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Scooters India Ltd.

BSE: 505141 Sector: Auto
NSE: N.A. ISIN Code: INE959E01011
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OPEN 27.00
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VOLUME 500
52-Week high 66.15
52-Week low 27.00
P/E
Mkt Cap.(Rs cr) 238
Buy Price 27.20
Buy Qty 100.00
Sell Price 29.45
Sell Qty 200.00

Scooters India Ltd. (SCOOTERSINDIA) - Director Report

Company director report

Dear Shareholders

The Board of Directors of your Company is pleased to present the 46th AnnualReport on the business and operations of the Company together with the audited BalanceSheet and statement of Profit and Loss Account and Auditors' Report thereon for financialyear ended 31st March 2018.

1. PRODUCTION REVIEW:

(Nos.)
Description 2016-17 2017-18
Three Wheeler 6650 3664

As per recent order of Supreme Court BS-III Vehicles will not be allowed formanufacturing & Sale after 1st April 2017. The approval of BS-IV complied Vehicle werenot available and few models got approved between May to September 2017 hence reduction inthe number of units produced.

2. SALES REVIEW:

The Sales performance for the year is shown below:

Description 2016-17 2017-18
Physical Financial Physical Financial
Three Wheeler 6349 10030.56 3107 4870.20
Spares - 337.95 157.12
Petrol Diesel Lubricants etc - 216.93 Nil
Other Operating Revenue - 27.95
Total - 10855.44 5055.27

3. FINANCIAL REVIEW:

The salient features of the Company's financial results for the year under review areas follows:

(Rs in lakhs)
Description 2016-17 2017-18
a) Profit before Depreciation Interest Taxes (1084.89) (2283.63)
Prior Year Items & Other Income
b) Profit before Depreciation Interest Taxes & (1084.89) (2283.63)
Other Income
c) PBDIT (660.07) (1627.89)
d) Profit /(Loss) for the Year (1025.81) (1870.11)

During the year under report:

(1) Loss before depreciation interest taxes prior year items & other incomeincreased by Rs. 1105.19 lakhs as compared to the previous year.

(2) Loss before depreciation interest taxes & other income increased by Rs.1104.33 Lakhs as compared to the previous year.

(3) Profit before depreciation interest & taxes decreased by Rs. 871.85 lakhs ascompared to the previous year.

(4) Net profit for the year decreased by Rs. 842.44 lakhs as compared to the previousyear.

4. OPERATIONAL REVIEW

During the year under report the operations of the company remained under stress due toconstraints in marketing and disruption in supplies leading to lower production sales& profits. Further the Ministry of Road Transport and Highways vide notification no.GSR - 643(E) dated 19.08.2015 amended Rule 115 of Central Motor Vehicles Rules 1989 toprovide that the Mass Emission Standards for Bharat Stage IV shall come into force allover the country in respect of vehicles manufactured on or after the 1st April 2017.Hon'ble Supreme Court of India in I.A.NO. 487/2017 I.A. NO. 491/2017 I.A. NO. 494/2017I.A. NO. 489/2017 I.A. NO. 495/2017 in Writ Petition (Civil) No.13029/1985 in M C Mehtavs. Union of India & Others vide order dated 29.03.2017 held that:

a) On and from 1st April 2017 such vehicles that are not BS-IV compliant shall not besold in India by any manufacturer or dealer that is to say that such vehicles whether twowheeler three wheeler four wheeler or commercial vehicles will not be sold in India byany manufacturer or dealer on and from 1st April 2017.

b) All the vehicle registering authorities under the Motor Vehicles Act 1988 areprohibited for registering such vehicles on and from 1st April 2017 that do not meetBS-IV emission standards except on proof that such a vehicle has already been sold on orbefore 31st March 2017.

Due to the above change the operations during the current year 2017-18 are also understress. Though the Company has got vehicle type approval of few vehicle models namelyVIKRAM 1500CG 1000CG on May 2017 750 D on July 2017 and 450 D on September 2017 ofBS-IV; however liquidity crunch has further stressed the operations all through the year.

