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Shriram Pistons & Rings Ltd.

BSE: 533021 Sector: Auto
NSE: SHRIPISTON ISIN Code: INE526E01018
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Shriram Pistons & Rings Ltd. (SHRIPISTON) - Director Report

Company director report

The Directors have pleasure in presenting the 55th Annual Report along withthe audited accounts of the Company for the year ended 31st March 2019.

Financial & Operational Performance

Company's revenues from operations (without excise duty/ taxes) increased during theyear from Rs. 17294 Million to Rs. 19549 Million. Gross Profit [before OtherComprehensive Income (OCI)] for the year after all interest charges but beforedepreciation and taxes were Rs. 3036 Million compared to Rs. 3012 Million of last year.Company's Gross Profit increased marginally from last year despite increase in cost ofcommodities severe liquidity crisis huge pressure from OEMs to reduce prices and verydifficult and volatile business conditions especially in the second half of the year.

The summarized standalone and consolidated results of the Company are as under:

(Rs./ Million)

Financial Year ended

Particulars

Standalone

Consolidated

31/03/2019 31/03/2018 31/03/2019 31/03/2018
Revenue from Operations-with Excise duty 19549 17743 19549 17743
- without Excise duty 19549 17294 19549 17294
Profit/(loss) before Interest Depreciation & Tax (EBITDA) 3175 3176 3175 3176
Gross Profit (before OCI) 3036 3012 3036 3012
Depreciation 943 903 943 903
Profit Before Tax (before OCI) 2092 2108 2092 2108
Income Tax (including for earlier years) 708 720 708 720
Net Profit After Tax (before OCI) 1384 1389 1384 1389
Dividend including Dividend Distribution Tax 270 215 270 215
Amount transferred to General Reserve 613 750 613 750

During the year Shriram Automotive Products Ltd. amalgamated with the Company withappointed date for amalgamation as 01.04.2018 (as detailed below) and therefore theresults of current year are not comparable with last year.

Company's exports increased from Rs. 2994 Million to Rs. 3257 Million despiteeconomic instability and sanctions in some important markets. Exports remain an importantcornerstone in Company's strategy for sustainable growth and to pro-actively acquiredeeper understanding of the technology quality and service expectations of global OEMsoperating in advanced automobile markets. We expect further growth in exports during theyear 2019-20.

During the year the Company has implemented low cost automation interlinking ofmachines and installation of robots in Foundry operations. These initiatives are expectedto improve Operating Profit margins in future. In addition to remain cost competitiveCompany took various measures for cost reduction on a sustainable basis.

With a well-equipped Tech Centre and strong support from our Technology Partners theCompany has acquired key business for BS-6 models which is expected to result inimprovement in long term market share with OEMs in India. The Company is rapidly gearingup for the smooth ramp-up and commercial production of latest technology Pistons PinsRings and Engine Valves for BS-6 engines.

Amalgamation of Shriram Automotive Products Ltd. with the Company

The Hon'ble National Company Law Tribunal vide its order dated 05.03.2019 approvedthe Scheme of Amalgamation ("Scheme") of Shriram Automotive Products Ltd.("SAPL") with the Company with appointed date for amalgamation as 01.04.2018.The amalgamation was effectuated on 29.03.2019.

Accordingly Financial Results of the Company as given above include the operationalresults of SAPL for F.Y. 2018-19 also.

Pursuant to the approval of the Scheme the authorized share capital of SAPL standstransferred to and added with the authorized share capital of the Company and standsenhanced to Rs. 825 Million. Further as part consideration the Company has issued2885760 Nos. 4.2% fully paid up Non Participating Redeemable Non- ConvertibleCumulative Preference Shares of Rs. 100/- each redeemable at par to the equityshareholders of SAPL.

Dividend

The Directors in their meeting of May 10 2019 have recommended that:

- Preference Shareholders be paid dividend at the stipulated rate of 4.2% per share onthe 4.2% fully paid up Non Participating Redeemable Non- Convertible CumulativePreference Shares of Rs. 100/- each on a pro-rata basis from the date of allotment ofshares i.e. 30.03.2019. The aggregate amount of dividend works out to Rs. 0.0230137 pershare for the year.

- Equity shareholders be paid dividend of Rs. 10.00 per share for the year inclusiveof Rs. 4.00 per share already paid.

New projects and Capacity Expansion

The Board of Directors of the Company have approved purchase of land for setting up 3rdPlant considering long term sustainable growth plans.

The Company also decided to set up a Centre of Excellence for Surface Treatment withsignificant improvements in operations in line with our Collaborators' practice.

Amalgamation of Shriram Automotive Products Limited with the Company will strengthenthe product portfolio and will lead to increase in sales by leveragingmarketing/distribution strength in Domestic & Exports After Market.

