Your Directors are pleased to present the 57th Annual Report of the Companytogether with the audited financial statements of the Company for the year ended December31 2019.
| || ||(Rs. in million) |
|Particulars ||2019 ||2018 |
|REVENUES ||43606.3 ||45615.1 |
|EBITDA* ||6460.8 ||7585.4 |
|Less: Depreciation ||1587.1 ||1485.0 |
|Less: Finance cost ||34.7 ||70.4 |
|Add: Interest Income ||507.2 ||719.0 |
|PROFIT BEFORE TAX || || |
|(before exceptional items) ||5346.2 ||6749.0 |
|Provision for Tax ||1666.4 ||2119.0 |
|PROFIT AFTER TAX ||3676.4 ||4198.0 |
* Earnings before Interest Tax Depreciation and Amortization
Financial and Operational Performance
Performance of the Company and State of Company's Affairs
Your Company's Revenues was at Rs.43606.3 million in year 2019 (Year 2018: Rs.45615.1million) which is marginally lower by 4.4%. Profit before tax (before exceptional items)was placed at Rs.5346.2 million (Year 2018: Rs.6749.0 million) down by 20.8%. YourCompany recorded profit after tax of Rs.3676.4 million (Year 2018: Rs.4198.0 million)which represent a decline of 12.4%.
IMF expects global economy to grow and reach levels of 3.3% in 2020 and 3.4% in 2021.Easing monetary policy stronger cross-border cooperation and implementation of supportivefiscal policies aimed at boosting demand could drive improvement in global activity.
India's GDP is estimated to touch 11 - year lows of 5.0% in 2019-20 (Source: NationalStatistical Office). This slowdown is a combined outcome factors such as deceleration inconsumption subdued investments sluggish growth in manufacturing sector and decliningcredit growth.
Dividend and Transfer to Reserves
Your Company has a steady dividend payment history and considering the financialperformance of the year 2019 your Directors recommend dividend for the year endedDecember 31 2019 at the rate of Rs.35/- (2018: Rs.30/- including a one time specialdividend of Rs.10/-) per equity share amounting to Rs.1094.1 million (2018: Rs.937.8million). Considering sufficiency of balance your Directors do not
propose to transfer any amount to General Reserves for the year under review.
Management Discussion and Analysis
Pursuant to Regulation 34 read with Schedule V of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 detailed reviewof operations performance and future outlook of the Company is covered under ManagementDiscussion & Analysis section of the Annual Report.
A separate section on Corporate Governance is included in the Annual Report and thecertificate from M/s. Samdani Kabra & Associates Company Secretaries the Company'sSecretarial Auditors confirming the compliance of conditions on Corporate Governance isannexed thereto.
Mr. Dharmesh Arora [DIN: 05350121] has resigned from the position of Managing Directorof the Company effective September 30 2019. However he continues to be Non-executiveDirector liable to retire by rotation effective October 1 2019.
Your Directors express their gratitude for the contribution made by Mr. Arora duringhis tenure as Managing Director.
Mr. Harsha Kadam [DIN: 07736005] has been appointed as an Additional Director andManaging Director with effect from October 1 2019. Mr. Arvind Balaji [DIN: 00557711] hasbeen appointed as an Additional Director (Independent Director) effective November 6 2019and Mr. Amit Kalyani [DIN: 00089430] has been appointed as an Additional Director(Independent Director) effective February 11 2020.
Your Company has received notices for their candidature for the office of Director(s)under Section 160 of the Companies Act 2013. The Nomination and Remuneration Committeeand the Board of Directors recommend their appointment as Directors of the Company. Mr.Harsha Kadam shall not be liable to retire by rotation by virtue of his employmentagreement with the Company. Mr. Arvind Balaji and Mr. Amit Kalyani have been appointed asIndependent Directors for a term of five years and therefore they are not liable toretire by rotation.
Further Mrs. Renu Challu [DIN: 00157204] has been reappointed for second term of fiveyears as an Independent Director effective November 6 2019.
The Company has received the approval on March 24 2019 by way of Postal Ballot forcontinuation of Directorship of Mr. Avinash Gandhi [DIN: 00161107] aged 80 years asNon-executive Independent Director of the Company from April 1 2019 till the conclusionof his present tenure as an Independent Director that is up to February 6 2023.