1MW Roof Top Solar Power Plant has been installed and commissioned on 10th August 2017. This will lead to substantial savings in energy cost.

5. CONTRIBUTION TO EXCHEQUER

The company has contributed a sum of Rs. 709.06 lakhs (towards duties & taxes) tothe exchequer during the period under review vis--vis Rs. 2167.26 lakhs during previousfinancial year.

6. EXPORTS

The company has not made any exports during the period under review. Further theroyalty income during the year by way of foreign exchange remittances also remained nilin view of ongoing legal cases.

7. EXPENDITURE ON ADVERTISEMENT AND PUBLICITY:

An expenditure of Rs. 12.98 Lakhs was incurred on account of advertisement andpublicity in the year.

8. STATUS OF REPAYMENT OF LOAN FROM GOI

In terms of Cabinet approval the existing term plan & non-plan loan as of 31stMarch 2012 of Rs 85.21 Crores (Plan loan - Rs 1.93 Crores & Non-plan - Rs. 83.28crores) has been converted into equity share capital of Rs. 85.21 crores by issue of 8.52crores equity shares of Rs. 10/- each at par and further the Equity share Capital of theCompany has been reduced by 85.21 crores by cancellation of aforesaid Rs. 85.21 croresequity share capital held by Government of India in terms of BIFR Order dated 24.06.2013.The existing interest Accrued as on 31st March 2012 amounting to Rs. 2367 Lacs on GOIloan (Plan loan of Rs. 193 lakhs & Non-plan loan of Rs. 8328 lacs) has been writtenoff against accumulated losses and no further interest has been provided on the aforesaidloan from 31st March 2012 onwards. The matter of repayment of principal & interest onnon-plan loan sanctioned during financial year 2012-13 of Rs. 189 Lakhs which has beenfollowed up with Department of Heavy Industry since the year 2013-14 has been approvedand Ministry of Heavy Industry and Public Enterprises vide its letter No. F3-33/2009PE-VI(Vol-IV) dated 5th June 2018 communicated the freezing of the interest on the NonPlan Loan of Rs.1.89 crore and conversion into Equity of the Outstanding Principal amountof Rs.1.89 Crore. The Company has accordingly made allotment of 18.90 lacs equity sharesof Rs. 10/- each.

The GOI has also approved the reduction of equity of Rs. 85.21 crores in the sharecapital of SIL held by GOI against the accumulated losses with effect from 31.03.2013. TheCompany has been preparing its annual reports for 2012-13 and onwards recognizing theaforesaid reduction so no revision in annual accounts is required to be made. TheGovernment of India Ministry of Industries & Public Enterprises Department of HeavyIndustry released funds by way of interest free plan loan amounting to Rs. 2000.00 lakhsduring the financial year 2013-14 for working capital under an approved revival package ofScooters India Limited by Cabinet/ Misc. Application approved by BIFR. As per sanction23.7.2013 the Moratorium period for the loan is 3 years and Installment commence from31.3.2015. The company sought by way of Reliefs & Concessions in the DraftRehabilitation Scheme (DRS) submitted to Operative Agency (SBI) for submission of BIFR forrecovery of 5 installments commencing from 23.7.2016 onwards i.e. 3 years from date ofsanctioning i.e. beginning w.e.f. 23.7.2016.

9. AUDITORS' REPORT

M/s Dhawan & Madan Chartered Accountants have been appointed by the Comptrollerand Auditor General of India as Statutory Auditors of the Company for the year 2017-

18. The Statutory Auditors' Report on the accounts of the Company for the financialyear ended 31st March 2018 are enclosed at ANNEXURE-2.

The Accounts of the Company were submitted to the Comptroller and Auditor General ofIndia for their report under section 143(5) of the Companies Act 2013 and their report isappended as ANNEXURE-3.

The Comptroller and Auditor General of India has appointed M/s Dhawan & MadanChartered Accountants as Statutory Auditors of the Company for the year 2018-19.

10. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL

POSITION OF THE COMPANY WHICH HAVE OCCURRED FROM 01.04.2017 TO DATE

No material change and commitment have been made by the company from 01.04.2018 to datethat has adverse effect on the financial position.

