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Panasonic Energy India Company Ltd.

BSE: 504093 Sector: Consumer
NSE: LAKHNNATNL ISIN Code: INE795A01017
BSE 00:00 | 07 Aug 147.10 -1.85
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NSE 05:30 | 01 Jan Panasonic Energy India Company Ltd
OPEN 152.50
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VOLUME 4802
52-Week high 197.45
52-Week low 91.00
P/E 35.02
Mkt Cap.(Rs cr) 110
Buy Price 147.00
Buy Qty 50.00
Sell Price 147.10
Sell Qty 11.00
OPEN 152.50
CLOSE 148.95
VOLUME 4802
52-Week high 197.45
52-Week low 91.00
P/E 35.02
Mkt Cap.(Rs cr) 110
Buy Price 147.00
Buy Qty 50.00
Sell Price 147.10
Sell Qty 11.00

Panasonic Energy India Company Ltd. (LAKHNNATNL) - Director Report

Company director report

Dear Shareholders

Your Directors have great pleasure to report you at the end of anotherchallenging year and presenting the forty seventh annual report together with the auditedfinancial statement for the year ended March 31 2019.

1. Financial Results Summary

(र: in Lakhs)

Particulars As at March 31 2019 As at March 31 2018
Sales Turnover 20746.35 21083.24
Profit/(Loss) before tax 584.74 1367.87
Less: Provision for taxation (Net of deferred tax) 150.32 456.72
Less: Provision for taxation of earlier years (Net of refund/demand) (26.86) (68.59)
Profit/(Loss) after tax 461.28 979.74
Add: Profit brought forward from previous year 1155.01 671.75
Net available surplus for appropriation 1616.29 1651.49
Appropriations
Dividend paid during the year 525.00 412.50
Dividend Distribution Tax paid 107.93 83.98
Surplus carried to Balance Sheet 983.36 1155.01
1616.29 1651.49

2. Transfer to Reserve

The Company does not propose to transfer any amount to the generalreserve out of the amount available for appropriation.

3. Dividend

Keeping in view the current profitability of the Company yourDirectors are pleased to recommend payment of a dividend of र: 4.00 per equity share (@ 40%at par value of र: 10/- each) (previous year र: 7.00 per equity share) subject to theapproval of shareholders at the forthcoming Annual General Meeting. The dividend whenapproved will entail payment to shareholders of र: 361.67 lakhs. It will be tax freeincome in the hands of recipients. However the Company’s outflow towards dividenddistribution tax would be to the tune of र: 61.67 lakhs.

4. Operational Review

The fiscal year 2018-19 was quite stable for the battery industry. TheINR vs. USD remained weak throughout the year which had remained a cause of worry.

In the above situation during the year your Company registered a netsales amount of र: 20746.35 lakhs as against

` 21083.24 lakhs of the previous year.

The profit before tax in the year stood at र: 584.74 lakhs as against र:1367.87 lakhs in the last year.

Batteries and Flashlights

The market seemed to be focusing more on the economy priced batteriesin the AA and AAA segment due to the acute competition amongst various players to securevolumes impacting the overall revenue and profitability.

Flash light market continued to slide due to the focus shifting towardslow priced rechargeable torches coupled with low demand for LED torches which resulted ina decrease of the flashlight sales. However your Company could achieve 105% revenue v/sthe previous year.

Prospects

The prospect for the dry batteries demand seems to be going good oneof the reason being implementation of BIS 8144/2018 standard as a mandatory provision(from May 2019) which shall make it difficult for importers to buy inferior-low pricedbatteries which are without BIS marking.

Your Company registered a growth in revenue towards the sale of ZincCarbon dry batteries. Sales of Alkaline batteries Lithium coins and Eneloop rechargeablebatteries also continued to grow over the last year and are likely to maintain theirupward trend in the coming years. Implementation of new sales/marketing techniques andstrategies during the year are likely to enhance the sale performance of Zinc Carbon drybattery.

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 19% in Zinc Carbonbatteries has now focused its expansion into various other product range to leverage itsoverall sales quantity and turnover viz. Rechargeable batteries under the brand name of‘Eneloop’ range of Alkaline batteries Lithium coins LED and elite white rangeof torches.

