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Shanthi Gears Ltd.

BSE: 522034 Sector: Auto
NSE: SHANTIGEAR ISIN Code: INE631A01022
BSE 00:00 | 26 Nov 151.60 -8.10
(-5.07%)
OPEN

158.50

HIGH

159.95

LOW

151.00

NSE 00:00 | 26 Nov 151.60 -8.10
(-5.07%)
OPEN

159.10

HIGH

159.10

LOW

131.00

OPEN 158.50
PREVIOUS CLOSE 159.70
VOLUME 13003
52-Week high 211.20
52-Week low 101.45
P/E 34.61
Mkt Cap.(Rs cr) 1,163
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 158.50
CLOSE 159.70
VOLUME 13003
52-Week high 211.20
52-Week low 101.45
P/E 34.61
Mkt Cap.(Rs cr) 1,163
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Shanthi Gears Ltd. (SHANTIGEAR) - Director Report

Company director report

#MDStart#

MANAGEMENT DISCUSSION AND ANALYSIS

Dear Shareholders

Your Directors have pleasure in presenting to you the performance of the Company forthe year ended 31 March 2021.

1. Business Environment

The Global prospects in the year 2020-21 was highly uncertain due to the pandemic.Economic recoveries are diverging across countries and sector The demand for productsremained sluggish during the first half of the year and we have seen improvement in thesecond half of the year. Governments and central banks across the globe deployed variouspolicy tools to support their economies such as lowering policy rates quantitative easingmeasures etc. Global growth is projected at 6% in 2021 and 4.4% in 2022.

On Indian Economy

The United Nations expects India's GDP to grow at 7.5% in 2021. According to the IMFin the next two years India is also expected to sustain as the fastest-growing economy onaccount of various Government initiatives like ‘Make in India' and ‘DigitalIndia'.

On the Industrial Gear Industry

With the increasing trend of population and income levels in India industries likeFMCG Steel Cement Power Infrastructure and Mining are in the process of renovating andexpanding their manufacturing facilities to meet the demand of the people. The estimatedmarket size of industrial gearboxes in India is 2000 Crores and is expected to reach to2600 Crores in next four yea Also India is focusing on renewable sources to generateenergy and to achieve 40% of its energy from non-fossil sources by 2030 which brings theopportunity for the Wind mill segment.

Industry Scenario Focus Markets

Industry Growth Drivers
Steel We expect the steel demand in India to touch the 100 million tonnes mark in 2022. As the economy and economic growth recovers steel demand from capital goods construction machinery mining equipment and electrical machinery is expected to show strong recovery.
Cement Cement Production in India is expected to touch 550 Million tonnes in 2025 from the current level of 327 Million tonnes. Heavy expansions with entry of foreign players is expected due to steady demand and healthy profit margins. As India has a high quantity and quality of limestone deposits throughout the country the Cement Industry promises huge potential for growth.
Power Steady increase in peak demand for electricity in the country is expected at 6% CAGR for the next 4 yea Installed renewable energy is 136 GW which meets 38% of the total demand. The country is aiming for even more ambitious target of 57% of the total electricity capacity from renewable sources by 2027.
Printing & Paper Printing & Paper poised for robust growth - Printing is expected to grow at CAGR of 4.5% and Paper is expected to grow at CAGR of 7.6%.
Mining and Minerals Mining plays an important role in Indian Industry which significantly contributes to the Indian economy. The Government has declared Mining as "essential service" and allowed the production and transportation of minerals during the country-wide lock down. Several initiatives such "Mining and Mineral Policy" reforms are also taken to ramp up production and maximize capacity utilization.

2. Company Performance

Particulars Year ended 31.03.2021 Year ended 31.03.2020
Revenue from operations (Net) 215.53 242.29
Earnings Before Interest Tax Depreciation & Amortisation 34.93 41.08
Depreciation and Amortisation expense 8.86 8.39
Profit Before Tax 26.07 32.69
Less: Tax expense 5.90 7.50
Profit After Tax 20.17 25.19
Add: Surplus brought forward 16.23 18.80
Appropriations:
Final dividend paid during the year - 7.68
Tax on Final dividend paid during the year - 1.58
Interim dividend paid during the year 11.51 15.35
Tax on Interim dividend paid during the year - 3.15
Balance carried to Balance Sheet 24.89 16.23

3. Review of Operations

During the year the business had a top line of 215.53 Crores (PY: 242.29 Crores) andprofit after tax is at 20.17 Crores (PY: 25.19 Crores).

