Panasonic Energy India Company Ltd.
|BSE: 504093||Sector: Consumer|
|NSE: LAKHNNATNL||ISIN Code: INE795A01017|
|BSE 00:00 | 04 Oct||266.15||
|NSE 05:30 | 01 Jan||Panasonic Energy India Company Ltd|
|Mkt Cap.(Rs cr)||200|
|Mkt Cap.(Rs cr)||199.61|
Panasonic Energy India Company Ltd. (LAKHNNATNL) - Director Report
Company director report
Your Directors have great pleasure to report you at the end of anotherchallenging year and presenting the 50th annual report together with theaudited financial statements for the year ended March 312022.
1. Financial Result Summary (jn Lakhs)
2. Transfer to Reserve
The Company does not propose to transfer any amount to the generalreserve out of the amount available for appropriation.
Keeping in view the current profitability of the Company yourDirectors are pleased to recommend payment of dividend of INR 7.50 per equity share (@ 75%at par value of INR 10.00 each) (previous year INR 8.00 per equity share) subject to theapproval of shareholders at the forthcoming Annual General Meeting. The dividend whenapproved will entail payment to shareholders of INR 562.50 lakhs. It will be tax freeincome in the hands of recipients till the amount of dividend does not exceed INR 5000.00.
4. Operational Review
The financial year 2021-22 was a year of recovery and stabilization ofbusiness activities post the COVID -19 pandemic. The overall markets operated normally formost of the year barring restricted lock downs and night curfews. The battery industry hadnormal business activity for most of the year. However the demand for batteries wasslightly subdued with the decreasing usage of batteries for special gadgets which were inhigh demand during last financial year. The year ended on a weaker note as a result ofthe sudden lockdown in March due to COVID-19 pandemic restricting the positive momentum inoverall sales which resulted in overall loss of sales and revenues against last year.
In the above situation during the year your Company registered netsales amount of INR 24151.56 lakhs as against INR 23235.49 lakhs of the previous year.
The profit before tax in the year stood at INR 1250.65 lakhs asagainst INR 1398.58 lakhs in the last year.
There was not much of a difference noticed in consumer preference andthe market continued to be focusing more on the economy priced batteries in the AA and AAAsegment due to the acute competition amongst various players to secure volumes. Howeverthe demand of premium batteries was slightly affected initially but gradually stabilizeddue to the price increase in this segment during the year. The demand of D size batterieshas been more or less stagnant.
The demand for premium batteries stabilized as the consumption of someof the high drain appliances dropped considerably post COVID-19 phase 2.
The prospect for Zinc Carbon dry batteries demand seems to be veryencouraging during the coming years one of the reason being the growing usage ofbatteries in portable devices as well as the robust Indian economy and government policiespromoting MAKE IN INDIA which is likely to generate more business opportunities. One ofthe reason being surge in demand for made in India batteries as a result of implementationof BIS 8144/2018 standard as a mandatory provision which shall make it difficult forimporters to buy inferior-low priced imported batteries which are without BIS marking.Secondly it is foreseen that many other industries such as electronic TV AC and set-topmanufacturing companies shall rely more on local make batteries vs. the Chinese batteries.
5. Change in Nature of Business
As reported last year there is no material change in the business.
6. Product Profile
The Company with its market share of about 15% in batteries has nowfocused its expansion into various other product range to leverage its overall salesquantity and turnover viz. Rechargeable batteries under the brand name of 'Eneloop'premium range of EVOLTA Alkaline batteries Lithium coins Zinc Air continues to grabfresh opportunities for advanced high drain new product introductions in the years tocome.
7. Management Discussion and Analysis Business Overview
India has emerged as one of the fastest growing major economy in theworld and is expected to be one of the top economic powers of the world over the next10-15 years backed by its strong democracy and partnerships.
The dry batteries demand is likely to find new segments which shallrequire Zinc Carbon Alkaline Lithium coins rechargeable Zinc Air batteries and yourCompany has the best resources to penetrate in the Indian market's evolving need with thecollaboration of Panasonic Corporation Japan.
Zinc Carbon batteries
Zinc Carbon batteries share of organized manufacturers is estimated tohave remained same with some minor fluctuations.
