stock Exchanges within the prescribed time limit.
As per Section 148 of the Act read with Companies (Cost Records and Audit) Rules 2014 Mr. Somnath Mukherjee Cost Accountant in Practice (M. No. - 5343) has been appointed as the Cost Auditor for the financial year 2020-21 to conduct cost audit of the accounts made and maintained by the Company in respect of the various products prescribed under the applicable Cost Audit Rules. The remuneration of Cost Auditor has been approved by the Board of Directors on the recommendation of Audit Committee. The requisite resolution for ratification of remuneration of Cost Auditor by the shareholders of the Company has been set out in the Notice of ensuing AGM. The Cost Auditor has certified that their appointment is within the limits as prescribed under Section 141(3)(g) of the Act and that they are not disqualified from such appointment within the meaning of the said Act.
Reporting by Auditors under Section 143(12) of the Act
The Statutory Auditor and Secretarial Auditor of the Company have confirmed that during the course of their respective audits for the financial year 2019-20 they have not come across any event which could have indicated on commitment of any fraud by the officers or employees of the Company and therefore no reporting under Section 143(12) of the Act including rules made thereunder is applicable.
Management Discussion and Analysis Report
Management Discussion and Analysis Report as per Regulation 34 of the Listing Regulations for the year under review is presented in a separate section forming part of the Annual Report for the financial year 2019-20.
Maintaining high standards of Corporate Governance has been fundamental to the business of your Company since its inception. Corporate Governance is a process that aims to allocate corporate resources in a manner that maximizes value for all stakeholders i.e. the shareholders employees customers suppliers government authorities and the community at large and holds those at the helms to account by evaluating their decisions on transparency inclusivity equity and responsibility. Your Company has a rich legacy of ethical governance practices and is committed to transparency in all its dealings and places high emphasis on business ethics.
A separate report on Corporate Governance together with a Certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Regulation 34 of Listing Regulations is included in the Annual Report for the financial year 2019-20. A Certificate from the CEO and CFO of the Company in terms of Listing Regulations inter-alia confirming the correctness of the financial statements and cash flow statements adequacy of the internal control measures and reporting of matters to the Audit Committee is also annexed to the Corporate Government Report.
Business Responsibility Report
Regulation 34(2)(f) of the Listing Regulations mandates the inclusion of Business Responsibility Report (BRR) as part of the Annual Report for top 500 listed companies which was thereafter amended to top 1000 listed companies with effect from December 26 2019 based on market capitalization as on March 31 every year. Based on the market capitalization as on March 31 2019 your Company falls under top 500 listed companies as per the list of such listed companies published by NSE & BSE. In compliance with the Listing Regulations BRR of your Company for the financial year 2019-20 is included in the Annual Report.
Your Company strongly believes that sustainable and inclusive growth is possible by using the levers of environmental and social responsibility while setting aspirational targets and improving economic performance to ensure business continuity and rapid growth. Your Company is committed to leverage 'Alternative Thinking' to build competitive advantage in achieving high returns for the shareholders through customer centricity innovation good governance and inclusive human development while being sensitive to the environment.
Corporate Social Responsibility
Corporate Social Responsibility (CSR) of your Company portrays the deep symbiotic relationship that the Company enjoys with the communities it is engaged with. As a responsible corporate citizen the Company aims to contribute for social and economic development on a regular basis. The Company believes that in order to succeed an organization must maintain the highest standards of corporate behaviour not only towards its employees consumers and vendors but also towards the society in which it operates. The Company is of firm opinion that CSR underlines the objective of bringing about a difference and adding value in the stakeholder's lives.
CSR Committee has been formulated by your Company pursuant to the provisions of Section 135(1) of the Act. The Company has in place a CSR Policy in line with Section 135 of the Act read with Rules made thereunder and Schedule VII thereto. As per the policy the CSR activities are focused not just around the plants and offices of the Company but also in other geographies based on the needs of the communities. With its focus on driving positive change to enable communities and marginalized sections of the society to rise your Company's CSR initiatives are designed to support the constituencies of girls youth and tribals through the domains of education health and protection of national heritage art & culture. The CSR policy is available on the website of the Company and can be accessed through the web link: https://www.orientelectric.com/images/investors/ corporate-social-responsibility-policy.pdf.