11. MANAGEMENT DISCUSSION AND ANALYSIS

(A) MISSION VISION & OBJECTIVE

VISION Scooters India's vision is to grow as a recognized automotive company withmarket presence in public transport category in Goods Passenger & Special PurposeCarriers in India & abroad.

MISSION Our mission is to build on the reliability we possess in niche markets andevolve into an economic enabler with stronger after-market support for our customers whotrust us when plying our vehicles in service.

OBJECTIVE??To prosper into defined areas delineated by the revival plan in 2013

??To achieve 2 % decrease in cost and rationalize input materials expense.

??Growing resources & JV partners to fill strategic gaps in skills and operations.

??To reduce energy input per unit of production with renewable.

??To make a mark in Electric Three Wheeler market and thus support the cause ofenvironment protection for further generations

(B) MARKET SCENARIO

(i). The total number of 3-Wheelers produced and sold in the domestic market bymanufactures in India during the year 2017-18 as against 2016-17 is given below :

Category Production (In Nos.)
Segment/ Sub- segment April'16- March'17 April'17- March'18
Passenger Carrier 671361 899023
Goods Carrier 112360 122888
Total 783721 1021911
Domestic Sales (In Nos.)
Passenger Carrier 402189 517423
Goods Carrier 109690 118275
Total 511879 635698

Note: Sales excluding Export of 281894 nos. in 2016-17 and 381002 nos. in 2017-18

Source: SIAM

Scooters India Limited has been a pioneer in bringing out various models of 3-Wheelersrunning on Diesel Electric LPG and CNG for applications as both passengers and loadcarrier versions. Company has played an important role in popularization of 3- Wheelers oflarger capacity in the country. SIL has achieved sales of 6348 nos. in 2017-18. This hasalso resulted in decrease the SIL market share from 1.28 % in 2016-17 to 0.44 % in2017-18.

The company continues to be the leader in larger capacity of vehicles i.e. passengercarrier (6+1) segment and goods carrier exceeding 1 ton of vehicles. The market share ofcompany is 100% in 2017-18 (SIL sales 1210 nos. out of 1210 nos.).

(ii). 3- Wheelers growth drivers in future are as under:

??Rapid development of infrastructure and focus of both Central as well as State Govt.on infrastructure mainly on roads the demand of 3- wheeler may see an upward trend incoming years. The demand driver for 3-Wheelers are its affordability as an economicalviable transport solution.

However the demand for 3-Wheeler passenger carrier depends on the availability ofpermits issued by Local RTO's.

??Increased demand from semi urban & rural areas for 3- Wheelers because of itshigh product maneuverability and drivability

??Suitability of 3- Wheelers for congested Indian roads and tropical conditions.

??Self employment opportunity for a large no of youths especially with the Govt. focuson various schemes for the unemployed youths.

??3- Wheelers of smaller capacity are in great demand in load carrier segment becauseof increase in organizing retail marketing across the country which requires faster andeconomical transportation.

??3-Wheeler is a low cost transport solution to daily commuting passenger.

Hence the market for 3 - wheeler shall continue to be there because of higher cost oftransportation in other modes of transport like taxi contract carriages buses etc.

??3-Wheeler are also better earning opportunity for unemployed youths. With a minimumexpenditure i.e Rs. 45000 - 50000 (margin money) one can start earning Rs.300-400 perday right from the day one of purchasing a new 3- Wheeler.

(C) Opportunities & Threats:

C1. Strengths:

??Integrated plant with capability to produce majority of components.

??Induction of new Machinery through CAPEX has improved quality as well asProductivity.

??Skilled manpower at reduced cost by re-engage retired personals.

??Scope of doubling/tripling the production with minimum investment.

C2. Weakness :

??Depleting manpower.

??Sourcing of material at ecpnomical costs is difficult due to low volumes.

This is also resulting in weak supply chain.

??Location of plant with respect to automotive hub:

??Not able to introduce new models/variants due to low volumes of production.

??Not having strong" vehicles finance" tie ups.

