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Servotech Power Systems Ltd.

BSE: 535002 Sector: Engineering
NSE: SERVOTECH ISIN Code: INE782X01017
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Servotech Power Systems Ltd. (SERVOTECH) - Director Report

Company director report

Dear Shareholders

Your Directors are pleased to present to you the 16th Annual Report of Board ofDirectors ("Board") on the business and operations of your Company along withits Audited Financial Statements for the financial year ended 31st March 2020.

CORPORATE OVERVIEW

The Company was incorporated in 2004 and listed its equity in National Stock Exchangeof India Limited at its emerge portal in

2017. The Company has been regularly working with the Public Sector Undertakingsthrough the tenders invited by them and has thereafter achieved remarkable position inPower and backup industrysuch as LED and Solar industry and recently in UVC segments aswell.

FINANCIAL PERFORMANCE

The financial performance of the Company for period under review is summarized below

Particulars Financial Year ended 31st March 2020 Financial Year ended 31st March 2019
Net Sales/Income from Business Operations 874415769 885009996
Other Income 5314397 5100683
Total Income 879730166 890110680
Less: Expense 867471191 849098750
Profit/Loss before tax and Extraordinary/exceptional items 12258974 41011930
Less: Extraordinary/exceptional items 834755 (756538)
Profit before tax 11424219 41768469
Less: Current Income Tax 2970000 11500000
Less: CSR Expenses 51000 100000
Less: Income Tax of earlier years 221068 -
Less: Deferred Tax 44044 121072
Net Profit After Tax 8138107 30047397
Earnings per share (Basic) 0.44 1.64
Earnings per share (Diluted) 0.44 1.64

STATE OF COMPANY'S AFFAIR AND OPERATIONAL HIGHLIGHTS

During the year under review the Gross Revenue from operations of your Company for theyear ended 31st March 2020 stood at '879730166 as compared to the revenue generated of'890110680 in the year ended 31st March 2019. The EBITDA of the company for the yearunder review stood at '11424219 as compare to '41668469 in in the year ended 31stMarch 2019. The Profit after tax ("PAT") for the year ended 31st March 2020stood at '8138107_as compared to '30047397 in previous year.

COVID-19

The World Health Organization declared a global pandemic of the Novel Coronavirusdisease ("Covid-19") on 11th February 2020 and in order to contain the spreadof Covid-19 the Government of India declared a lockdown situation on 24th March 2020 allover the country. In enforcing social distancing to contain the spread of the disease ouroffices have been operating with minimal or no staff for extended periods of time. Inkeeping with its employee-safety first approach the Company quickly instituted measuresto trace all employees and assured of their well-being. The Manufacturing facility atKundli Haryana had resumed its operations from the last week of May 2020 when lockdownwas partially lifted after establishing thorough and well-rehearsed safety protocols.Proactive preparations were done in our work locations during this transition to ensureour offices were safe. The future impact on the business operations is difficult to assessat this point as the crisis of the pandemic continues to accelerate and the situationremains volatile. However barring unforeseen circumstances the Company is confidentabout its ability to manage this crisis and come out of it slowly but steadily.

SHARE CAPITAL

During the period under review there was no change in the share capital of theCompany. The authorized share capital of the Company stood at '190000000 divided into19000000 equity shares of '10 each and issued subscribed and paid- up capital of theCompany stood at '183104290 as at 31st March 2020.

DIVIDEND

The Board of Directors of your Company has decided to retain and plough back theprofits into the business of the Company thus no dividend is being recommended for thisyear.

CHANGE IN THE NATURE OF BUSINESS

For sustained growth in the future Company wants to rely on the main business(es) ofCompany. There is no change in the nature of the business of the Company during the year.

TRANSFER TO RESERVE

The Company did not transfer any amount to the General Reserve for the Financial Yearended 31st March 2020.