Company is identifying various projects for diversification of its product portfoliofor continuous growth in sales and to minimize the impact of electric mobility in somesegments.

Change in nature of business

During F.Y. 2018-19 there was no change in nature of Company's business.

Material changes and commitment

No material change and/ or commitment affecting the financial position of the Companyhas occurred between between April 1 2019 and the date of signing of this Report.

Subsidiary Company and its Annual Accounts

There was no operation in the Subsidiary Company M/s SPR International Auto ExportsLimited during the year. Annual accounts of the Subsidiary Company are available onCompany's website and shall also be kept for inspection by any member in the Head Officeand Registered Office. Hard copy of Annual Accounts of Subsidiary Company would also bemade available to members seeking such information.

In accordance with the Indian Accounting Standard (Ind AS-110) on consolidatedfinancial statements the consolidated financial statements are attached which form partof the Annual Report.

During the year no company has become or ceased to be Company's Subsidiary JointVenture or Associate Company.

Board Meetings

During the year 7 meetings of Board of Directors were held details of which have beenprovided in the Report on Corporate Governance Annexure-I to this Report.

Audit Committee

As on 31.03.2019 members of the Audit Committee of the Company are Shri InderdeepSingh (Chairman) Shri Ravinder Narain Shri C.Y. Pal and Shri Pradeep Dinodia.

During the year the Board has accepted all recommendations made by the AuditCommittee.

Whistle Blower Policy

The Company has a Whistle Blower Policy for Directors Employees and Stakeholders toreport any kind of misuse of Company's properties mismanagement or wrongful conductprevailing/executed in the Company. As per the policy all Whistle Blowers are grantedaccess to Chairman of the Audit Committee in appropriate cases.

Nomination and Remuneration Policy

The Nomination and Remuneration Committee (NRC) of Board has formulated a Nominationand Remuneration Policy for remuneration of Directors Key Managerial Personnel (KMP)Senior Management Personnel (SMP) and other employees of the Company.

The Nomination and Remuneration Policy covers the criteria for appointment of Directors(including Independent Directors) KMPs and SMPs. The Policy also covers the criteria forremuneration.

The level and composition of remuneration shall be reasonable and sufficient toattract retain and motivate Directors KMPs SMPs and employees at all levels. It shallbe determined taking into account the factors such as Company's performance and theremuneration structure as generally applicable in the industry.

The Directors affirm that remuneration paid to all Directors KMPs SMPs and all otheremployees is as per the remuneration policy of the Company.

In accordance with the amendments in SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Board in its meeting held on 02.02.2019 revised theNomination & Remuneration Policy effective from 01.04.2019 by amending thedefinition of SMP and inclusion of recommendation of remuneration payable to KMP and SMPby NRC to the Board.

Nomination and Remuneration Policy of the Company is available on Company's websiteviz. www.shrirampistons.com under the link "Investors' Guide".

As on 31.03.2019 numbers of permanent employees on rolls of the Company are 4398.

Related Party Transactions

The Company's contract/arrangements with the related parties are in the ordinary courseof business and on arm's length basis. Thus provisions of Section 188(1) of the CompaniesAct 2013 are not applicable. During the year the Company has not entered into anycontract/ arrangement/ transaction with related parties which could be construed to be"material" in accordance with the "Policy for determining material RelatedParty Transactions" approved by the Board. Details of all transactions with relatedparties are given in Note No. 33 of Notes forming part of Financial Statements.

The Company has complied with the Accounting Standards on Related Party Transactions.

Internal Financial controls and their adequacy

The Company has appointed M/s Ernst & Young and M/s KPMG as its Internal Auditorsin addition to in-house team. The Internal Control System is commensurate with the sizescale and complexity of Company's operations. The Internal Auditors report to the Chairmanof the Audit Committee.

The Internal Audit teams monitor and evaluate the efficacy and adequacy of internalcontrol systems in the Company its compliance with operating systems accountingprocedures and policies at all locations of the Company. Based on their reports thecorrective actions in respective areas are taken to strengthen the controls andsignificant audit observations and corrective actions thereon are presented to the AuditCommittee.

