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SML ISUZU Ltd.

BSE: 505192 Sector: Auto
NSE: SMLISUZU ISIN Code: INE294B01019
BSE 10:59 | 02 Mar 495.00 5.40
(1.10%)
OPEN

493.60

HIGH

499.00

LOW

492.30

NSE 10:49 | 02 Mar 495.75 5.50
(1.12%)
OPEN

493.00

HIGH

499.90

LOW

490.40

OPEN 493.60
PREVIOUS CLOSE 489.60
VOLUME 682
52-Week high 551.30
52-Week low 280.00
P/E
Mkt Cap.(Rs cr) 716
Buy Price 495.00
Buy Qty 10.00
Sell Price 495.95
Sell Qty 5.00
OPEN 493.60
CLOSE 489.60
VOLUME 682
52-Week high 551.30
52-Week low 280.00
P/E
Mkt Cap.(Rs cr) 716
Buy Price 495.00
Buy Qty 10.00
Sell Price 495.95
Sell Qty 5.00

SML ISUZU Ltd. (SMLISUZU) - Director Report

Company director report

The Directors are pleased to present their Thirty-Sixth Annual Reporttogether with audited financial statements for the financial year ended 31st March 2020.

PERFORMANCE REVIEW

Indian economy witnessed slowdown during FY 2019-20 with GDP growthmoderating to 4.2% from 6.1% achieved in the preceding year mainly due to decline in theperformance of some of the prominent sectors such as manufacturing utilitiesconstruction services etc. Further lower government spending and decline in privateconsumption also impacted the growth.

Subdued economic environment tighter financial conditions limitedfreight demand revised axle norms resulting in overcapacity in trucking system etc. hadits inevitable impact on the demand for Commercial Vehicles during FY 2019-20. Inventorycorrections by the Dealers in the last quarter of the year for transition to BS VIemission norms and country-wide lockdown announced by the Government of India in March2020 to contain the spread of Covid-19 added to the woes of the Industry adverselyimpacting sales volume further.

As a result during fiscal 2019-20 the domestic Commercial Vehiclesindustry registered decline of 29% with volumes reaching at 717700 vehicles. Lightvehicles (LCVs) declined by 20% with volumes at 492900 and Medium & Heavy vehicles(M&HCVs) dropped by 42% with volumes at 224800.

In line with the industry trend the Company's sales volume alsosuffered reaching 10533 vehicles in FY 2019-20 compared to 13602 in the previous fiscal- a decline of 23%.

The financial performance of the Company for the year ended 31stMarch 2020 is summarized below :

Year ended 31st March 2020 2019
Sales Volume (No. of Vehicles) 10533 13602
Revenue from Operations 1154.16 1409.22
Profit before Other Income Depreciation Finance Costs and Tax 11.89 74.38
Add: Other income 5.14 4.49
Profit before Depreciation Finance Costs and Tax 17.03 78.87
Less: Depreciation and Amortisation 40.72 38.44
Profit / (Loss) before Finance Costs and Tax (23.69) 40.43
Less: Finance Costs 14.63 16.10
Profit / (Loss) before Tax (38.32) 24.33
Less: Tax (Including Deferred Tax) (17.26) 4.76
Profit / (Loss) after Tax (21.06) 19.57
Add: Other Comprehensive Income / (Loss) [Net of Tax] (2.43) (142)
Total comprehensive income for the year (23.49) 18.15

DIVIDEND

Keeping in view the financial position of the Company the Directors ofyour Company have not recommended any dividend for the Financial Year 2019-20.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis which also covers the state of theCompany's affairs forms a part of this report. CORPORATE GOVERNANCE

A report on corporate governance together with the Certificate fromM/s. A. Arora & Co. a firm of Practicing Company Secretaries confirming compliancewith corporate governance norms as stipulated under the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 forms a part of this report.

INDUSTRIAL RELATIONS

Industrial relations and work atmosphere remained cordial throughoutthe year with sustained communication and engagement with workforce through variousforums.

SAFETY HEALTH AND ENVIRONMENT

The Company continues to demonstrate strong commitment to safetyhealth and environment which have been adopted as core organizational values. The Companyensures safety and audits its facilities in accordance with statutory and regulatoryrequirements. The Directors review these areas periodically through reports andpresentations made at the Board Meetings. Employees are continuously made aware of hazards/ risks associated with their job and their knowledge and skills are updated throughrequisite training to meet any emergency. Medical check-ups and eco-friendly activitiesare conducted periodically. Safe disposal of hazardous waste is ensured through recyclers/ co-processors of hazardous wastes. Effluent treatment plant and online monitoringsystems have been installed for the treatment of trade & domestic effluents and usageof treated water for other processes like green belt maintenance.

The Company continues to maintain and uphold ISO 14001:2015(Environmental Management System) IATF 16949: 2016 (Automotive Quality ManagementSystem) ISO 27001:2013 (Information Security Management System) ISO 9001:2015 (QualityManagement System) and ISO 45001:2018 (Occupational Health & Safety Management System)certifications.