DEPOSITS

During the period Company has not invited or accepted or renewed any fixed depositsfrom public as mandated under Section 73 of the Companies Act 2013 ("the Act")read with Companies (Acceptance of Deposits) Rules 2014.

DETAILS OF SUBSIDIARY/JOINT VENTURE/ASSOCIATE COMPANIES

As on 31st March 2020 the Company does not have any subsidiary or joint venture andassociate Company.

NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS

During the year under review 6 (Six) meetings of the Board of Directors were held. Fordetails of the meetings of the Board please refer to the Corporate Governance Reportwhich forms part of this Report.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Board of the Company upon the recommendation of the Nomination and RemunerationCommittee in its meeting held on 20th July 2019 and 21st August 2019 had appointed Mr.Nimesh Malhotra (DIN: 07104660) and Ms. Sarika Bhatia (DIN: 00155602) respectively as theWhole-time Director of the Company.

Mr. Malhotra who was associated with the Company as the General Manger- Human Resourcewas appointed as the Wholetime Director of the Company for a term of 2 (two) years w.e.f.20th July 2020. Ms. Sarika Bhatia who has held the position of Director since theincorporation of the Company was further appointed as the Whole-time Director for a periodof 5 (five) years w.e.f 21st August 2020.

Mr. Kamlesh Kumar Thakur resigned from the position of Chief Financial Officer w.e.f21st August 2019. Thereafter on the recommendation of Audit Committee Mr. Shyam SundarChoudhary was appointed as the Chief Financial Officer ("CFO") of the Company inplace of Mr. Thakur with immediate effect in accordance with the Act and the ListingRegulations. Further Mr. Shyam Sundar Choudhary tendered his resignation as the ChiefFinancial Officer vide his resignation letter dated 9th December 2019 and Lastly Mr.Vikas Bhatia was appointed as the Chief Financial Officer of the Company w.e.f. 22nd May2020.

Declaration by Independent Directors

All Independent Directors of the Company have given declaration confirming that theymeet the criteria of independence laid down under section 149(6) of the Act and ListingRegulation.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134 (5) of the Act the Board of Directors to the best of theirknowledge and ability confirm that:

i) in preparation of annual accounts for the financial year under review theapplicable accounting standards have been followed and that no material departures havebeen made from the same;

ii) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give true and fair viewof the state of affairs of the Company at the end of the financial year and of the profitand loss of the Company for that period;

iii) they have taken proper and sufficient care for their maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

iv) they have prepared the annual accounts on a ‘going concern' basis;

v) they have laid down internal financial controls to be followed by the Company andsuch internal financial controls are adequate and operating effectively; and

vi) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively.

AUDITORS AND AUDITOR'S REPORT

STATUTORY AUDITORS

The provision of section 139 of the Companies Act 2013 requires that the statutoryauditor may be appointed by the shareholders for a period of 5 (five) consecutive years;however the said appointment needs to be placed for ratification by the members in eachAGM. Now with effect from 7th May 2018 the aforesaid requirement related to annualratification of appointment of statutory auditors by the members has been omitted by theCompanies (Amendment) Act 2017. Hence the resolution for ratification of appointment ofGupta Jalan and Associates Charted Accountants (FRN No. 03721N)) as the statutoryauditor whose appointment was approved by the members in the 12th AGM for a term of fiveconsecutive years has not been put for motion as an ordinary business in the 16th AGM.

Auditors' Report and the Notes on financial statements referred to in the Auditors'Report are self-explanatory and do not call for any further comments. The Auditors' Reportdoes not contain any qualification reservation or adverse remark.

SECRETARIAL AUDITOR

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directorsin its meeting held on 21st August 2020 have appointed R & D Company Secretaries asSecretarial Auditor of the Company to conduct the Secretarial Audit of the Company for thefinancial year 2019-20.

The Secretarial Audit Report in prescribed Form MR-3 for the financial year ended 31stMarch 2020 is appended as Annexure-1 to this Report. The Secretarial Audit Report doesnot contain any qualification reservation or adverse remark.