During the year under review your Company spent Rs1.55 crores on CSR activities i.e. 2% of the average of the net profits of the Company for the past three financial years. In accordance with the provisions of Section 134(3)(o) of the Act and Rule 9 of the Companies (Corporate Social Responsibility) Rules 2014 a report on Corporate Social Responsibility covering brief extract of the CSR policy of the Company and the CSR projects undertaken during the financial year 201920 is annexed as Annexure - C to this Report.
Composition role and terms of reference of the CSR Committee are stated in the Corporate Governance Report forming part of this Annual Report.
Related Party Transactions
In line with the provisions of the Act and the Listing Regulations the Board has approved a policy on related party transactions which is available on the Company's website and can be accessed at the web link: https://www.orientelectric.com/images/investors/related- party-policy.pdf. The policy intends to ensure that proper reporting approval and disclosure processes are in place for all transactions between the Company and Related Parties.
All Related Party Transactions entered during the year under review were in the ordinary course of business operations of the Company and on arms' length basis. During the year the Company had not entered into any contract or arrangement with related parties which could be considered 'material' (i.e. transactions exceeding ten percent of the annual consolidated turnover as per the last audited financial statements entered into individually or taken together with previous transactions during the financial year) according to the policy of the Company on materiality of Related Party Transactions.
All Related Party Transactions are placed before the Audit Committee for review and approval. The Audit Committee of the Company has approved the criteria for granting omnibus approval for transactions with related parties within the overall framework of the related party Transaction Policy. Omnibus approval for transactions with Related Parties which are of repetitive nature and / or entered in the Ordinary Course of Business operations of the Company and are at arm's length basis are obtained as and when required. The approval of the Board and shareholders is also taken wherever such approval is required as per the provisions of Section 188 of the Act rules made thereunder Regulation 23 of the Listing Regulations and applicable Accounting Standards.
In terms of Section 188(1) of the Act and the rules made thereunder Form AOC-2 is annexed to this Report as Annexure - D. Shareholders may also refer to notes to the Financial Statements for details on Related Party Transactions.
Disclosure Under the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013
As per the requirement of The Sexual Harassment of Women at the Workplace (Prevention Prohibition and Redressal) Act 2013 (POSH) your Company has a robust mechanism in place to investigate and redress complaints if any reported under it as defined under the policy on prevention prohibition and redressal of sexual harassment of women at workplace of the Company. All employees (permanent contractual temporary trainees) are covered under this Policy. The Policy is gender neutral. The Company has complied with provisions relating to the constitution of the Internal Complaints Committee under POSH. The Internal Complaints Committee is composed of internal members and an external member who has extensive experience in the field.
During the course of the year several initiatives were undertaken to demonstrate the Company's zero tolerance philosophy against discrimination and sexual harassment which included creation of comprehensive and easy to understand training and communication material which were also made easily accessible. In addition workshops were also organized for the employees to enhance awareness and knowledge on sexual harassment and on other biases that may influence thinking and actions.
During the calendar year ended December 31 2019 one complaint with allegations of sexual harassment was filed with the Internal Complaint Committee which was disposed- off as per the provisions of POSH. Details as required to be disclosed under POSH including that of the said complaint are provided in the Corporate Governance Report which forms part of the Annual Report for the financial year 2019-20.
The present business environment has become increasingly volatile uncertain complex and ambiguous (VUCA) world-over with rapid changes in all domains potentially impacting the operating conditions. The ongoing pandemic outbreak has been an eye-opener for a never before anticipated risk that has thrown the entire national and global economy out of gear. These changes bring in new opportunities for your Company and also bring about multi-dimensional risks which need to be judiciously managed. Risk Management is thus an integral part of your Company's strategy. The Company proactively identifies potential risks and accordingly devise the short-term and long-term actions to mitigate any risk which could materially impact your Company's long-term goals.