CURRENT BUSINESS ENVIRONMENT

The Commercial Vehicle Industry (CVI) which was impacted severelyduring FY 2019-20 due to economic slowdown revised axle norms transition to new emissionnorms etc. is now facing another challenge - the outbreak of Covid-19. Following thecomplete lockdown instructions as pronounced by the Central Government the Plantoperations of the Company were temporarily shut from 23rd March 2020 to 3rd May 2020.Thereafter the Company resumed operations after obtaining the requisite approvals.Management has taken appropriate measures to ensure the continuity of business activitieswith due focus on safety of the employees.

Due to disruptions in demand and supply chain across the CV Industryarising from outbreak of Covid-19 Commercial Vehicles sales in the country werenegligible during months of April & May 2020. In June 2020 freight movement improvedto some extent with easing of lockdown restrictions. But demand sentiments remained muteddue to various uncertainties associated with the pandemic. The Company could achieve salesvolume of only 202 vehicles during Q1 of current fiscal against 4282 in the correspondingperiod of the previous year. Current scenario and outlook for CVI are discussed in detailin the Management Discussion and Analysis which forms part of this Report.

Amidst such challenging scenario the Company is increasing its focuson customer reach product development operational efficiencies and cost optimization.

DIRECTORS

Mr. Kazuo Goda tendered his resignation as Director of the Company witheffect from 30th June 2020. The Board in its Meeting held on 21st July 2020 recordedits deep appreciation for his valuable support and advice during his tenure.

The Board on the recommendation of its Nomination and RemunerationCommittee has appointed Mr. Noboru Murakami as an Additional Director of the Company witheffect from 21st July 2020 subject to approval of the Members of the Company at theensuing Annual General Meeting.

At the last Annual General Meeting held in September 2019 the Membershad approved the re-appointment of Mr. S.K. Tuteja and Mr. Sudhir Nayar as IndependentDirectors of the Company for a second term of five years effective from 22nd September2019 and Dr. (Mrs.) Vasantha S. Bharucha as Independent Director of the Company for asecond term of three years effective from 22nd September 2019. Members had also approvedthe appointment of Mr. Chandra Shekhar Verma as Independent Director of the Company forfive years effective from 22nd September 2019.

Mr. Masaki Morohoshi retires by rotation and being eligible offershimself for re-appointment.

Mr. Pankaj Bajaj retires by rotation and being eligible offers himselffor re-appointment.

The details of the Directors being recommended for appointment /re-appointment are contained in the Notice convening the ensuing Annual General Meeting ofthe Company.

All the independent Directors have given declaration to the Companythat they meet the criteria of 'independence' set out in the SEBI (LODR) Regulations 2015and the Companies Act 2013. The Board is of the opinion that the Independent Directors ofthe Company hold highest standards of integrity and possess requisite expertise andexperience required to fulfill their duties as Independent Directors.

In terms of Section 150 of the Companies Act 2013 read with the Rulesframed there under Independent Directors of the Company have confirmed to the Companythat they have registered themselves with the databank maintained by the Indian Instituteof Corporate Affairs (IICA).

KEY MANAGERIAL PERSONNEL (KMPs)

In terms of the applicable provisions of the Companies Act 2013 Mr.Yugo Hashimoto Managing Director & CEO Mr. Gopal Bansal Whole-time Director &CFO and Mr. Parvesh Madan Company Secretary are the Key Managerial Personnel of theCompany.

NOMINATION AND REMUNERATION POLICY

Based on the recommendations of its Nomination and RemunerationCommittee the Board has adopted a Nomination and Remuneration Policy which is attachedas Annexure A.

SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES

The Company does not have any Subsidiary Joint Venture or AssociateCompany.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during thefinancial year were at arm's length in the ordinary course of business and in compliancewith the applicable provisions of the Companies Act 2013 and the Listing Regulations.There were no material transactions made by the Company during the year that would haverequired Members' approval.

All related party transactions are placed before the Audit Committeefor approval. Prior omnibus approval of the Audit Committee is obtained for thetransactions which are repetitive in nature.

The Company has adopted a policy to deal with related partytransactions as approved by the Board of Directors. It is available on the Company'swebsite at web link: http://smlisuzu.com/Financials/RPTPolicy.aspx.

In terms of Section 134(3)(h) of the Companies Act 2013 there are notransactions to be reported in Form AOC-2. The details of the related party transactionsas per Ind-AS are set out in Note 36 to the Financial Statements

EXTRACT OF ANNUAL RETURN

Pursuant to Section 92 (3) of the Act and Rule 12 (1) of The Companies(Management and Administration) Rules 2014 the extract of Annual Return in Form MGT-9 isavailable on the website of the Company at web link https://www.smlisuzu.com/Upload/AgmNotice/f70e250fMGT-9.pdf and is also attached as Annexure B.

MEETINGS OF THE BOARD

Six Board meetings were held during the year as detailed in theCorporate Governance Report which forms part of this report.

AUDIT COMMITTEE

The Audit Committee comprises of three independent Directors Mr. S.K.Tuteja as Chairman Mr. Sudhir Nayar and Mr. Chandra Shekhar Verma and the Whole-timeDirector & CFO Mr. Gopal Bansal.