The market size of D size batteries was above average of last fewyears due to the increase in demand of water geysers. Maintaining its trend in financialyear 2021-22 also AA size continues to dominate the volume share andAAAsize continues tobe the growing segment.
Battery industry in India is dominated by Zinc Carbon batteries unlikein other parts of the world which is dominated by Alkaline battery market. Alkaline is acategory which is continuously showing an uptrend and indicates good future growth.
Alkaline batteries contribute 6% to 7% approximately of the totalbattery demand in India. However its contribution in terms of profit is considerablygood. Considering this your Company is aggressively concentrating its activities towardsimprovement of sales in this category by targeting new segments. Since the launch of'Evolta 'premium Alkaline batteries last year your company is focusing to satisfy the needof customers for a reliable anti-leak longer lasting batteries for their devices thoughits distribution amongst all trade channels.
In the financial year 2021-22 your Company registered more than doubledigit growth in the consumer channel markets. Your Company also envisages a sizeablebusiness in the forthcoming year in this segment.
Rechargeable battery market contributes around 1% to total batterydemand. This segment is dominated by imported low priced rechargeable batteries.
Your Company has successfully marked its presence in marketing andsales of high quality "Eneloop" brand of rechargeable batteries and chargers.
Dealers and consumers appreciate the quality and superiority of ourrechargeable batteries. Your Company maintained its dominance and marketshare in thiscategory.
Lithium coin batteries
The Lithium coin batteries usage in various applications is on thegrowth in India. Your Company has introduced new models in this segment over last coupleof years to serve the consumer needs and registered a significant revenue growth of about139% over last year.
Industry Structure and Development
Organized battery industry is maintaining the overall demand of R20.R14 ZnC segment in absence of new applications/ appliances has led to elimination ofmanufacturing in India in the organized sector.
However the Company foresees positive growth in the AAA segment as aresult of the gadgets using AAA batteries replacing usage of AA batteries. A steady shifttowards alkalization of Indian market is also likely to benefit in the years to come. TheCompany also witnessed growing trend of other categories of rechargeable cylindrical andlithium coin batteries.
Marketing and Distribution
The Company has also taken many steps to enhance its customer reach andwiden its distribution and coverage. In the modern trade segment also your Company hasinitiated activities to expand its presence in the market.
Your Company has been continuously making efforts not only tostrengthen its distribution network but also concentrating on improving the productivityof every member of its sales team through various training and educational programs.
Your Company will also continue its efforts to promote the brand"PANASONIC" and its products through various channels of advertising andpublicity for enhancing consumer awareness and its advantages over competition.
Opportunities and threats
Presently per capita consumption of batteries in India continues toremain low as compared with other developed countries. Batteries are the cheapest sourceof portable power and its consumption is always expected to grow as it is a product ofrecurring use. Changing usage patterns arrival of new appliances shift towardsminiaturization of appliances growing income levels and changing life style promisesgrowth especially inAA/AAAsize of batteries.
The fluctuating exchange rates increasing logistic costs spiralingfixed costs fluctuating zinc prices continue to give some uncertainty to the overallprofitability. Over and above the global uncertainties post COVID-19 and the recent warlike situation is further like to inflate the raw material costs shipping uncertaintiesand overall impact on the economies. It not only exerts more pressure on the pricing ofbatteries but also augments price competition giving lower operating margins.
Like the whole world your Company has also been dealing with theCOVID-19 crisis. The time tested ways of working have to be modified time and again inorder to prioritize the health and safety of our employees. Like . all other manufacturingorganizations maintaining the speed of production to meet the market demand whileensuring adherence to the precautionary safety measures and mandates has been a tight-ropewalk. However with the focus firmly on one of our core principles - Contribution toSociety we have been dealing with and tackling every new challenge that comes our way inorder to ensure that the consumers do not face any inconvenience due to shortage insupply.
Risks and Concerns
During FY 2021-22 the purchase prices of major materials have remainedupward vs. FY 2020-21. The average purchase prices of Zinc EMD NMD ACB Metal jacketsPVC Corrugation packaging & components Zinc chloride etc. stayed higher in FY2021-22 by around 110% to 150 % which have not only impacted the direct materials costbut also severely disrupted estimates on profits. Besides the weakening of INR vs. USD& tremendous increase in sea freight charges has caused additional burden on the rawmaterial imports.