Your Company has revisited and further strengthened the Enterprise Risk Management (ERM) framework and adopted an ERM policy based on globally recognized standards. The ERM framework is administered by the Risk Management Committee. The Chief Risk Officer of the Company identifies the risks based on discussions with functional heads which are affecting or may affect the operations of the Company and evaluates the risk management framework in consultation with the management of the Company. The ERM report prepared after analysis of identified risks is presented before the Risk Management Committee. The ERM report is also reviewed by the Audit Committee of the Company with the objective to ensure that the Company's internal controls and risk mitigation strategies are functioning effectively. The objective of the ERM framework is to enable and support the achievement of business objectives through risk-intelligent assessment apart from placing a significant focus on constantly identifying and mitigating risks within the business. The ERM Framework covers various categories of risks including inter alia information security and cyber security risks effectiveness of the controls that have been implemented to prevent such risks and continuous improvement of the systems and processes to mitigate such risks.
Your Company operates a wide range of processes and activities across all its operations covering strategy planning execution and performance management. Controls are built into every stage of the business process and are formalised and documented. The Company is actively pursuing the digital transformation of its activities and always embraces the advances in technology to help centralise and automate several controls into the transactional Information Technology systems.
Business risk assessment is a cross functional exercise involving leadership across the organisation to identify update and mitigate business risks. Each risk is assessed basis its probability of occurrence and the severity of impact.
Basis this assessment your Company classifies various risks into three major heads and accordingly decides the strategies to monitor manage and mitigate such risks- 1) High risk exposure requiring immediate attention; 2) Medium risk exposure requiring close monitoring; and 3) Low risk exposure. This comprehensive exercise ensures an effective risk culture across the organisation and an embedded approach to risk management. The Risk Management Committee periodically reviews the findings of the risk assessment exercise and the effectiveness of the management controls in place to mitigate the risk exposure. Your Company's Board of Directors through the Audit Committee and Risk Management Committee also periodically reviews the assessment of risks internal controls and disclosure controls and procedures in operation within your Company.
Risk likelihood measurement matrix:
|Score||Rating||Risk Likelihood of Occurrence|
|5||Expected / Almost Certain||Very high will be almost a routine feature every month / quarter within the immediate next twelve months|
|4||Likely||High may rise several times within the next twelve months|
|3||Possible||Possible may rise once or twice within twelve months|
|2||Unlikely||May occur once or twice between two to three years|
|1||Rare||Not likely almost impossible to occur between two to three years|
The details of Risk Management Committee its terms of reference number and frequency of meetings held during the financial year 2019-20 are included in the Corporate Governance Report which is an integral part of the Annual Report for the financial year 2019-20.
Internal Financial Controls and their Adequacy
The Act emphasizes the need for an effective Internal Financial Control system in the companies which should be adequate and shall operate effectively. Rule 8(5)(viii) of Companies (Accounts) Rules 2014 requires the information regarding adequacy of Internal Financial Controls with reference to the financial statements to be disclosed in the Board's Report.
The Company's internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Internal Auditors and cover all offices factories and key business areas. Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews adequacy and effectiveness of the Company's internal control environment and monitors the implementation of audit recommendations including those relating to strengthening of the Company's risk management policies and systems.
Your Company recognises that Internal Financial Controls cannot provide absolute assurance of achieving financial operational and compliance reporting objectives because of its inherent limitations. Also projections of any evaluation of the Internal Financial Controls to future periods are subject to the risk that the Internal Financial Control may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Accordingly regular audits rigorous follow-up actions and review processes ensure that such systems are reinforced on an ongoing basis.
Vigil Mechanism / Whistle Blower Policy
In line with the objective of strengthening the governance mechanism and to report to the Audit Committee instances of illegal or unethical practices unethical behaviour actual or suspected fraud or violation of the Company's code of conduct or ethics policy and as per the provisions of Section 177(9) and (10) of the Act and Regulation 22 of the Listing Regulations your Company has adopted a Vigil Mechanism through Whistle Blower Policy' (Policy). The Policy of the Company was amended to align with the requirements under Regulation 9A of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations 2015.