7. Management Discussion and Analysis Business Overview

Increase in disposable income in the rural India and low penetrationlevels in the rural market offer room for growth. FMCG urban segment is expected to have asteady revenue growth at 8% in FY 2019. Post GST and demonetization modern trade sharegrew to 10% of the overall FMCG revenue during 1st half of last Fiscal year.Demand of quality goods and services have been going up in rural areas of India majorreasons being improved distribution channels growing awareness easier access andimproved standard of living. The focus on agriculture MSMEs education healthcareinfrastructure and tax rebate under Union Budget 2019-20 is expected to directly impactthe FMCG sector. These initiatives are expected to increase the disposable income in thehands of the common people especially in the rural area which will be beneficial for thegrowth of sector.

Further the focus of your Company on improving its direct reach andpromotion strategy would be a major supporter of its recovery and improved market share.

Zinc carbon batteries

Zinc carbon share of organized manufacturers is estimated to haveremained same with some minor fluctuations. Your Company has successfully maintained itsmarket share. Significant factor which has affected the sales turnover is the shift inconsumer preference from high value D size batteries towards low priced AA / AAA sizebatteries due to change in usage pattern in various appliances. Maintaining its trend infinancial year 2018-19 also market share of D size batteries continues to drop AA sizecontinues to dominate the volume share and AAA size continues to be fast-growing segment.

Alkaline batteries

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 for future growth.

Alkaline batteries contribute only 4-5% of the total battery demand inIndia. However its contribution in terms of profit value amounts to be in double digits.Considering this your Company is aggressively concentrating its activities towardsimprovement of sales in this category.

In the financial year 2018-19 your Company registered more than doubledigit growth in the consumer channel markets and has in the second consecutive yearsuccessfully clinched orders of Alkaline AA for the Electronic Voting Machine (EVM) whichhave been successfully executed. Your Company also envisages a sizeable business in theforthcoming year in this segment.

Flashlights

Flashlight market is shared equally by organized and unorganizedsectors. There is a visible significant shift from LED (battery operated) torches to lowpriced Rechargeable torches. Another aspect stalling the growth of this segment is thecontinuously improving electrification across the country hence reducing the usage ofportable torches by common man.

Rechargeable batteries

Rechargeable battery market is stagnant and contributes around 1% tototal battery demand. This segment is dominated by imported low priced rechargeablebatteries.

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 registered a good growth of about 137% in terms ofrevenues year on year.

Industry Structure and Development

Organized battery industry continues to witness slowdown of R20 and R14segment in absence of new applications / appliances which consume these segment ofproducts.

However the Company foresees positive growth in the AAA segment inlieu 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.

Your Company shall continue its efforts in this direction to enhanceexports.

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.

Your Company is also pleased to inform that it continued variouspromotional activities through television commercials cinema advertisements as well aselectronic media; endorsed by Olympic Silver Medalist Badminton player Ms. P. V. Sindhufor promoting the ‘Panasonic brand of Alkaline batteries’ in the financial year2018-19 and is likely to continue this campaign in financial year 2019-20.

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 training and educational programs.

Opportunities and threats

Opportunities

Presently per capita consumption of batteries in India continues toremain quite low as compared to other developed countries. Batteries are the cheapestsource of portable power and its consumption is always expected to grow as it is a productof recurring use. Changing usage patterns arrival of new appliances shift towardsminiaturization of appliances growing income levels and changing life style promisesgrowth especially in AA/AAA size of batteries.

Threats

The stronger dollar and the fluctuating Zinc prices continue to givesome uncertainty to the overall profitability. It not only exerts more pressure on thepricing of economy range of batteries but also augments price competition giving loweroperating margins.

Risks and Concerns

During FY 2018-19 the average prices of major materials have remainedupward vs. FY 2017-18.

The average prices of NMD EMD ACB tin plates metal components zincchloride etc. stayed higher in FY 2018-19 from around 102% to 143% which have not onlyimpacted the direct materials cost but also severely disrupted estimates on profits.

Besides the weakening of INR vs. USD has caused additional burden onthe imports.

Outlook

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 and Rechargeable batteries which shall generateadditional revenues for your Company and strengthen its revenues in the coming 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 the Audit Committee for itsreview.

Development in 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 31 2019 stood at 848.

Details of significant changes in key financial ratios

Sr. No. Ratio analysis 2018-19 2017-18
1 *Debtors Turnover 5.64 times 3.53 times
2 Inventory Turnover 9.60 times 9.27 times
3 Interest Coverage Ratio - -
4 Current Ratio 3.94:1 3.68:1
5 Debt Equity Ratio - -
6 *Operating Profit Margin(%) 0.8% 4.7%
7 *Net Profit Margin (%) 2.2% 4.6%
8 *Return on Net Worth 4.57% 9.55%

1. Debtors turnover has improved due to discontinuation of OEM(Original Equipment Manufacturer) customers and implementation of stringent credit policy.