Mr. Satish Patel [DIN: 00690869] has been appointed as an Additional Director andWhole-time Director designated as Director-Finance & CFO effective February 13 2019for a period of five years upto February 12 2024 at the 56th AGM held on April30 2019 liable to retire by rotation.
Dr. Sanak Mishra [DIN: 00027288] and Mr. Rakesh Jinsi [DIN: 00182187] completed theirterm of appointment as Independent Directors on November 5 2019 and February 10 2020respectively. Your Directors express their gratitude for the contribution made by Dr.Mishra and Mr. Jinsi during their tenure as Independent Directors.
Mr. Marcus Eisenhuth [DIN: 07904850] resigned from the Directorship effective February14 2019. Your Directors express their gratitude for the contribution made by Mr.Eisenhuth during his tenure as Director.
In accordance with the provisions of Section 152 of the Companies Act 2013 Mr. R.Sampath Kumar [DIN: 00495192] and Mr. Jurgen Ziegler [DIN: 07092477] will retire byrotation at the ensuing Annual General Meeting (AGM') and being eligible offerthemselves for reappointment.
A brief resume of the Directors seeking appointment or reappointment at the ensuingAnnual General Meeting nature of their expertise in specific functional areas and detailsregarding the companies in which they hold directorship membership/chairmanship ofcommittees of the Board is annexed to the Notice convening 57th Annual GeneralMeeting of the Company.
Key Managerial Personnel (KMP)
Pursuant to provisions of Sections 2(51) and 203 of Companies Act 2013 read with Rule8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014following persons are acting as Key Managerial Personnel of the Company:
1. Managing Director & Chief Executive Officer:
Mr. Harsha Kadam
2. Director-Finance & Chief Financial Officer: Mr. Satish Patel
3. Company Secretary: Mr. Chirag K. Shukla
During the year Mr. Dharmesh Arora has resigned as Managing Director of the Companyeffective from September 30 2019 and Mr. Harsha Kadam has been appointed as ManagingDirector of the Company effective October 1 2019.
Mr. Chirag K. Shukla has resigned from the position of the Company Secretary effectiveFebruary 28 2020 and Mr. Ashish Tiwari VP - Legal has been appointed as the CompanySecretary of the Company effective February 29 2020.
Based on the declarations received from the Independent Directors your Board ofDirectors confirm the independence integrity expertise and experience (including theproficiency) of the Independent Directors of the Company.
However as per regulatory requirements time limit to pass the online proficiencyself-assessment test is upto one year from the date of inclusion of an IndependentDirector's name in Databank for Independent Directors.
Meetings of Board of Directors
During the year under review four meetings of the Board of Directors were held onFebruary 13 2019 April 30 2019 July 23 2019 and October 21 2019. The details ofattendance of each Director at these meetings are provided in the Corporate GovernanceReport.
Policy on Nomination and Remuneration
The Company's Policy on Nomination and Remuneration is framed with objectives as under:
1. To formulate criteria and advise the Board in matters of determining qualificationscompetencies positive attributes and independence of Directors and policies relating totheir appointment and removal;
2. To review corporate goals and objectives to set norms of performance evaluation andto lay out remuneration principles for Directors KMP and Senior Management linked totheir effort performance and contribution towards achievement of organisational goals;
3. To evaluate performance and give recommendations to the Board on remunerationpayable to the Directors KMP and Senior Management; and
4. To review and recommend to the Board measures to retain and motivate talentincluding KMP and Senior Management Personnel with a view to ensuring long-termsustainability and competitiveness of the organisation.
Nomination and Appointment of Directors and Senior Management Criteria andQualification
A person to be appointed as Director KMP or at Senior Management level should possessadequate relevant qualification expertise and experience for the position that he/she isbeing considered. The Nomination and Remuneration Committee (NRC) evaluates whetherqualification expertise and experience possessed by a person is sufficient/satisfactoryfor the concerned position and makes appropriate recommendations to the Board ofDirectors.
Policy on Remuneration
1. The remuneration (including revisions) of Directors is recommended by NRC to theBoard for its approval. The remuneration (including revisions) of the Directors sorecommended by NRC to the Board should be within the limits specified under the CompaniesAct 2013 read with the Rules thereunder and as approved by the shareholders of theCompany.
2. None of the Directors (including Independent Directors) shall be entitled to anystock option of the Company.
3. While determining remuneration of KMP Senior Management Personnel and otheremployees the Company encourages and rewards-merit and superior performance. Theobjective is to set the total remuneration at levels to attract motivate and retainhigh-calibre and high potential personnel in a competitive global market.