Annexures to Directors' Report

Following reports which form an integral part of Directors' report are enclosed: -

1. Report on "CORPORATE GOVERNANCE"-as per Annexure-I

2. Report on "MANAGEMENT DISCUSSION AND ANALYSIS"-as per Annexure-II

3. Report on "CONSERVATION OF ENERGY" "TECHNOLOGY ABSORPTION" and"FOREIGN EXCHANGE EARNING & OUTGO"-as per Annexure-III

4. Data of "EMPLOYEES"-as per Annexure-IV

5. "DETAILS AND ANNUAL REPORT ON CSR"-as per Annexure-V

6. "SECRETARIAL AUDIT REPORT"-as per Annexure-VI

7. "SALIENT FEATURES OF SUBSIDIARY COMPANY"-as per Annexure-VII

Disclosures on Company's website

Company is committed to good corporate governance practice and corporate socialresponsibility. In line with the Company's principles/ commitment the following policies/programmes are in place and are available on Company's website viz. www.shrirampistons.com under the link "Investors' Guide":

1. Corporate Social Responsibility (CSR) Policy

2. Vigil Mechanism/ Whistle Blower Policy

3. Company's policy on dealing with Related party transactions

4. Nomination and Remuneration Policy

5. Familiarization programmes for Independent Directors

6. Policy for distribution of Dividend and

7. Extract of Annual Return of the Company

Directors' Responsibility Statement:

The Directors confirm that: -

1. in the preparation of the annual accounts the applicable Accounting Standardsissued by the Institute of Chartered Accountants of India and requirements of CompaniesAct have been followed and there are no material departures from the same.

2. appropriate accounting policies have been selected and applied consistently andhave made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at 31st March 2019 and ofthe profit of the Company for the same year.

3. 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 theassets of the Company and for preventing and detecting fraud and other irregularities.

4. the annual accounts have been prepared on a going concern basis.

5. internal financial controls are followed by the Company and are adequate andoperating effectively.

6. proper and adequate systems have been devised to ensure compliance with provisionsof all applicable laws and such systems are adequate and operating effectively.

Other Disclosures:

1. During the year no fraud has been reported by the Statutory Auditors to the AuditCommittee or the Board under Section 143(12) of the Companies Act 2013.

2. No orders were passed by the Regulators or Courts or Tribunals which could impactgoing concern status and Company's operations in future.

3. There are no disqualifications reservations or adverse remarks or disclaimers inthe Statutory Auditors' and Secretarial Auditors' Report.

4. No Director of the Company is receiving commission from the Company and also fromits Subsidiary Company.

5. Company has not given any loans guarantees or made investments under section 186 ofthe Companies Act 2013.

6. The Company has complied with applicable Secretarial Standards on Board Meetings andGeneral Meetings.

7. The Company has not issued any of the following:

i) Equity Shares with differential rights

ii) Sweat Equity Shares

iii) Shares issued pursuant to Employee Stock Option Scheme or Employee Stock PurchaseScheme

8. During the year the Company has not bought back any Shares.

Fixed Deposits

Fixed deposits amounting to Rs. 287 Million were accepted during the year and depositsamounting to Rs. 13 Million pertaining to 48 depositors remained unclaimed/ unpaid at theclose of the year. During the year there was no default in repayment of deposits andinterest thereon. Deposits accepted by the Company are in compliance with requirements ofChapter V of the Companies Act 2013.

Investor Education and Protection Fund

The amount lying in unpaid dividend accounts of last seven years is Rs. 0.53 Millionwhich is due to be transferred to the Investor Education and Protection Fund on19.07.2019. Amount transferred to the Investor Education and Protection Fund during theyear is Rs. 0.10 Million.

Disclosures w.r.t. shares lying in IEPF Account:

S. No. Particulars No. of Shareholders No. of Shares
1 Aggregate number of Shareholders and the outstanding shares in the IEPF Authority account lying at the beginning of the year 10 14752
2 Number of Shareholders who approached the Company for transfer of shares from IEPF Authority account during the year NIL NIL
3 Number of Shareholders to whom shares were transferred from IEPF Authority account during the year NIL NIL
4 Aggregate number of Shareholders and the outstanding shares in the IEPF Authority account lying at the end of the year 11 14800

Notes:

1. During the year 48 Nos. Shares pertaining to one shareholder were transferred toIEPF Authority Account.

2. The voting rights on these shares shall remain frozen till the rightful owner ofsuch shares claims the shares.

Maintenance of Cost Records and Cost Audit

As specified by the Central Government the Company is required to maintain CostRecords and get these records audited by a Cost Accountant.

The Company is maintaining Cost Records. Cost Audit Report of the Company for the yearended 31st March 2018 duly audited by M/s Chandra Wadhwa & Co. CostAccountants New Delhi was submitted to the Ministry of Corporate Affairs Government ofIndia on 10th August 2018 before the due date of 3rd September2018.

Details of CSR Activities undertaken by the Company

During the year Company has spent Rs. 48.10 Million on various CSR activities againstthe requirement of Rs. 36.24 Million as per the provisions of the Companies Act 2013.Details of initiatives taken by the Company during the year in CSR activities andcomposition of CSR Committee are provided in Report on CSR Activities undertaken by theCompany in 2018-19 Annexure-V to this Report.