C3. Opportunities:

Growing automobile sector

Untapped markets - South West East & Exports

Developing hub and spoke transportation model

Increasing allocation of funds for poverty alleviation under various Govt. Schemes likePMRY SC/ST NREGS etc.

Rapidly growing awareness about vehicular pollution leading to policy formulation forincrease use of alternate fuel vehicles such as Electric Vehicle.

Options for technology infusion

Rapidly growing network for CNG supply

Replacement market of 4W SCV like Tata Ace with 3 wheelers.

C4. Threats:

Growing e- rickshaws markets.

Increase in product substitution effect by rapidly growing Electric Market Vehicle

Increased competition both from organized and unorganized players

Frequent changes in Market Norms.Volatility in Raw Materials prices/input anddifficulty in passing on cost increase.

(D) Future Outlook:

Challenges faced by the Company:

The need for consistency in quality demands for enhanced investment in R&D andupgradation of plant & machinery. Existing over-lived plant & machinery is a causeof concern.

Manpower cost in the company is still high because of low volumes of production and sois the average age profile of the employees. While the company needs to reduce itsmanpower cost even while putting efforts to infuse fresh blood simultaneouly.

Though 3-wheelers as an industry continue to grow but increase in competition andavailability of 4-wheelers in 1.0 ton and sub 1.0 ton category is expected to aggravatethe extremely competitive scenario and impact the volumes and margins.

Strict regulatory laws concerning pollution and their strict implementation by banningsale of diesel vehicles in certain states shall act as deterrent for company growth.

SIL has lesser presence in small 1+3- Passenger Category segment which has strongmarket preference. This segment contribution has high volumes though the margins are low.The established player's viz. Piaggio Mahindra etc. dominate the market. SIL is puttingextra efforts to enhance its market share in this segment by expanding its market networkto southern states.

Employees' aspiration for effecting revision in salary and wages.

(E) Strategic Road Map:

Although there has been negative growth in three wheeler segment of Auto sector inIndia the performance of your company has improved considerably in comparison to theprevious year. Your company is evaluating various new product development options to caterto various market segments with a view to higher production and sales.

The various efforts are as under

??Introduction of Electric Passenger Vehicle with Li-ion Battery with DC Motor as shortterm strategy.

??In long term it is planned to introduce electric Passenger /Load Carrier vehicleswith Li-Ion Battery and AC Motor.

(iii) Status before BIFR:

On 18th February 2010 BIFR has declared the Company as sick industrial company interms of the provisions of section 3(1)(o) of the Sick Industrial Companies (SpecialProvisions) Act1985 (SICA) on reference being made after full erosion of the Net-worth ofthe Company as per annual accounts for the year ended at 31st March 2009. BIFR approvedthe miscellaneous application filed by the Company for seeking necessarypermission/appropriate directions for reliefs & concessions enabling issue of sharesrestructuring of balance sheet and for release of funds for capital expenditure andworking capital in line with the cabinet decision for revival of SIL. The DraftRehabilitation Scheme (DRS) was submitted by Co Operating Agency (SBI) for submission withBIFR. BIFR in its hearing dated 15.09.2015 directed that SIL ceases to be a sickindustrial company within the meaning of Section 3(1)(o) of the SICA as its net worth hasturned positive and It is therefore discharged from the purview of SICA/BIFR.

12. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN

EXCHANGE EARNINGS AND OUTGO:

Your company is an ISO 9001: 2000 certified which focuses on quality management system.A statement giving details of conservation of energy technology absorption foreignexchange earnings and outgo in accordance with the Section 134 (3) (m) of the CompaniesAct 2013 read with Rule 8 of The Companies (Accounts) Rules 2014 is provided at ANNEXURE-11-A and 1-B to this report.

13. PARTICULARS OF EMPLOYEES:

Information under Sec. 197(12) of the Companies Act 2013 read with rule 5(2) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 be treated asNIL as none of the employee of the company is getting salary more than the prescribedlimit.

14. INDUSTRIAL RELATION:

During the period under review i.e. 01.04.2017 to 31.03.2018 the industrial relationin the Company remained normal. No agitation and strike took place during the aforesaidperiod.