2. Operating profit margin has gone down due to increase in materialcost on account of weakening of Indian rupee.

3. Net profit margin has reduced due to increase in material cost onaccount of weakening of Indian rupee.

4. Return on Net worth has reduced due to low profit on account ofincrease in material cost due to weakening of Indian rupee.

Research & Development

In order to comply with the guidelines provided by PanasonicCorporation regarding contribution to the society in order to improve the environmentyour Company has introduced all types of zinc carbon products with eco-friendly featuresby removing four more heavy metals from not only such batteries but also from the rawmaterials.

This will not only help promoting the healthy environment but will alsohelp your Company to increase its export by qualifying to international standard ofquality and trade.

8. 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.

9. Extract of Annual Return

The details forming part of the extract of the Annual Return in FormMGT- 9 are annexed herewith. (Ref. "Annexure-A")

10. 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.

11. 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 Companies Act 2013;

(a) that in the preparation of the annual accounts for the yearended March 31 2019 the applicable accounting standards have been followed along withproper explanation 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 March 312019 and of the profit and loss of the Company for the year ended on that date;

(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 in the case of a listed Company had laiddown internal financial controls to be followed by the Company and that such internalfinancial controls are adequate and were operating effectively; and

(f) that the Directors had devised proper systems to ensurecompliance with the provisions of all applicable laws and that such systems were adequateand operating effectively.

12. 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 areno material related party transactions during the year and thus a disclosure in Form AOC-2in terms of Section 134 of the Act 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/pdf/Related_Party%20_Transaction%20_Policy.pdf

13. Conservation of Energy Technology Absorption Foreign ExchangeEarnings and Outgo

The details of conservation of energy technology absorption foreignexchange earnings and outgo are annexed herewith. (Ref. "Annexure-B")

14. 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.

15. Corporate Social Responsibility

During the year under review as part of its initiatives underCorporate Social Responsibility (CSR) the Company has expanded its activities andparticipated in the projects in the areas of health hygiene medical and educationundertaken by various NGOs and trusts. These projects are in accordance with Schedule VIIof the Companies Act 2013. The Annual Report on CSR activities is annexed herewith. (Ref."Annexure-C")

16. Disclosure under the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013

The Company has constituted an Internal Complaint Committee in linewith the requirements of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 for consideration and redressal of complaints. Nocomplaints have been received from any employee during the financial year 2018-19 andhence no complaints are outstanding as on March 31 2019 for redressal.

17. Annual Evaluation by the Board

Pursuant to the amendments in the Companies Act 2013 and ListingRegulations the Board has amended the Nomination and Remuneration Policy. The Board hascarried out an annual performance evaluation of its own performance the Directorsindividually as well as the evaluation of the working of its Committees. The Board ofDirectors expressed their satisfaction with the evaluation process.

18. 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 the Companyand the same is also posted on the website of the Company.

19. Directors

Appointment/ Re-appointment

During the year under review Mr. Tadasuke Hosoya has been inducted onthe Board as Executive Director for a period of three years w.e.f. Sepetember 2018 andMr. Hideyuki Okunaga has been appointed as Non-Executive Director (Promoter) effectivefrom June 01 2019.

Mr. Mikio Morikawa will retire by rotation and being eligible offershimself for re-appointment. On the recommendation of Nomination & RemunerationCommittee the Board has re-appointed Mr. Morikawa as Chairman & Managing Director fora further period of three years effective from October 01 2019.

Ms. Geeta Goradia is completing her tenure as an Independent Director.On the basis of performance evaluation done by the Board the Board has re-appointed Ms.Geeta Goradia as an Independent Director for a further period of five years from July 282019.

Mr. Atul Dalmia and Mr. Mayur Swadia will be completing their tenure asIndependent Directors. On the basis of performance evaluation done by the Board the Boardhas re-appointed Mr. Atul Dalmia and Mr. Mayur Swadia as Independent Directors for afurther period of five years from October 29 2019.

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.

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 Boardrecommends all the resolutions placed before the members relating to appointment /re-appointment of Directors for their approval.

Cessation

Mr. Motoaki Shimamura Mr. Kazuo Tadanobu and Mr. Toshihiro Nakamurahad resigned from the Board due to change in their assignments at Panasonic Corporation.Mr. Gautam Punj had completed his tenure of five years as an Independent Director. TheBoard had placed its appreciation for all the outgoing Directors.