Under this Policy your Company encourages any Whistle Blower internal or external who has enough knowledge of any illegal or unethical practices unethical behaviour or malpractices being committed by any employee(s) of the Company to blow the whistle without fear of punishment or unfair treatment. He has the option to remain anonymous. Further your Company has prohibited discrimination retaliation or harassment of any kind against any employee who reports under the Vigil Mechanism or participates in the investigation. The mechanism provides adequate safeguards against victimization of Whistle Blower. Awareness of Policy is created through awareness sessions posters and mailers portraying the mechanism followed under the Policy.
The Company has provided a dedicated e-mail address for reporting such concerns. Alternatively the Whistle Blower can also send written communications to the Company. The employees are encouraged to voice their concerns by way of whistle blowing and all the employees have been given access to the Audit Committee. No personnel have been denied access to the Audit Committee pertaining to the Whistle Blower Policy.
The Company Secretary is the designated officer for effective implementation of the policy and handling the complaints registered under the policy. All cases registered under the Policy are reported to the Whistle Blower Committee and are subject to review by the Audit Committee and the Board.
The Whistle Blower Policy is available on the website of the Company and can be accessed through the web link: https://www.orientelectric.com/images/investors/whistle- blower-policy.pdf.
During the year under review two complaints were received under the Policy. The Whistle Blower Committee consisting of senior managerial personnel including Managing Director & CEO investigated the matter. Based on the investigation necessary disciplinary actions were taken against the employees who were found to be involved in the irregularities.
The complaints were disposed-off as per the provisions of the Policy and as of March 312020 no complaint was pending. The details and status of the said complaints were placed before the Audit Committee and Board of Directors of the Company.
Nomination and Remuneration Policy
Pursuant to the provisions of Section 178 of the Act and Listing Regulations your Company has adopted a Nomination & Remuneration Policy for selection and appointment of Directors including determining qualifications and independence of a Director Key Managerial Personnel and providing for their remuneration and that of the senior management personnel as part of its charter and other matters provided under the Act and Listing Regulations.
Pursuant to Section 134(3) of the Act the Nomination and Remuneration policy of the Company is available on the Company's website at https://www.orientelectric.com/ images/investors/Nomination-Remuneration-Policy.pdf.
The Company affirms that the remuneration paid to Directors during and for the financial year 2019-20 is in accordance with the Nomination and Remuneration Policy of the Company.
The Board approves remuneration of the Managing Director & CEO Key Managerial Personnel and the Senior Management Personnel on the recommendation of the Nomination and Remuneration Committee. The Nomination and Remuneration Committee also decides and recommends to the Board of Directors the remuneration in the form of commission apart from sitting fees for attending meetings of the Board and Committees thereof payable to the Non- Executive Directors.
Details of sitting fees paid to the Non-Executive Directors for attending meetings of the Board and Committees thereof along with the commission paid for the financial year 201920 are provided in the Corporate Governance Report annexed to the Annual Report for the financial year 2019-20.
Holding Subsidiary and Joint Venture Companies
During the financial year 2019-20 the Company had no holding subsidiary or joint venture company.
Particulars of Directors and Employees
The statement of disclosure on the remuneration of Directors and Key Managerial Personnel as per the provisions of Section 197 of the Act and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is appended as Annexure - E to this Report.
Compliance with Secretarial Standards
During the year under review your Company has complied with the respective mandatory Secretarial Standards issued by the Institute of Company Secretaries of India.
Particulars of Loans Guarantees and Investments
During the year under review your Company has not given any loans provided any guarantees / security and made investments that are covered under the provisions of Section 186 of the Act.
During the year under review your Company has not accepted any deposits from the public under Chapter V of the Act and as such no amount on account of principal or interest on deposits from public was outstanding as on March 312020.
Conservation of Energy Technology Absorption and Foreign Exchange Earnings & Outgo
The information pertaining to conservation of energy technology absorption foreign exchange earnings and outgo as required under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules 2014 is attached as Annexure - F and forms part of this Report.