15. TRAINING AND DEVELOPMENT:

Employees of the Company are the most important constituent and Company understandsthat without their motivation and development the Company cannot progress. The Company hasbeen analyzing developmental needs in technical and managerial areas and provide requisitetraining and exposure to all employees at all levels in the area on ProfessionalExcellence through motivation etc. employees were trained during 01.04.2017 to 31.03.2018on course of Fire Fighting Vigilance Industrial Safety & Health etc.

Programme Details Officers Staffs Workmen Trainees Total
External 15 09 02 70 96
Internal 07 01 - - -
Total 22 10 02 70 104

16. VIGILANCE:

Vigilance Department continues to function with particular emphasis on the aspects ofpreventive and corrective vigilance. Strict vigil was exercised over various activities aspart of Preventive Vigilance measures and suggestions were made to the Management forsystem improvement. Company also observed Vigilance Awareness Week from 31.10.2017 to04.11.2017.

17. HUMAN RESOURCE DEVELOPMENT:

Employees of the Company are the most important constituent and Company understandsthat without their motivation and development Company cannot progress. The Company hasbeen analyzing developmental needs in technical and managerial areas and providesrequisite training and exposure to the employees at all levels in the area on ProfessionalExcellence through Motivation Advance Engine Combustion & Diagnostics CompetenceBuilding for Effective Management Healthcare Services Part Programming for CNC MachinesLeadership Strategies for Building Excellence Quest for Excellence Imperatives for IndiaPSUs Health Safety Environment Protection through Legal Reforms & technologicalInnovations Building & Leading Effective Teams Safety Engineering & ManagementValue Based Management Legal framework for Cost Audit Compliances Finance forNon-finance Executives International Commercial Practices Energy Conservation HouseKeeping etc.

18. HINDI IMPLEMENTATION:

Official Language Implementation Committee monitors and reviews the progress ofimplementation of the Annual Programme issued by Department of Official Language Ministryof Home Affairs Government of India. Hindi Divas is commemorated every year by observingofficial language week in the month of September. Various competitions are organized foremployees and winners are felicitated on Republic Day.

19. REPRESENTATIVE FOR SCHEDULED CASTES & SCHEDULE:

As on 31.03.2018 the total strength of the company is 177. Out of these 52 employeesbelong to Scheduled Castes and 01 employee to Scheduled Tribe.

20. DIRECTORS KEY MANAGERIAL PERSONNEL APPOINTED AND RESIGNED:

Government of India Ministry of Heavy Industries & Public Enterprises Departmentof Heavy Industry has vide its Order No. F. No.:1(1)/2016-PE-VI dated 26th September2016 appointed Shri Renati Sreenivasulu as Chairman & Managing Director of SIL forthe period of five years or till the date of his superannuation or until further orderswhichever is earliest. Shri Renati Sreenivasulu has joined as Chairman & ManagingDirector of SIL w.e.f. 06.10.2016. Mr. Shaktimani was appointed as a Diector (F) onadditional charge basis with effect from 30 May 2018 for the period of three months.

Ms. Shrabanti Mandol has joined as Company Secretary of SIL w.e.f 06.11.2017.

Mr. R.S Tiwari HOD Finance also re designated as Chief Financial Officer of theCompany w.e.f 08.02.2018

The Board of Directors of the Company are appointed by the Government of India as perguidelines issued by the Department of Public Enterprises (DPE) Government of India fromtime to time. The remuneration of Managing Director/Whole time Director is fixed as pergrade and other terms and conditions issued by the DPE. The Government Directors on theBoard of the Company draw their remuneration from Government of India and not from theCompany. The independent directors if any are paid the sitting fee only (within thelimits prescribed under the Companies Act) as per Articles of Association besidesreimbursement of the expenses to attend the meeting. No other remuneration is paid to theindependent directors.

As regards the appointment and remuneration of Key Managerial Personnel and otheremployees the appointment of all employees below board level is made as per Recruitment& Promotion Rules of the Company and remuneration is paid to them as per DPEguidelines.