The Nomination and Remuneration Policy of the Company is disclosed on the website athttps://www.schaeffler.co.in/remotemedien/media/_shared_media_rwd/03_worldwide_1/websites_worldwide/india_3/investor_relations/corporate_governance_1/codes_and_policies/nomination_and_ remuneration_policy_schaeffler_india.pdf
Formal Annual Evaluation
Your Company believes that systematic evaluation contributes significantly to improvedperformance at three levels; Organisational Board and Individual Board Member. Itencourages the leadership teamwork accountability decision-making communication andefficiency of the Board. Evaluation also ensures teamwork by creating better understandingof Board dynamics board-management relations and thinking as a group within the board.
The evaluation is done as per the process and criteria of performance evaluationrecommended by the Nomination and Remuneration Committee (NRC) and approved by the Boardof Directors. Separate evaluation questionnaire for each category of evaluation viz. theBoard of Directors Non-independent Directors Independent Directors and Committees of theBoard are prescribed under the process and criteria so approved by the Board. The NRC hasreviewed the implementation and compliance of the process of performance evaluation.
Separate sets of questions (questionnaire) for each of the evaluations i.e. forevaluation of (a) Board; (b) Each of the Committees of the Board; (c) IndependentDirector; (d) Non-Independent Director and (e) Chairman of the Board are defined in thePolicy for Performance Evaluation.
The questionnaire for each category of evaluation are circulated to all the Directors.Each question has four rating options i.e. 1 to 4. 1 denotes Need Improvement' 2:Fair' 3: Good Rs.and 4: Excellent'.
The ratings of every question are averaged (averaged ratings') based on feedbacksreceived from each Director. Further average of all averaged ratings Rs.areconsidered as the rating for a particular questionnaire. Based on the outcomes ofquestionnaire the NRC carries out evaluation of all the Directors including IndependentDirectors and the Board carries out the evaluation of its own performance each of theCommittees and that of all Directors.
For the year 2019 the Board has carried out an annual performance evaluation of itsown and that of each of the Committees and all Directors. Further the NRC has alsocarried out evaluation of all the Directors including Independent Directors.
The evaluation for the year 2019 of Directors each of the Committees and that of theBoard have received ratings near excellent.
The Board has taken note of the feedback received from Directors to further improve theperformance of the Directors the Board itself and Committees of the Board.
Separate Meeting of Independent Directors
As per provisions of Schedule IV to the Companies Act
2013 the Independent Directors are required to hold at least one meeting in afinancial year without the attendance of Non-independent directors and members ofmanagement. During the financial year 2019 the Independent Directors have held oneseparate meeting on October 20 2019.
Independent Directors Rs.Declaration
The Independent Directors have given declarations that they meet the criteria ofindependence as per the provisions of the Companies Act 2013 and Securities and ExchangeBoard of India (Listing Obligations & Disclosure Requirements) Regulations 2015.
The Audit Committee consists of six Directors including Four Independent Directors.Mrs. Renu Challu is the Chairperson of the Committee. The other members of the AuditCommittee are Mr. Avinash Gandhi Mr. Arvind Balaji Mr. Amit Kalyani Mr. Jurgen Zieglerand Mr. Satish Patel. The Committee met five times during the year. The terms of referenceof the Audit Committee details of meetings held during the year and attendance of membersare disclosed in the Report on Corporate Governance.
There was no instance where the recommendation by the Committee was not accepted by theBoard.
Whistle-Blower Policy/Vigil Mechanism
Your Company has a well defined Whistle-Blower Policy Rs.and established VigilMechanism to provide for adequate safeguard against victimisation of Directors andemployees who follow such mechanism. The mechanism also provides for direct access to theChairperson of Audit Committee in appropriate cases.
Whistle-Blower Policy of the Company is available on the Company's website at theweb-link: https://www.schaeffler. co.in/remotemedien/media/_shared_media_rwd/03_worldwide_l/websites_worldwide/india_3/investor_relations/corporate_governance_l/codes_and_policies/ vigil_mechanism_or_whistle_blowerpolicy_schaeffler_ india_2019.pdf
Your Company has established comprehensive Risk Management System to ensure that risksto the Company's continued existence as a going concern and to its development areidentified and addressed on timely basis.
For details you may also refer the Risk Management Section of the Annual Report.