The current trend of battery usage pattern in India is gradually movingin line with global trend. It is a positive sign and first step towards moving up with theglobal per capita consumption which at present is much higher than the per capitaconsumption in India. We also hope that the Indian consumers shall gradually move towardshigher end of batteries such as Alkaline Lithium coin and Rechargeable batteries whichshall generate additional revenues for your Company and strengthen its revenues in thecoming years.
Internal Financial Controls
The Company has an internal financial control system commensurate withthe size and scale of its operations. These controls are adequate and operatingeffectively so as to ensure orderly and efficient conduct of business operations.
The internal staff monitors and evaluates the adequacy of internalcontrol system in the Company its compliances with operating systems accountingprocedures and policies at all locations of the Company. Based on the reports the Companyundertakes corrective actions thereby strengthening the controls. Significantobservations and corrective actions thereon are presented to theAudit Committee for itsreview.
Development in the Human Resource and Industrial Relation
The Board wish to place on record its appreciation to all its employeesfor their sustained efforts and valuable contribution. Your Company is very much concernedfor the employees so as to provide them with safe and accident free environment with amotto "Safety First" at the work place. The total employee strength of theCompany as on March 312022 stood at 829.
Details of significant changes in key financial ratios
* Debtors turnover has effected due to decrease in Industrial sales dueto COVID-19.
* Operating profit margin Net profit margin & Return on net worthhas gone down due to increase in material cost.
* Previous period ratio changed in case of Inventory turnover ratioNet profit margin and return on net worth as calculation is made as perSchedule III.
Research & Development
We at Panasonic Energy India Company Ltd. aim for better quality ofhuman life and preservation of our planet. Recognizing that our Company is a member ofsociety we are contributing to a healthier and more prosperous community by way ofmanufacturing and selling complete range of eco-friendly batteries through elimination ofhazardous substances i.e. Lead (Pb) Mercury(Hg) and Cadmium(Cd) etc. Contributing inreduction of CO2 emission through energy conservation means. Implementing 3R concept"Reduce Re-use and Re-cycle". Our main business objective is Customer First& we always strive to deliver best quality & environmental friendly batteries thatoffer consistent performance by putting our best efforts through Research &Development and Empowered with Japanese technology.
8. Material changes and Commitments
There is no such material change and commitment affecting thefinancial position of the Company which have occurred between the end of the financialyear ended on March 312022 and the date of the report.
9. Corporate Governance
As per requirement of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 (hereinafter referred as "Listing Regulations")a separate section on corporate governance practices followed by the Company togetherwith a certificate from the Company Secretary in Practice confirming compliances forms anintegral part of this Report.
10. Annual Return
A copy of Annual Return as required under the Companies Act 2013 hasbeen placed on the Company's website viz.https://www.panasonicenergyindia.in
11. Board Meetings
Schedules of Board and Committee meetings are prepared and circulatedin advance to the Directors. During the year four Board Meetings and four Audit CommitteeMeetings were convened and held. The details of which are given in the CorporateGovernance Report. The intervening gap between the meetings was within the periodprescribed under the Companies Act 2013 and General Circular No. 11/2020 dated March242020.
12. Directors' Responsibility Statement
To the best of their knowledge and belief and according to theinformation and explanations obtained by them your Directors make the followingstatements in terms of Section 134(3)(c) of the CompaniesAct 2013:
(a) that in the preparation of the annual accounts for the year endedMarch 31 2022 the applicable accounting standards have been followed along with properexplanation relating to material departures if any;
(b) that the Directors had selected such accounting policies andapplied them consistently and made judgments and estimates that are reasonable and prudentso as to give a true and fair view of the state of affairs of the Company as at March312022 and of the profit and loss of the Company for the year ended on March 312022;
(c) that the Directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of theCompanies Act 2013 for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities;
(d) that the Directors had prepared the annual accounts on a goingconcern basis;
(e) that the Directors had laid down internal financial controls to befollowed by the Company and that such internal financial controls are adequate and wereoperating effectively; and
(f) that the Directors had devised proper systems to ensure compliancewith the provisions of all applicable laws and that such systems were adequate andoperating effectively.