Risk Management Framework

The Company has developed and implemented Risk Management Policy includingidentification of elements of risk if any which in the opinion of the Board may threatenthe existence of the Company. The Company has also constituted a "Risk ManagementCommittee". As on 31.03.2019 Members of the Committee are Shri Pradeep Dinodia(Chairman) Shri C.Y. Pal Shri Inderdeep Singh Shri A. K. Taneja Shri R. SrinivasanShri Luv D. Shriram and Smt. Meenakshi Dass.

Disclosure under Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013

The Company has complied with provisions of Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013. The Company has in place a Policy onprevention of sexual harassment at workplace. The Company has also constituted InternalComplaints Committees under the Act. No complaint was received/ pending under the aboveAct during the year.

Changes in Directors/ KMPs during the year and Appointment/ Re-appointment of Directorsin the ensuing AGM

Dr. Alexander Sagel and Shri Toru Suzuki Directors of the Company resigned from theBoard due to personal reasons with effect from 30th April 2018 and 7thMay 2018 respectively. The Board appreciated their significant contribution to theCompany & in Board deliberations and the services rendered.

The Board in its meeting of May 22 2018 appointed Dr. Peter Neu as Non-ExecutiveDirector in the casual vacancy caused due to resignation of Dr. Alexander Sagel & ShriRalf Buschbeck as Alternate Director to Dr. Peter Neu and Shri Kiyoto Tone as IndependentDirector in the casual vacancy caused due to resignation of Shri Toru Suzuki.Re-appointment of Dr. Peter Neu and Shri Kiyoto Tone was approved by Shareholders in theAnnual General Meeting (AGM) held on 10.07.2018.

The Board in its meeting held on 30.03.2019 appointed Shri Alok Ranjan and Smt.Ferida Chopra as Additional (Non- Executive Independent) Directors of the Company whoseappointment shall be subject to Shareholders' approval in the forthcoming AGM.

The Shareholders have also given their consent through special resolution forcontinuation of Directorship of Shri C.Y. Pal and Shri Ravinder Narain as Non-ExecutiveIndependent Director of the Company up to the expiry of their present term of office i.e.upto 28th July 2019 (as approved by Members in the AGM held on 29thJuly 2014) or upto the conclusion of the 55th AGM to be held in the year 2019whichever is earlier.

Shri C.Y. Pal and Shri Ravinder Narain have expressed their desire not to seekre-election therefore they will retire at the end of their current term. The Boardappreciated their long association significant contribution to the Company & in theBoard deliberations and the services rendered by Shri Ravinder Narain and Shri C.Y. Pal asDirectors of the Company.

Shri Inderdeep Singh and Shri Kiyoto Tone were appointed by the Shareholders in the AGMheld on 29.07.2014 and 10.07.2018 respectively and their current term is valid till28.07.2019. The Board in its meeting held on 10.05.2019 has decided to re-appoint ShriInderdeep Singh and Shri Kiyoto Tone for a further period of five years subject toapproval of Shareholders in the ensuing AGM.

Shri A.K. Taneja Managing Director & CEO was appointed by the Shareholders intheir meeting held on 29.07.2014 and his term was valid till 31.03.2019. Shri Luv D.Shriram Whole time Director was appointed by the Shareholders in their meeting held on29.07.2014 and his term is valid till 04.05.2019.

The Board in its meeting held on 30.03.2019 has decided to re-appoint Shri A. K.Taneja as Managing Director & CEO w.e.f. 01.04.2019 till 31.03.2022 and Shri Luv D.Shriram as Whole time Director w.e.f. 05.05.2019 till 04.05.2024 subject to approval ofShareholders.

Smt. Meenakshi Dass and Shri Pradeep Dinodia Directors retire by rotation and beingeligible offer themselves for re-appointment.

Brief resume and other details of all Directors seeking appointment/re-appointment aregiven in the 'Notice of the Annual General Meeting'.

Declarations from Independent Directors

Shri C.Y. Pal Shri Ravinder Narain Shri Inderdeep Singh Shri Kiyoto Tone Shri AlokRanjan and Smt. Ferida Chopra are Independent Directors of the Company and have given thedeclarations to the Board that they meet the criteria of independence as provided underSection 149(6) of the Companies Act 2013 and Regulation 16(1)(b) of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.

Performance evaluation of Board its Committees and Individual Directors

Pursuant to the provisions of the Companies Act 2013 the Board has carried out anannual performance evaluation of its own performance evaluation of the working of itsCommittees and the Directors individually. The manner in which the evaluation has beencarried out has been explained in Report on Corporate Governance Annexure-I to thisReport.

Appreciation

The Directors place on record their appreciation of the support extended to the Companyby the Collaborators the Bankers its business associates and their appreciation of thework of all ranks of Company's personnel during the year.

On behalf of the Board
New Delhi (PRADEEP DINODIA)
May 10 2019 CHAIRMAN
DIN:00027995