Constitution of Risk Management Committee
The Board of Directors of the Company has constituted the Risk Management Committeewhich comprises of Mr. Dharmesh Arora as Chairman Mr. Harsha Kadam Mr. Satish PatelMr. Sameer Mathur (Chief Operating Officer) and Mr. Santanu Ghoshal (Head of HumanResources) as Members.
The Statutory Auditors M/s. B S R & Co. LLP Chartered Accountants Mumbai (FirmRegistration Number: 101248 W/W-100022) were appointed as Statutory Auditors of theCompany at the 52nd Annual General Meeting of the Company held on April 242015 for a period of five consecutive years.
They complete their term of five consecutive years at the conclusion of the ensuingAnnual General Meeting (AGM'). As per provisions of Section 139 of the CompaniesAct 2013 read with rules made thereunder they are eligible for appointment as StatutoryAuditors for one year from conclusion of the ensuing AGM. The Board of Directors of yourCompany has on the basis of recommendation of the Audit Committee recommended theirappointment for a period of one year from the conclusion of the 57th AGM of theCompany up to conclusion of the 58th AGM.
The details as required under SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 including the credentials of the firm and fees proposed to be paid tothem for their period of appointment are provided in the Notice convening the 57thAGM.
There is no qualification reservation adverse remark or disclaimer by the StatutoryAuditors in their Report. The observations made in the Auditor's Report read togetherwith relevant notes thereon are self-explanatory and hence do not call for any comments.
Reporting of Fraud
The Auditor of the Company have not reported any instances of fraud committed againstthe Company by its officers or employees as specified under Section 143(12) of theCompanies Act 2013.
M/s. Samdani Kabra & Associates a firm of Company Secretaries in Practice wasappointed as Secretarial Auditors Rs.to carry out Secretarial Audit of the Company.In terms of provisions of Section 204 of the Companies Act 2013 and in terms ofregulation 24A of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015read with SEBI's circular CIR/CFD/CMD1/27/2019 dated February 8 2019 a Secretarial AuditReport has been annexed to this Report. (Annexure-A)
There is no qualification reservation adverse remark or disclaimer by the SecretarialAuditors in their Secretarial Audit Report.
Cost Records and Cost Audit
Maintenance of Cost Records
The Company is required to maintain cost records under Companies (Cost Records andAudit) Rules 2014. Accordingly cost records have been maintained by the Company.
M/s. Y. S. Thakar & Co. Cost Accountants as Cost Auditors were appointed toconduct the audit of the cost records of the Company for the financial year ended December31 2019. Based upon the declaration on their eligibility consent and terms ofengagement your Directors have reappointed M/s. Y. S. Thakar & Co. Cost Accountantsto conduct Audit of Cost records for the financial year 2020.
As required under the provisions of the Companies Act 2013 the remuneration of CostAuditors as approved by the Board of Directors is subject to ratification by theshareholders at the ensuing Annual General Meeting.
Corporate Social Responsibility (CSR)
Being a responsible Corporate Citizen your Company is committed in fulfilling itsSocial Responsibility. Guided by the prevailing regulatory requirements the Company hasconstituted a Corporate Social Responsibility (CSR) Committee Rs.and framed a Policyon CSR. The policy is available on the website of the Company at https://www.schaeffler.co.in/remotemedien/media/_shared_media_rwd/03_worldwide_l/websites_worldwide/india_3/investor_relations/corporate_governance_l/codes_and_policies/policy_on_corporate_social_responsibility_schaeffler_india.pdf
A summary of CSR Policy together with details of CSR activities undertaken by theCompany during the year 2019 have been covered in the Annual Report on CSR activitieswhich is annexed to this report. (Annexure-B)
Contracts and Arrangements with Related Parties
During the year all transactions with the Related Parties have been carried out innormal course of business and based upon well set principles of arm's length.
Prior omnibus approval of the Audit Committee is obtained for the transactions whichare of a foreseeable and repetitive nature. The details of all transactions executed withRelated Parties are placed before the Audit Committee on a quarterly basis for its reviewor ratification as the case may be and are also placed before the Board for itsinformation.