COST AUDITOR

M/s. NN Sharma & Associates Cost Accountants (Firm Regn. No. 101702) wereappointed by the Board of Directors as the Cost Auditors of the Company to conduct CostAudit of the Company for the financial year 2019-20.

Further the Board on the recommendation of the Audit Committee has re-appointed M/s.NN Sharma & Associates as Cost Auditors of the Company for the financial year 2020-21at an annual fee of '30000 plus applicable taxes subject to its ratification by theshareholders at the ensuing AGM.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis Report highlighting the performance and prospectsof the Company's business forms part of the Annual Report.

CORPORATE GOVERNANCE

Our corporate governance practices are a reflection of the Company's value systemencompassing our culture policies and relationships with our stakeholders. Integrity andtransparency are key to our corporate governance practices to ensure that we gain andretain the trust of our stakeholders at all times. Corporate governance is aboutmaximizing shareholder value legally ethically and sustainably. The Board exercises itsfiduciary responsibilities in the widest sense of the term. Our disclosures seek to attainthe best practices in international corporate governance. We also endeavour to enhancelong-term shareholder value and respect minority rights in all our business decisions. OurCorporate governance report for financial year 2019-20 forms part of this Annual Report.

The members may please note that the Company being listed on the Small and MediumEnterprise platform is exempted from provisions of corporate governance as per theprovisions stated in Chapter IV -Regulation 15 of the Securities and Exchange Board ofIndia Listing Regulations. However keeping in view the objective of encouraging the useof better governance

practices through voluntary adoption the Company has decided to provide the CorporateGovernance Report to its members which not only serve as a benchmark for the corporatesector but also help the Company in achieving the highest standard of corporategovernance. The members may please note that any inconsistency shall not be construed as anon-compliance of any relevant provisions thereof.

BOARD EVALUATION

In pursuance to the provisions of the Companies Act 2013 and the SEBI ListingRegulations the Board has carried out annual performance evaluation of its ownperformance of the directors individually as well the evaluation of the working ofcommittees. The performance of the Board was evaluated by the Board after seeking inputsfrom all the directors on the basis of the criteria such as the Board composition andstructure board meetings and effectiveness of board processes information andfunctioning etc. The performance of the committees was evaluated by the board afterseeking inputs from the committee members on the basis of the criteria such as thecompliance with the terms of reference of the committees composition of committeesfunctions and duties committee meetings and procedures etc.

The Board and the Nomination and Remuneration Committee ("NRC") reviewed theperformance of the individual directors on the basis of the criteria such as thecontribution of the individual director to the Board and committee meetings attendanceindependent judgment etc.

In a separate meeting of independent directors performance of non-independentdirectors performance of the board as a whole was evaluated taking into account theviews of executive directors and non-executive directors.

COMMITTEES OF THE BOARD OF DIRECTORS

Your Company has following Committees of Board of Directors:

1. Audit Committee;

2. Nomination and Remuneration Committee;

3. Stakeholders' Relationship Committee;

4. Corporate Social Responsibility Committee; and

5. Committee of Board of Directors

The role and composition of these Committees including the number of meetings heldduring the period under review and the related attendance are provided under CorporateGovernance Report which forms part of the Annual Report.

MATERIAL CHANGES

There are no material changes and commitments affecting the financial position of theCompany during the financial year 201920. Further no material change has taken place theend of the financial year i.e. 31st March 2020 and the date of the Board Report.