Focus on Servicing and Replacement segment in power transmission helped in sustainingthe competitive advantage. The business continued to build relationships through highlevels of customer engagement during the year.

Conscious effort on cash generation helped us to sustain the reduced net workingcapital levels of previous year.

Specific attention is given to development of alternate materials and processes todrive value addition and cost reduction. Capital investments were made wherevertechnological upgradation was required.

The Company remains debt free and invests its surplus funds judiciously balancingsafety and returns.

4. Dividend

The Company has declared an interim dividend of 1.5/- per equity share of Face Value1/- in February 2021 and paid during March 2021. The Board has not recommended any finaldividend for the financial year 2020-21 and the interim dividend already declared and paidwill be considered as the Dividend for the financial year 2020-21.

The dividend pay-out is in accordance with the Company's policy on DividendDistribution. The said Policy as approved by the Board is uploaded and is available on thefollowing link on the Company's website http://www.shanthigeacom/wp-content/uploads/2021/04/SGL-Dividend-Distribution-Policv.pdf.

Details there of also form part of this Annual Report for the information ofshareholders as Annexure-A.

5. Share Capital

The paid up Equity Share Capital as on 31 March 2021 was 7.67 Crores.

6. Deposits

The Company has not accepted any fixed deposits under Chapter V of the Companies Act2013 and as such no amount of principal and interest was outstanding as on 31 March 2021.

7. Particulars of Loans Guarantees

During the year under review the Company has not given any loans or guarantees underthe provisions of Section 186 of the Companies Act 2013. As part of treasury managementthe Company deploys short-term surplus in units of mutual funds the details relating towhich form part of the Notes to the financial statements provided in this Annual Report.

8. Directors

Mr. L Ramkumar will retire by rotation at the ensuing Annual General Meeting underSection 152 of the Companies Act 2013 and being eligible he offers himself forre-appointment.

Mr. M A M Arunachalam was appointed as Additional Director (Non-Executive Director) on10 February 2021 liable to retire by rotation and he continues upto the ensuing AnnualGeneral Meeting (AGM). Necessary resolution proposing the appointment of Mr. M A MArunachalam as a Director liable to retire by rotation under Section 152 of the CompaniesAct 2013 forms part of the Notice for the ensuing AGM.

Mr. M Karunakaran was appointed as Additional Director and as Whole-time Director ofthe Company by the Board of Directors with effect from 10 February 2021. The appointmentof Mr. M Karunakaran is for a term of 3 (three) years from 10 F ebruary 2021 till 9February 2024 (both days inclusive) and subject to the approval of the shareholders of theCompany. Necessary resolution proposing the appointment of Mr. M Karunakaran as Whole-timeDirector forms part of the Notice for the ensuing AGM.

Notice has been received from a Member proposing the candidature of Mr. M A MArunachalam as Director and Mr M Karunakaran as Whole-time Director of the Company.

The Board takes pleasure in recommending the appointment of Mr.L Ramkumar and Mr. M A MArunachalam as Directors and Mr. M Karunakaran as Whole-time Director of the Company atthe forthcoming Annual General Meeting.

All the Independent Directors of the Company have furnished necessary declaration interms of Section 149(6) of the Company Act affirming that they meet the criteria ofindependence as stipulated under the Company Act. In the opinion of the Board all theIndependent Directors fulfill the conditions specified in the Companies Act 2013 andRules made there under and SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 and are independent of the Management.

9. Key Managerial Personnel

Mr. B Balamurugan Chief Financial Officer of the Company resigned from the services ofthe Company for personal reasons and was relieved on 14 August 2020.

Mr. Ranjan Kumar Pati was appointed as Chief Financial Officer of the Company witheffect from 10 F ebruary 2021. Mr. M Karunakaran Chief Executive Officer was appointed asthe Whole-time Director of the Company with effect from 10 F ebruary 2021.

Mr. M Karunakaran Whole-time Director Mr. Ranjan Kumar Pati Chief Financial Officerand Mr. C Subramaniam Company Secretary are the Key Managerial Personnel (KMP) of theCompany as per Section 203 of the Companies Act 2013.

10. Internal Control System and their Adequacy

The Company has an Internal Control System Commensurating with its size scale andcomplexity of its operations. Audit Committee reviews internal audit reports and overseesthe internal control system of the Company.

11.Internal Financial Control Systems with reference to financial statements

The Company has a formal system of internal financial control to ensure the reliabilityof financial and operational information and regulatory and statutory compliances. TheCompany's business processes are enabled by an Enterprise-wide Resource Platform (ERP) formonitoring and reporting processes resulting financial discipline and accountability.