The Related Party Transaction Policy of the Company is available on the website of theCompany at https://www . schaeffler.co.in/remotemedien/media/_shared_media_rwd/03_worldwide_1/websites_worldwide/india_3/investor_relations/corporate_governance_l/codes_and_policies/policy_on_related_party_transactions_schaeffler_india.pdf
A separate report containing details of Material Related Party Transactions carried outduring the year is annexed to this report in prescribed form AOC-2. (Annexure-C)
Particulars of Employees and Related Disclosures
The disclosures pertaining to remuneration and other details of employees as requiredunder Section 197(12) of the Companies Act 2013 read with Rule 5(1) 5(2) and 5(3) ofCompanies (Appointment and Remuneration of Managerial Personnel) Directors Rs.ReportRules 2014 have been annexed to this Report. (Annexure - D)
Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo
The particulars as prescribed under Section 134(3)(m) of the Companies Act 2013 readwith rule 8 of the Companies (Accounts) Rules 2014 have been annexed to this report.(Annexure - E)
Annual Return and Extract of Annual Return
As per provisions of Section 92(3) of the Companies Act 2013 and rules madethereunder an Extract of Annual Return in the form MGT-9 has been annexed to this Report.(Annexure - F) A copy of Annual Return of the Company for the financial year 2018 in theform MGT-7 has also been placed on the website of the Company athttps://www.schaeffler.co.in/remotemedien/media/_shared_media_rwd/03_worldwide_1/websites_worldwide/india_3/investor_relations/shareholders_ information/annual_return/2018_AnnualReturn.pdf
Particulars of Loans Given Investments Made Guarantees Given and Securities Provided
The particulars of loans given and Investments made have been disclosed in notes to theFinancial Statements.
There were no financial guarantee or security provided by the Company.
Disclosure under the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013
The Company has in place a Policy against Sexual Harassment at workplace in line withthe requirement of Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. The Policy is available on the website of the Companywww.schaeffler.co.in
Internal Complaints Committee (ICC) has been set-up to redress complaints receivedregarding sexual harassment. All employees (permanent contractual temporary andtrainees) are covered under this policy.
Status of complaints during the year 2019
There were no complaints pending at the beginning of the year 2019 and the Companyreceived one complaint during the year 2019 which was resolved.
Directors Rs.Responsibility Statement
Pursuant to the requirements under Section 134(3)(c) of the Companies Act 2013 yourdirectors hereby state that:
a) In the preparation of the annual accounts the applicable Indian AccountingStandards (Ind AS) have been followed and there are no material departures from the same;
b) The accounting policies have been selected and these have been applied consistentlyand judgements and estimates made thereon are reasonable and prudent so as to give a trueand fair view of the state of affairs of the Company as at December 31 2019 and of theprofit of the Company for that period;
c) Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act
2013 for safeguarding the assets of the Company and for preventing and detecting fraudand other irregularities;
d) Annual accounts of the Company have been prepared on a going concern Rs.basis;
e) Internal financial controls have been laid down and being followed by the Companyand that such internal financial controls are adequate and were operating effectively; and
f) Proper systems to ensure compliance with the provisions of all applicable laws havebeen devised and that such systems are adequate and were operating effectively.
Adequacy of Internal Financial Controls
Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the internal statutory andsecretarial auditors and external consultants and the reviews performed by management andthe Audit Committee the Board is of the opinion that during the financial year endedDecember 31 2019 the Company has sound internal financial controls commensurate with thenature and size of the business operations and are adequate and operating effectively withno material weakness.
Material Changes and Commitments and Change in Nature of Business
There have been no material changes and commitments affecting the financial positionof the Company from the end of the Year 2019 up to the date of this report.
There has been no change in the nature of business carried on by the Company.
Compliance of Secretarial Standards
The Company has complied with Secretarial Standards issued by the Institute of CompanySecretaries of India on Meetings of the Board of Directors (SS-1) and General Meetings(SS-2).
During the year the Company has not accepted any deposits under the Companies Act2013.
Subsidiaries Joint Ventures and Associates
The Company does not have any Subsidiary Company Joint Venture or Associate Companiesas defined in the Companies Act 2013.
Orders Passed by the Regulators or the Courts or the Tribunals
There are no significant and material orders passed by the Regulators or Courts orTribunals impacting the going concern status of the Company and its operations.
Your Directors express their gratitude for the continued cooperation and supportextended by Schaeffler Group all the Shareholders Customers Suppliers DistributorsBankers and all stakeholders. Your Directors also place on record their appreciation forthe employees for their dedication hard work and efforts.
| ||For and on behalf of the Board |
| ||Avinash Gandhi |
| ||Chairman |
| ||DIN: 00161107 |
|Pune: February 12 2020 || |