RELATED PARTY TRANSACTION

Your Company has adopted the practice of undertaking related party transactions only inthe ordinary and normal course of business and at arm's length as part of its philosophyof adhering to highest ethical standards transparency and accountability. In line withthe provisions of Section 188 of the Companies Act 2013 read with Rule 8(2) of theCompanies (Accounts) Rules 2014 the particulars of contract and arrangement in Form AOC-2 is annexed with this report as Annexure-2. The Related Party Transactions Policy asapproved by Board on recommendation of the Audit Committee is placed on the Company'swebsite at www.servotech.in. For details on related party transactions entered during theyear members may refer to the notes to the financial statement.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has effective and reliable Internal Control System to commensurate with thesize scale and complexity of its operations. The scope and authority of the InternalAudit function is well defined in the organization and is aligned with the statutoryrequirements. The Audit Committee reviews the internal audit plans adequacy andeffectiveness of the Internal Control System significant audit observations and monitorsthe sustainability of remedial measures.

SIGNIFICANT OR MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant material orders passed by the Regulators or Courts orTribunals impacting the going concern status of the Company and its future operations.

CORPORATE SOCIAL RESPONSIBILITY

As a responsible organization the Company focus on inclusive growth and emphasizes onenvironment Conservation and sustainability promotion of education promotion of sportsand community. In pursuit of the same the Company is committed to its stakeholders toconduct business in an economically socially and environmentally sustainable manner thatis transparent and ethical. The Company is committed to pursue CSR projects that arereplicable scalable and sustainable with a significant multiplier impact on sustainablelivelihood creation and environmental replenishment. The Board of Directors of the Companyhas constituted Corporate Social Responsibility ("CSR") Committee in compliancewith Section 135 of the Companies Act 2013. The brief outline of the CSR policy andinitiatives taken by the Company on CSR activities during the period under review areprovided in the Annexure-3 of this Report in the format prescribed in the Companies(Corporate Social Responsibility Policy) Rules 2014. The CSR policy is available on thewebsite of the Company.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNING AND OUTGO ANDRESEARCH & DEVELOPMENT

In accordance with the requirements of Section 134 (3) (m) of the Companies Act 2013read with Rule 8(3) of the Companies

(Accounts) Rules 2014 a statement showing particulars with respect to Conservation ofEnergy Technology Absorption Foreign Exchange Earnings and Outgo is annexed hereto asAnnexure-4 and forms part of this report.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

In accordance with the provisions of the Act and Listing Regulations the Company hasadopted a Whistle Blower Policy to provide appropriate avenues employee and director todirectly communicate to the Chairman of the Audit Committee to report any fraudirregularity or mismanagement in the Company. The policy ensures strict confidentialitywhile dealing with concerns and also that no discrimination or victimization is meted outto any whistleblower. The details of the Whistle Blower Policy is explained in theCorporate Governance Report and also available on the website of the Company atwww.servotech.in.

EXTRACT OF ANNUAL RETURN

In accordance with Section 134(3)(a) of the Companies Act 2013 as amended by theCompanies (Amendment) Act 2017 effective from 31st July 2019 an extract of the annualreturn in form MGT-9 is annexed hereto as Annexure-5 and available on the website of theCompany at www.servotech.in.

SECRETARIAL STANDARDS

The Company complies with all applicable Secretarial Standards issued by the Instituteof Company Secretaries of India.

PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS MADE BY THE COMPANY

Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Act are given in the notes to the Financial Statements.

PARTICULARS OF EMPLOYEES

The information required under Section 197 of the Act read with Rule 5 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed asAnnexure-6 to this Report.

The Company does not have any employee who is in receipt of remuneration of Rs.850000/- per month or Rs. 10200000 per annum and hence the Company is not required togive information under Sub rule 2 and 3 of Rule 5 of the companies (Appointment andRemuneration of Managerial Personnel) Rules 2014.

NOMINATION AND REMUENRATION POLICY

Nomination and Remuneration Committee covers the areas as contemplated under Section178 of the Companies Act 2013 besides other terms as referred by the Board of Directors.

The role includes formulation of criteria for determining qualifications positiveattributes and independence of a director and recommending to the Board the remunerationfor the directors key managerial personnel and other employees formulation of criteriafor evaluation of Independent Directors the Board and Committees of the Board developingon diversity of Board of Directors and identification of persons who are qualified tobecome directors and who may be appointed in senior management in accordance with thecriteria laid down.