In absence of Independent Directors on the Board the Nomination & RemunerationCommittee (NRC) has also not been constituted. The other matters relating to remunerationif any are placed directly to the Board of Directors.

21. INDEPENDENT DIRECTOR'S DECLARATION

Directors on the Board of the Company are appointed by the Administrative Ministry. SILhas been requesting the Ministry to appoint the independent directors. The appointment ofIndependent directors is yet to be made by the Ministry. During the year there was noindependent director on the board of the Company. Thus the declaration pertaining toindependent director does not apply.

22. DISCLOSURE ON REAPPOINTMENT OF INDEPENDENT DIRECTORS:

During the year there was no independent director on the Board of the Company. Hencedisclosure pertaining to reappointment of independent directors does not apply.

23. NUMBER OF MEETINGS OF THE BOARD

The Board met seven times during the financial year the details of which are given inthe Corporate Governance Report that forms part of this Annual Report. The intervening gapbetween any two meetings was within the period prescribed by the Companies Act 2013 andthe Listing Agreement.

24. COMPANY'S POLICY ON DIRECTORS' APPOINTMENT & REMUNERATION

INCLUDING CRITERIA FOR DETERMINING QUALIFICATIONS ATTRIBUTES INDEPENDENCE ETC.:

The Board of Directors of the Company are appointed by the Government of India as perguidelines issued by the Department of Public Enterprises (DPE) Government of India fromtime to time. The remuneration of Managing Director/Whole time Director is fixed as pergrade and other terms and conditions issued by the DPE. The

Government Directors on the Board of the Company draw their remuneration fromGovernment of India and not from the Company. The independent directors if any are paidthe sitting fee only (within the limits prescribed under the Companies Act) as perArticles of Association besides reimbursement of the expenses to attend the meeting. Noother remuneration is paid to the independent directors.

As regards the appointment and remuneration of Key Managerial Personnel and otheremployees the appointment of all employees below board level is made as per Recruitment& Promotion Rules of the Company and remuneration is paid to them as per DPEguidelines.

In absence of Independent Directors on the Board the Nomination & RemunerationCommittee (NRC) has also not been constituted. The other matters relating to remunerationif any are placed directly to the Board of Directors.

25. ANNUAL EVALUATION OF PERFORMANCE OF BOARD ITS COMMITTEE AND DIRECTORS

The Company enters into MoU with the Administrative Ministry in the month of Marchevery year for the next financial year. Before signing the MoU the targets are negotiatedwith the Company in detail by the MoU Task Force constituted by the DPE. The evaluation ofperformance of the Company against MoU parameter is done by DPE every year and MoU scoreis communicated by it to the Company through the Administrative Ministry.

26. MANAGING DIRECTOR RECEIVING COMMISSION OR REMUNERATION FROM HOLDING OR SUBSIDIARYCOMPANY:

The Company has no holding or subsidiary company hence not applicable.

27. RATIO OF DIRECTORS' REMUNERATION TO MEDIAN EMPLOYEES' REMUNERATION AND OTHERDISCLOSURES:

During the year the remuneration of Chairman & Managing Director was Rs. 24.94 lacand median employee's remuneration was Rs. 4.28 lac. The Chairman & Managing Directorremuneration comes to 582.71% of median employees' remuneration.

(ANNEXURE – 7)

28. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

As per the requirement of section 186(4) of Companies Act 2013 particulars of loansgiven investments made guarantees given or securities provided along with the purposefor which the loan or guarantee or security is proposed to be utilized by the recipientare provided in the financial statements on page number 71. The Company is in compliancewith the limits as prescribed under Section 186 of Companies Act 2013 read with rule 11of the Companies (Meeting of Board and its Powers) Rules 2014.

29. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED

PARTIES:

All contracts / arrangements / transactions entered by the Company during the financialyear with related parties were in the ordinary course of business and on an arm's lengthbasis. Particulars of contracts or arrangements with related parties referred to insection 188(1) of the Companies Act 2013 are presented in Annexure 8 to the Directors'Report in Form AOC 2.