12. Enterprise Risk Analysis and Management

The Company has constituted a Risk Management Committee aligned with the requirementsof the Companies Act 2013 and Listing Regulations. The details of the Committee and itsterms of reference are set out in the Corporate Governance Report forming part of thisReport.

The Company operates across various product platforms built over the yea Relativeadvantages and disadvantages of such product verticals are studied and advances aretracked. The Company seeks to address technology gaps through continuous benchmarking ofexisting manufacturing processes with developments in the industry and in this connectionhas made arrangements with technology consultants.

Sub-par utilization of capacities may lead to inadequate leverage benefits. The Companyis ramping up its marketing efforts towards successful product establishment and marketacceptance of its products exploring development of alternate products and establishing arange of applications.

13. Corporate Governance

Your Company is committed to maintaining high standards of Corporate Governance. Areport on Corporate Governance along with a certificate from the Statutory Auditors oncompliance with Corporate Governance norms forms part of this report as Annexure-G.

14. Corporate Social Responsibility (CSR)

As a corporate citizen your Company is committed to the conduct of its business in asocially responsible manner. The Company contributed a portion of its profit for thepromotion of worthy causes like education healthcare scientific research etc. As a partof Corporate Social Responsibility program the Company has undertaken projects in thearea of Education Scientific Research etc. List of CSR Activities Composition of CSRCommittee and CSR Policy is annexed herewith as Annexure-B.

15. Annual Return

Pursuant to section 92(3) read with section 134(3)(a) of the Companies Act 2013 theAnnual return as on 31 March 2021 is available on the company's Website link:http://www.shanthigeacom/wp-content/uploads/2021/06/Annual-Returns-2020-21.pdf

16. Directors Responsibility Statement

Pursuant to Section 134 (5) of the Companies Act 2013 the Board of Directors to thebest of their knowledge and belief confirm that:

a) in the preparation of the annual accounts applicable Accounting Standards have beenfollowed and that there were no material departures there from;

b) they have in the selection of the accounting policies consulted the statutoryauditors and have applied their recommendations consistently and made judgments andestimates that are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company as at 31March 2021 and of the profit of the Company for the yearended on that date;

c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

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 were operating effectively duringthe year ended 31 March 2021; and

f) proper system has been devised to ensure compliances with the provisions of allapplicable laws and that such systems were adequate and operating effectively during thefinancial year ended 31 March 2021.

17. Policy on Appointment and Remuneration of Directors

Pursuant to Section 178(3) of the Companies Act 2013 the Nomination and RemunerationCommittee of the Board of the Company has formulated the criteria for Board nominations aswell as policy on remuneration for Directors and employees of the Company.

The Remuneration policy provides the framework for remunerating the members of theBoard Key Managerial Personnel and other employees of the Company. This policy is guidedby the principles and objectives enumerated in Section 178 (4) of the Companies Act 2013and reflects the remuneration philosophy and principles of the Murugappa Group to ensurereasonableness and sufficiency of remuneration to attract retain and motivate competentresources a clear relationship of remuneration to performance and a balance betweenrewarding short and long-term performance of the Company. The policy lays down broadguidelines for payment of remuneration to Executive and Non-Executive Directors within thelimits approved by the shareholder

The Board Nomination criteria and the Remuneration policy are available on the websiteof the Company athttp://www.shanthigeacom/wp-content/uploads/2019/05/SGL-Remuneration-Policy-Mar-2019.pdf

18. Related Party Transactions

All related party transactions that were entered during the year under review were onan arm's length basis and were in ordinary course of business. There are no materiallysignificant related party transactions during the year which may have a potential conflictwith the interest of the Company at large. Necessary disclosures as required underAccounting Standard (Ind AS 24) have been made in the notes to the Financial Statements.The Policy on Related Party Transactions as approved by the Board is uploaded and isavailable on the Company's websitehttp://www.shanthigeacom/wp-content/uploads/2019/05/SGL-RPT-Policy-Mar-2019.pdf

None of the Directors had any pecuniary relationships or transactions vis-a-visthe Company.

19. Board Evaluation

The manner in which the evaluation has been carried out has been explained in theCorporate Governance Report.

20. Vigil Mechanism/ Whistle Blower Policy

The details of vigil mechanism/Whistle Blower policy is given in the CorporateGovernance Report.