Change in the Nature of Business of the Company
During the year under review there is no change in the nature of the business operations of the Company.
Material Changes During the year
During the year under review there was no material change in the business operations and the financial position of the Company. However due to operational challenges and consequent commercial disadvantages and considering the insignificant volume of production the Board approved the transfer of manufacturing operations from Guwahati plant to other manufacturing plants of the Company with effect from February 012020.
During the year under review your Company had for the purpose of setting up a manufacturing facility in the southern states of India purchased 23 acres of land in Hyderabad. The Company is in the process of setting up a manufacturing plant for its products in Hyderabad.
Material changes after the end of the year
There are no material changes and commitments affecting the financial positions of the Company that occurred after the close of the financial year to which the Financial Statements relate till the date of this Report. However the accelerated outbreak of Covid-19 across the globe and in India has substantially disrupted the economic activities with complete uncertainty. On March 11 2020 the Covid-19 outbreak was declared a global pandemic by the World Health Organisation (WHO). Consequent to this the Government of India declared countrywide lockdown on March 24 2020 which was further extended from time to time. To ensure the safety of its employees and workman and to contain the spread of Covid-19 the Company had temporarily shut down the operations at all its plants on March 23 2020 which has impacted the business activities of the Company. Based on Government's directives the Company has gradually started the operations at its plants and several depots across the country. Resumption of normal business operations completely is also dependent on future directives from the Government including future implications of the pandemic on the people and economy which is not known as of now and will be closely monitored by the Company to assess for any material implication on its financial performance. The management of the Company is constantly deliberating and taking all necessary actions to manage the situation in the best possible manner.
Investor Education and Protection Fund
During the year under review no share of the Company was liable to be transferred to the demat account of Investor Education and Protection Fund Authority (IEPF Authority) pursuant to Section 124(6) of the Act read with Investor Education and Protection Fund (Accounting Audit Transfer and Refund) Rules 2016 (IEPF Rules). In the past Company has transferred 557238 equity shares to the demat account of IEPF Authority. Corresponding dividend amount on the said shares required to be transferred during the financial year 2019-20 in the designated bank account of IEPF Authority has been transferred by the Company. Details of dividend amount so far remitted to IEPF are as follows:
|Financial Year||Type of Dividend||Dividend declared on||Amount Transferred to IEPF (In H)|
|2017-18||Interim Dividend||February 12 2018||278619.00|
|2017-18||Final Dividend||July 16 2018||278619.00|
|2018-19||Interim Dividend||January 28 2019||278619.00|
|2018-19||Final Dividend||July 16 2019||278619.00|
|2019-20||Interim Dividend||January 28 2020||362204.70|
Registrar and Share Transfer Agent
The Registrar and Share Transfer Agent (RTA) of the Company was changed to Kfin Technologies Private Limited (erstwhile Karvy Fintech Private Limited) from MCS Share Transfer Agent Limited effective from May 10 2019.
Extract of Annual Return
Pursuant to Section 134(3)(a) and Section 92(3) of the Act read with Rule 12(1) of the Companies (Management and Administration) Rules 2014 an extract of the Annual Return as on March 31 2020 in Form No. MGT-9 is attached as Annexure - G and forms part of this Report.
The Annual Return of the Company can also be accessed at the website of the Company at http://www.orientelectric. com/images/investors/Annual-Report-2019-20.pdf.
Significant and Material Orders Passed by any Regulators or Court
During the year under review no regulator or court has passed any significant and material orders impacting the going concern status of the Company and its future operations.
Appreciations and Acknowledgements
Your Directors take this opportunity to thank its customers shareholders suppliers bankers business partners/ associates financial institutions and Central and State Governments for their consistent support and encouragement to your Company. Your Directors also convey their sincere appreciation to all employees of your Company for their hard work and commitment. Their dedication and competence have ensured that your Company continues to be a significant and leading player in the industry.
|For and on behalf of the Board of Directors|
|For Orient Electric Limited|
|New Delhi||Chandra Kant Birla|