30. DIRECTORS' RESPONSIBILITY STATEMENT:

In accordance with the provisions of section 134(3)(c) of the Companies Act 2013 yourDirectors confirm that:

a) in preparation of the annual accounts for the year ended March 31 2018 theapplicable accounting standards read with the requirements set out under Schedule III ofthe Act have been followed and that there are no material departures from the same;

b) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year ended on March 312018and of the profit of the Company for year ended on that date;

c) they have taken proper and sufficient care to the best of their knowledge andability for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act 2013 for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities;

d) they have prepared the annual accounts on a going concern basis;

e) they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and are operating effectively to thebest of their knowledge and ability; and

f) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and are operating effectively.

31. ADEQUACY OF INTERNAL CONTROL:

The Company has proper and adequate system of internal controls to ensure that allactivities are monitored and controlled against any unauthorized use of disposal ofassets and that the transactions are authorized recorded and reported correctly.

The Company ensures adherence to all internal control policies and procedures as wellas compliance with all regulatory guidelines. The Company has in place adequate internalfinancial controls with reference to financial statements. The Statutory Auditors of theCompany tested such controls and no reportable material weakness in the design oroperation was observed.

32. FIXED DEPOSITS:

The Company has not accepted any deposits under the provisions of the Companies Act2013 during the year.

33. SECRETARIAL AUDITOR:

M/s Amit Gupta & Associates Practicing Company Secretaries were appointed assecretarial auditors of the Company for the year 2017-18 as required under Section 204 ofthe Companies Act 2013 and Rules made there under. The secretarial audit report in FormMR-3 for FY 2017-18 forms part of the Directors Report and is placed at Annexure - 5.Regarding comments/qualifications in the said report it is submitted that the Company hastaken up matter regarding appointment of Independent Directors/women Director with DHI andwith the said appointments the Board shall become duly constituted in accordance with theprovisions of the Companies Act 2013 & Listing agreement and necessary compliancesregarding constitution of various Committees viz. Audit Committee Nomination &Remuneration Committee etc. shall also be made. Further the Company is in process offiling of necessary returns with the Registrar of Companies Kanpur.

34. CORPORATE GOVERNANCE:

A Certificate from M/s Dhawan & Madan Auditors of the Company regarding complianceof conditions of Corporate Governance as stipulated under regulation 34(3) of the SEBIListing regulations 2015 along with the report on Corporate Governance is attached as Annexure- 4 to this report.

SECRETARIAL STANDARDS

The Directors state that applicable Secretarial Standards i.e. SS-1 and SS-2 relatingto ‘Meetings of the Board of Directors' and ‘General Meetings' respectivelyhave been duly followed.

35. SIGNIFICANT AND MATERIAL ORDERS:

There are no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and the Company's operations in future.

36. AUDIT COMMITTEE AND VIGIL MECHANISM:

In view of non appointment of Independent Directors by GOI the Company is not havingAudit Committee pursuant to requirement of section 177(1) of Companies Act 2013 read withRule 6 of the Companies (Meeting of Board and its Powers) Rules 2014 and Regulation 18 ofthe SEBI Listing Regulations 2015 & erstwhile clause 49 of Listing Agreement.

The Vigil Mechanism of the Company which also incorporates a Whistle Blower Policy interms of the Listing Agreement may be accessed on the Company's website at the link:http://www.scootersindia.com. The policy includes appointment of a Whistle Officer whowill look into the matter conduct detailed investigation and take appropriatedisciplinary action. Protected disclosures can be made by a whistle blower through ane-mail or dedicated telephone line or a letter to the Whistle Blower Officer. During theyear under review no employee was denied access to Whistle Blower Officer.

37. EXTRACT OF ANNUAL RETURN:

Extract of Annual Return of the Company is annexed herewith as ANNEXURE - 6 tothis Report.

38. ISSUE OF SHARES WITH DIFFERENTIAL RIGHT SWEAT EQUITY EMPLOYEE STOCK OPTION:

The Company has not issued any share with differential right sweat equity employeestock option during the year hence not applicable.