20. Committees of the Board

The Board of Directors have the following Committees:

1. Audit Committee

2. Nomination and Remuneration Committee

3. Stakeholders’ Relationship Committee

4. Corporate Social Responsibility Committee.

The details of the Committees along with their composition number ofmeetings and attendance at the meetings are provided in the Corporate Governance Report.

21. Statutory Auditors

In accordance with the provisions of the Companies Act 2013 at the 45thAnnual General Meeting held on August 10 2017 the shareholders had appointed M/s B S R& Associates LLP as Statutory Auditors of the Company for a period of 5 years i.e.up to the conclusion of 50th Annual General Meeting to be held for the adoptionof accounts for the financial year ending March 31 2022. As the Companies (Amendment)Act 2017 has done away with the requirement of ratification at every Annual GeneralMeeting no ratification for the appointment is required. There is no qualification oradverse remark in Auditors’ report.

22. Cost Auditor and Cost Audit Report

On the recommendation of the Audit Committee M/s. Diwanji & Co.Cost Accountants have been re-appointed as the Cost Auditor for the financial year2019-20. In terms of the provisions of Section 148(3) of the Companies Act 2013 readwith the Companies (Audit and Auditors) Rules 2014 the remuneration payable to the CostAuditors has to be ratified by the Members of the Company. Accordingly the Board seeksratification at the ensuing Annual General Meeting for the remuneration payable to theCost Auditors for the financial year 2019-20.

23. Secretarial Auditor

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. Practising Company Secretaries toundertake the Secretarial Audit of the Company for the financial year 2019-20. There is noqualification or adverse remark in their report. The Report of the Secretarial Auditor isannexed herewith. (Ref. "Annexure-D")

24. Subsidiaries

Your Company does not have any subsidiary / subsidiaries within themeaning of the Companies Act 2013.

25. Deposits

The Company has not accepted any fixed deposits and accordingly noamount was outstanding as on the date of the Balance Sheet.

26. 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.

27. 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 IEPF Account.

28. Disclosure under Rule 5 of Companies (Appointment &Remuneration) Rules 2014

Disclosures required under Section 197 of the Companies Act 2013 readwith Rule 5 of Companies (Appointment

& Remuneration) Rules 2014 have been annexed herewith. (Ref."Annexure-E")

29. Nomination & Remuneration Policy

The Board has on the recommendation of the Nomination and RemunerationCommittee revised a policy for selection and appointment of Directors Key ManagerialPersonnel and Senior Management Personnel and their remuneration. The remuneration paid tothe Directors is in accordance with the Nomination and Remuneration Policy. The abovepolicy has been posted on the website of the Company viz.https://www.panasonicenergyindia.in/ pdf/Nomination_and_Remuneration_Policy.pdf

30. Compliance with all the applicable laws of Secretarial Standards

During the year the Company has complied with all the applicableSecretarial Standards.

31. Significant and Material Orders passed by the Regulators or Courts

No significant and material order has been passed by the regulatorcourt tribunal statutory and quasi-judicial body impacting the going concern status ofthe Company and its future operations.

Summary of cases under the Competition Act 2002

Date of Order Authority Parties Involved Order
April 19 2018 CCI* Eveready Industries India Ltd. Indo National Ltd. The CCI concluded that the Company and
respective parties had indulged in anticompetitive conduct with Section 3(3) of the Competition Act 2002 (Act).
The Association of Indian Dry Cell Manufacturer.
Panasonic Energy India Co. Ltd.
August 30 2018 CCI Geep Industries (India) Private Limited CCI decided to impose a penalty on all the parties and their respective individuals. In respect of the Company and its individuals the CCI granted 100 percent reduction in penalty
Panasonic Energy India Co. Ltd.
January 15 2019 CCI Godrej and Boyce Manufacturing Co. Limited by invoking the provisions of Section 46 of the Act read with the Competition Commission of India (Lesser Penalty) Regulations 2009 (Lesser Penalty Regulations). Resultantly no penalty was imposed on the Company and its individuals.
Panasonic Energy India Co. Ltd. The decision so mentioned above was appealed by respective parties before NCLAT.

* Competition Commission of India (CCI)

In the case pertaining to alleged cartelization in the market forflashlights in India the CCI passed a final order on November 6 2018 observing thatthere was no violation of Section 3(3)(a) of the Act. The CCI held that the evidence wasnot sufficient to conclude a violation under the Act.

32. Acknowledgment

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.

For and on behalf of the Board
Vadodara Mikio Morikawa
May 29 2019 Chairman & Managing Director