21. Business Responsibility Reporting

As required under the SEBI Listing Regulations which mandate the inclusion of aBusiness Responsibility Report as part of the Annual Report for the top 1000 listedentities based on market capitalisation the Business Responsibility Report forms part ofthe Annual Report as Annexure-F. The Business Responsibility Policy of the Company isdisplayed in the Company's website at the following linkhttp://www.shanthigeacom/wp-content/uploads/2020/06/SGL-BRR-Policv-Mav-2020.pdf

22. Declarations/Affirmations

During the year under review:

- there were no material changes and commitments affecting the financial position ofthe Company which have occurred between the end of the financial year of the Company towhich the financial statements relate viz. 31 March 2021 and the date of thisReport; &

- there were no significant material orders passed by the regulators or courts ortribunals impacting the Company's going concern status and its operations in future.

23. Human Resources

The HR strategy and initiatives of your Company are designed to effectively partner thebusiness in the achievement of its ambitious growth plans and to build a strong leadershippipeline for the present and several years into the future. Industrial Relations continuedto be cordial.

Senior leaders have been investing lot of time and efforts in identifying anddeveloping succession pipeline for critical positions in the organization. The transitionmanagement programmes viz. FTF and LEAD have been very successful and as part ofthe programme implementation of Individual Development Plans (IDPs) for talent poolidentified through these programmes is being facilitated. The IDPs are being reviewedregularly and On-the-Job projects job enlargement /job rotation mentoring support to thetarget group are being provided. Coaching & mentoring was done for select talentacross the organization with an intent of developing future leader Internal employees havebeen given opportunities to take up higher roles and grow in the system.

The Company had 572 permanent employees on its rolls as on 31 March 2021.

The disclosure with respect to remuneration as required under Section 197 of theCompanies Act 2013 read with Rule 5 of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is attached and forms part of this Report as Annexure-C.

The information relating to employees and other particulars required under Section 197of the Companies Act 2013 read with Rule 5 of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 will be provided upon request. In terms of Section136 of the Companies Act 2013 the Report and Accounts are being sent to the Membersexcluding the information on employees particulars of which are available for inspectionby the Members at the Registered Office of the Company during business hours on allworking days of the Company up to the date of the forthcoming Annual General Meeting. Ifany Member is interested in obtaining a copy thereof such member may write to the CompanySecretary in the said regard.

24. Conservation of Energy Technology Absorption and Foreign Exchange Earnings andOutgo

Conservation of energy technology absorption and foreign exchange earnings and outgois annexed herewith as Annexure-D.

25. Disclosure under the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013

The Company has in place an anti-sexual harassment policy in line with the requirementof the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013. Internal Compliance Committee (ICC) has been set up to redress complaintsreceived regarding sexual harassment. All employees (Permanent contractual temporary andtrainees) are covered under this policy. The Company has not received any complaint aboutsexual harassment during the year 2020-21.

26.Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed M/s. R Sridharan Associates Company Secretaries to undertake Secretarial Auditof the Company. The Secretarial Audit Report is annexed herewith and forms part of thisReport as Annexure-E. The Company has ensured compliance of the Secretarial Standardsissued by the Institute of Company Secretaries of India during the period under review.Accordingly no qualification or observation or other remarks have been made by theSecretarial Auditor in his Report.

27.Auditors

The Members have appointed M/s Deloitte Haskins & Sells Chartered Accountants(Firm Registration No. 008072S) the Statutory Auditors of the Company for a period of 5years from the conclusion of 45* AGM (2018) till the conclusion of 50*1 AGM(2023) subject to ratification of such appointment by members at every AGM. Therequirement to place the matter relating to appointment of auditors for ratification byMembers at every AGM has been done away by the Companies (Amendment) Act 2017 with effectfrom 7 May 2018. Accordingly no resolution is being proposed for ratification ofappointment of statutory auditors at the Forty-eighth AGM.

Mr. B Venkateswar was appointed as Cost Auditor for audit of the Cost Accountingrecords of the Company for the year ended 31 March 2021. A resolution seeking Members'ratification of the Remuneration payable to Cost Auditor is included in the AGM noticedated 24 May 2021. The Cost Audit report will be filed within the stipulated period.

The Directors thank all Customers Vendors Banks State Governments and Investors fortheir continued support to your Company's performance and growth. The Directors also wishto place on record their appreciation of the contribution made by all the employees of theCompany in delivering the good performance during the year.

On behalf of the Board
L Ramkumar
Chennai Chairman
24 May 2021 DIN-00090089

#MDEnd#

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