39. RISK MANAGEMENT:

SIL aims to have a formalized and systematic approach for managing risks across theCompany. It encourages knowledge and experience sharing in order to increase transparencyon the key risks to the Company to the extent possible. This approach increases riskawareness and ensures proper management of risks as part of the daily managementactivities.

The policy on Risk Management may be accessed on the Company's website at the link:http//www.scootersindia.com. The objective of the Company's risk management process is tosupport a structured and consistent approach to identify prioritize manage monitor andreport on the principal risks and uncertainties that can impact its ability to achieve itsstrategic objectives. The Company has introduced several initiatives for risk managementincluding the introduction of audit functions and processes to identify and createawareness of risks optimal risk mitigation and efficient management of internal controland assurance activities.

40. LISTING:

The Company is listed at BSE Limited and has connectivity from both National SecuritiesDepository Limited (NSDL) & Central Depository Services Limited (CDSL). Delhi StockExchange Limited Delhi has been de-recognized by SEBI vide its order dated November 192014.The Company has paid due listing fees with the stock exchange.

41. CORPORATE SOCIAL RESPONSIBILITY:

SIL strongly believes in concept of sustainable development and is committed to operateand grow its operations in a socially and environmentally responsible way.

As per the Companies Act 2013 all companies with a net worth of Rs. 500 crore ormore or turnover of Rs. 1000 crore or more or a net profit of Rs. 5 crore or more duringany financial year are required to constitute a Corporate Social Responsibility (CSR)committee of the Board of Directors comprising of three or more directors at least one ofwhom should be an independent director and such company shall spend at least 2% of theaverage net profits of the company's immediately preceding three financial years on CSRactivities. The Company has duly constituted a Corporate Social Responsibility (CSR)Committee pursuant to the requirement of Section 135(1) of Companies Act 2013 and theRules made there under. However in absence of an Independent Director Committeeconstitution is not proper. Accordingly to conserve the resources for business operationsthe Company has decided not to spend any amount towards Corporate Social Responsibilityduring the year under report.

42. VIGILANCE CASES:

In pursuance of Order No. F. No. 26(1)/2016 PE-VI dated January 24 2018 issued byMinistry of Ministry of Heavy Industries & Public Enterprises; Department of HeavyIndustries Committee recommends including vigilance cases during the year. The Report isas follows: During 2017-18 4 complaints related to procurement and Corruptions andHarassment of employees were investigated by Vigilance department out of which 2complaints related to procurement were carried to a logical conclusion and appropriatedisciplinary action has been initiated wherever necessary. The remaining 2 related toCorruptions and Harassment of employees complaints were under various stages ofinvestigation as on 31.03.2018.

43. RIGHT TO INFORMATION CASES:

In pursuance of Order No. F. No. 26(1)/2016 PE-VI dated January 24 2018 issued byMinistry of Ministry of Heavy Industries & Public Enterprises; Department of HeavyIndustries Committee recommends including RTI matters during the year. The Report is asfollows:

RTI CASES STATUS FOR FY 2017-18

Application Received 2017-18 No. of cases to other Public Decisions where in FY transferred request/ appeals rejected* Authorities Decisions where request/ appeals accepted Cases Disposed off in FY 2017-18 Cases Pending
Requests 23 1 1 21 23 0
First Appeal 1 0 0 1 1 0
Second Appeal 1 0 1 1 1 0

44. ACKNOWLEDGEMENT:

The Board of Directors would like to express their grateful appreciation for thesincere support and co-operation extended by its Bankers Financial Institutions Dealersand Suppliers. The Directors would also like to express their sincere thanks for theco-operation and advice received from Govt. of India particularly Deptt. Of HeavyIndustry and Public Enterprises BIFR BRPSE the State Govt. and the local authoritiesfor their continued support co-operation and guidance.

Your Directors wish to place on record their deep sense of appreciation for the devotedservices of employees and are deeply grateful to the shareholders for reposing theconfidence and faith in us.

By the order of Board of Directors
Sd/
Renati Sreenivasulu
DIN: 07634253
Place : New Delhi Chairman & Managing Director
Dated : August 03 2018 Scooters India Limited Lucknow -226008