13. Contracts and Arrangements with Related Parties
All transactions entered with related parties for the year under reviewwere in the ordinary course of business and on arm's length basis. Further there are nomaterial related party transactions during the year and thus a disclosure in FormAOC-2 interms of Section 134 of theAct is not required.
All related party transactions are placed before the Audit Committeefor approval. Omnibus approval was obtained on a yearly basis for transactions which areof repetitive nature. The policy on related party transactions as approved by the Board ofDirectors has been uploaded on the website of the Company viz.https://www.panasonicenergyindia.in
14. Conservation of Energy TechnologyAbsorption Foreign ExchangeEarnings and Outgo
The details of conservation of energy technology absorption foreignexchange earnings and outgo are annexed herewith. (Ref. "Annexure-A")
15. Risk Management
The Company has framed a risk management policy containing the elementsof various risks and implementation strategy to mitigate those risks. The risk managementframework is reviewed periodically by the Board.
16. Corporate Social Responsibility
During the year under review as part of its initiatives under CorporateSocial Responsibility (CSR) the Company has expanded its activities and participated inthe projects in the areas of health medical and education undertaken by various NGOs andTrusts. These projects are in accordance with Schedule VII of the Companies Act 2013.
During the year Company's obligation towards its CSR Policy was INR20.86 lakhs and the Company had distributed INR 21.00 lakhs to three outside implementingagencies operating in the area of health medical and education.
The Annual Report on CSR activities is annexed herewith. (Ref."Annexure-B")
17. Disclosure under the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal)Act 2013
The Company has in place a policy on prevention of sexual harassment inline with the requirements of the Sexual Harassment of Women at the Workplace (PreventionProhibition and Redressal)Act 2013.
Internal Complaints Committee (ICC) has been set up to redresscomplaints received regarding sexual harassment. All employees (permanent contractualtemporary trainees) are covered under this policy.
During the year no complaint was received by the Company and hence nocomplaints are outstanding as on March 312022forredressal.
18. Annual Evaluation by the Board
The Board has carried out an annual evaluation of its own performanceCommittees of the Board and individual Directors pursuant to the provisions of theCompanies Act 2013 and Listing Regulations. The Board of Directors expressed theirsatisfaction with the evaluation process.
19. Vigil Mechanism/Whistle Blower Policy
The Company has established a vigil mechanism for Directors andemployees and the same has been communicated to the Directors and employees of theCompany. The vigil mechanism policy/whistle blower policy is also posted on the website ofthe Company.
Mr. Tadasuke Hosoya had been appointed as Chairman & ManagingDirector of the Company with effect from April 012020 for a period of 2 years. Due tochange in his assignment Mr. Hosoya had to go back to Japan. Therefore the Board hadapproved the re-designation of Mr. Hosoya as Non-Executive Director (Promoter) effectivefrom January 012022.
After this Mr. Akinori Isomura had been appointed as Chairman &Managing Director of the Company for a period of two years effective from January 012022. The appointment of Mr. Isomura has already been approved by members by way of postalballot and by the Central Government as per requirement of Schedule V.
Mr. Mikio Morikawa had resigned from the Board due to change in hisassignment at Panasonic Corporation. The Board had placed its appreciation for theoutgoing Director.
The Company had received declarations from all Independent Directorsthat they meet the criteria of independence as laid down under Section 149(6) of theCompanies Act 2013 and requirements of Listing Regulations.
Mr. Tadasuke Hosoya will retire by rotation and being eligible offershimself for re-appointment.
As required by Regulation 36(3) of Listing Regulations the relevantdetails in respect of the Directors proposed to be appointed / re-appointed are set out inthe Corporate Governance Report forming part of the Board's Report. The Board recommendsall the resolutions placed before the members relating to appointment/re-appointment ofDirectors for their approval.
21. Committees of the Board
The Board of Directors have the following Committees:
2. Nomination and Remuneration Committee
3. Stakeholders' Relationship Committee
The details of the Committees along with their composition number ofmeetings held and attendance at the meetings are provided in the Corporate GovernanceReport.