The Board on the recommendation of the Nomination and Remuneration Committee hasframed a policy for selection and appointment of Directors Key Managerial Personnel andSenior Management and their remuneration. The Remuneration Policy is available on thewebsite of the Company at www.servotech.in.

RISK MANAGEMENT

The Audit Committee in supervision of Board of Directors is responsible foridentifying evaluating and managing all significant risks faced by the Company. Thedetailed statement indicating the development and implementation of risk management policyincluding identification therein of elements of risk has been covered in the ManagementDiscussion and Analysis Report which forms part of this report

DISCLOSURE UNDER SEXUAL HARRASMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION ANDREDRESSAL) ACT 2013

The Company has in place a Sexual Harassment Policy in compliance with the requirementsof the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013. The Company always endeavors to create and provide an environment that is freefrom discrimination and harassment including sexual harassment. The Internal ComplaintsCommittee (ICC) has been set up to redress complaints regarding sexual harassment if any.

Further the Company has always provided a congenial atmosphere for work to all theemployees that is free from discrimination and harassment including sexual harassment.There were no cases/complaints pertaining to the sexual harassment reported to the Boardduring the year under review.

UNPAID AND UNCLAIMED DIVIDEND

As per the provision of section 124 (1) of the Act any money transferred to the UnpaidDividend Account of accompany which remains unpaid or unclaimed for a period of 7(seven)years from the date of such transfers hall be transferred by the company along withinterest accrued if any there on to the Investor Education and Protection Fundestablished in accordance with section125(1).

The members may please be informed that the Company has not declared any dividend inlast 7 (seven) years. Accordingly there were no funds which were required to betransferred to Investor Education and Protection fund.

FRAUD REPORTING

There was no fraud disclosed during the Financial Year ended 31st march 2020.

LISTING OF EQUITY SHARES

The equity shares of your Company are listed on National Stock Exchange of IndiaLimited ("NSE") emerge Portal. The Annual Listing Fees for the year 2020-21 hasbeen paid to the NSE.

DEPOSITORY SYSTEM

The Members are requested to note that as on 31st March 2020 98.9% of the Company'stotal paid-up share capital representing 18126279 shares are in dematerialized form. Inview of the numerous advantages offered by the Depository System as well as to avoidfrauds members holding shares in physical mode are advised to avail of the facility ofdematerialization from National Securities Depository Limited ("NSDL') and CentralDepository Services (India) Limited ("CDSL').

HEALTH SAFETY AND ENVIRONMENT

Your Company has complied with all the applicable Health & Safety StandardsEnvironment Laws and Labour laws and has been taking all necessary measures to protect theenvironment and provide workers a safe work environment. Your Company is committed towardsimprovement in Health & Safety as well as Environmental performance by providing aSafe & healthy work environment to all its employees and co-workers.

HUMAN RESOURCE AND INDUSTRIAL RELATIONS

Your Company considers people as its biggest assets and "Believing in People"is at the heart of its human resource strategy. Lot of efforts are put in for talentmanagement strong performance management learning and training initiatives in order toensure that your Company consistently develops inspiring strong and credible leadership.During the year under review your Company continued to have cordial relationship with allits employees and maintained healthy cordial and harmonious industrial relations at alllevels.

ACKNOWLEDGMENTS

The Directors thank the Customers vendors Investors Financial Institutions andbankers for their continued support during this year. We appreciate the contribution madeby our employees at all levels. The growth of the Company is made possible by their hardwork solidarity co-operation and support.

FOR AND ON BEHALF OF BOARD OF DIRECTORS
RAMAN BHATIA SARIKA BHATIA
MANAGING WHOLE-TIME DIRECTOR
DATE: 18.11.2020 DIRECTOR DIN- 00155602
PLACE: New Delhi DIN- 00153827

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