22. Statutory Auditors
In accordance with the provisions of the Companies Act 2013 theshareholders had appointed M/s. BSR & Associates LLP Chartered Accountants asStatutory Auditors of the Company at the 45th Annual General Meeting held onAugust 102017 fora period of five years i.e. up to the conclusion of the 50thAnnual General Meeting to be held for the adoption of accounts for the financial yearending March 31 2022. There is no qualification or adverse remark inAuditors' report.
The first term of appointment of the StatutoryAuditors is ending at theconclusion of ensuing AGM. The Board has re-appointed M/s. BSR and Co. CharteredAccountants (a member entity of BSR &Affiliates) for a further period of fiveconsecutive years as StatutoryAuditors of the Company from the conclusion of the 50thAGM till the conclusion of the 55thAGM.
'M/s. BSR & Associates LLP' and 'M/s. BSR and Co.' both are part ofthe 'B S R& Affiliates' which is a network registered with the Institute of CharteredAccountants of India (ICAI). M/s. BSR and Co. have given their consent for theirappointment as Statutory Auditors of the Company and have issued certificate confirmingthat their appointment if made will be within the limits prescribed under the provisionsof Section 139 of the Companies Act 2013 ('the Act') and the rules made thereunder. Sinceboth the firms are registered with the same network this shall be treated as second termfor a further period of five consecutive years.
23. Cost Auditor and Cost Audit Report
On the recommendation of the Audit Committee M/s. Diwanji & Co.Cost and Management Accountants have been re-appointed as the Cost Auditor for thefinancial year 2022-23. In terms of the provisions of Section 148(3) of the Companies Act2013 read with the Companies (Audit and Auditors) Rules 2014 the remuneration payableto the CostAuditors has to be ratified by the Members of the Company.Accordingly theBoard seeks ratification at the ensuing Annual General Meeting for the remunerationpayable to the Cost Auditors for the financial year 2022-23.
Pursuant to the provisions of Section 204 of the Companies Act 2013and the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 theCompany has appointed M/s. J. J. Gandhi & Co. Practicing Company Secretaries toundertake the Secretarial Audit of the Company for the financial year 2022-23. There is noqualification or adverse remark in their report. The Report of the SecretarialAuditor isannexed herewith. (Ref. "Annexure-C")
Your Company does not have any subsidiary / subsidiaries within themeaning of the Companies Act 2013.
The Company has not accepted any fixed deposits and accordingly noamount was outstanding as on the date of the Balance Sheet.
27. Particulars of Loans Guarantees or Investments made under Section186 of the Companies Act 2013
There are no loans guarantees or investments covered under theprovisions of Section 186 of the Companies Act 2013.
28. Transfer to Investor Education and Protection Fund (IEPF)
As per Section 124(6) of the Act read with the IEPF Rules as amendedall the shares in respect of which dividend has remained unpaid / unclaimed for sevenconsecutive years or more have been transferred to an IEPF Account.
During the year the Company has transferred 2773 number of shares tothe IEPF AuthorityAccount.
29. Disclosure under Rule 5 of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014
Disclosures required under Section 197 of the Companies Act 2013 readwith Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 have been annexed herewith. (Ref. "Annexure-D")
30. Nomination & Remuneration Policy
The remuneration paid to the Directors Key Managerial Personnel andSenior Management Personnel are in accordance with the Nomination and Remuneration policy.The above policy has been posted on the website of the Company viz.https://panasonicenergyindia.in
31. Compliance with all the applicable laws of Secretarial Standards
During the year the Company has complied with all the applicableSecretarial Standards.
32. Significant and Material Orders passed by the Regulators or Courts
No significant and material order has been passed by the regulatorcourt tribunal statutory and quasijudicial body impacting the going concern status ofthe Company and its future operations.
Your Directors wish to place on record their appreciation of thecontribution made by employees at all levels to the continued growth and prosperity ofyour Company. Your Directors also wish to place on record their appreciation to theshareholders dealers distributors consumers and banks for their continued support.
Your Directors regret the loss suffered due to the COVID-19 pandemicand are always grateful and have immense respect for every person who risked their lifeand safety to fight this pandemic.