All the recommendations made by the Audit Committee during the yearwere accepted by the Board.

PARTICULARS OF EMPLOYEES

The information as per Section 197 of the Companies Act 2013 read withRule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 forms part of this Report is attached as Annexure C.

The disclosure as per Section 197 of the Companies Act 2013 read withRule 5 (2) and Rule 5 (3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is provided in a separate annexure forming part of this Report.That annexure is not being sent to the Members and others entitled to this Report and thefinancial statements as provided in Section 136 (1) of the Companies Act 2013. Anymember interested in obtaining a copy of the said Annexure may write to the CompanySecretary at investors@smlisuzu.com.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186 OFTHE COMPANIES ACT 2013

The Company has not given any loans guarantees or made any investmentsduring the year which would be covered by Section 186 of the Companies Act 2013.

AMOUNTS PROPOSED TO BE CARRIED TO RESERVES

No amount proposed to be transferred to General Reserves.

MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION OF THECOMPANY

Covid-19 pandemic has significantly impacted the business operations ofthe Company by way of stoppage of production / sales and disruption in supply chainw.e.f. 23rd March 2020. With the ease of restrictions on movement of goods & peopleoperations recommenced from the month of May 2020 with limited capacity.

The Company has evaluated the impact of this pandemic on its businessoperations financial position internal financial reporting and controls etc. and hastaken appropriate mitigating measures. Based on the detailed assessment of its liquidityposition financial arrangements future course of actions and business plans the Companyhas concluded that the carrying value of its assets as at the end of Balance Sheet datewill be recovered.

However the assessment of Covid-19 impact on business operations is acontinuing process given the uncertainties associated with its nature and duration.Accordingly the actual impact on the operational and financial performance may differfrom that estimated. The Company will continue to closely monitor any material changes tothe future business conditions and financial performance.

SUSTAINABILITY INITIATIVE

Your Company is conscious of its responsibility towards preservation ofnatural resources and continuously takes initiatives to reduce consumption of electricityand water.

RISK MANAGEMENT

The primary objective of risk management is to protect the Companyagainst risks to the value of the business its capital and its continuity. In order toachieve the objective and for better governance the Board has constituted a RiskManagement Committee (RMC) comprising two independent Directors one non-executiveDirector and the Whole-time Director & CFO.

RMC is entrusted with the functions of determining efficacy of riskmanagement framework of the Company evaluation of risks and mitigating measures. TheCompany has adopted a formal Risk Management Policy based on the recommendations of RMC.

The Policy sets out key risk areas - financial risks (including risk toassets) commodity price risks foreign exchange fluctuation risks legislative andregulatory risks environmental risks (including natural disasters) operational risks(markets production technology etc.) IT & Cyber Security risks risks relating toemployment and manpower and individual large transactional risks. The Managing Director& CEO identifies and proposes action in respect of all risks through his managementteam as and when any are perceived or foreseen or inherent in operations; analyses theseand then reports to RMC for its review and guidance. The Directors also bring to thenotice of and caution the Committee of a risk perceived by them.

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) Committee was reconstituted inFebruary 2020 with one independent Director - Dr. (Mrs.) Vasantha S. Bharucha as Chairmanand two Executive Directors - Mr. Yugo Hashimoto Managing Director & CEO and Mr. GopalBansal Whole-time Director & CFO as Members. On the recommendations of the Committeethe Board has adopted Company's policy on CSR with key thrust areas defined as - promotinghealthcare and sanitation supporting education of girl child and under privilegedchildren sponsoring vocational education / technical education etc.

Annual Report on CSR activities for the year ended 31st March 2020 isattached as Annexure D.

BOARD EVALUATION

Pursuant to the provisions of the Companies Act 2013 and ListingRegulations performance evaluation of the Board and its Committees and all the Directorshas been carried out and the details are covered in the Corporate Governance Report.

CHANGE IN THE NATURE OF BUSINESS

There has been no change in the nature of business of the Companyduring the year.

SHARE CAPITAL

There was no change in the Company's issued subscribed and paid-upequity share capital during the year.

DEPOSITS

During the year the Company has not accepted any deposit under ChapterV of the Companies Act 2013.

SIGNIFICANT ORDERS PASSED BY REGULATORS COURTS OR TRIBUNALS IMPACTINGGOING CONCERN AND COMPANY'S OPERATIONS

To the best of our knowledge the Company has not received any suchorders from regulators courts or tribunals or any other authority during the year whichmay impact the going concern status of the Company or its operations in future.

POLICY ON PREVENTION PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT ATWORKPLACE

The Company has adopted a policy in line with the provisions of theSexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013(the Act) and the Rules there under. The Policy aims to provide protection to women at theworkplace and prevent and redress complaints of sexual harassment and for matters

connected or incidental thereto with the objective of providing a safeworking environment. The Company has also constituted an Internal Complaints Committee inaccordance with the Act to inquire into complaints and take appropriate action.

The Company has not received any complaint of sexual harassment duringthe year.

VIGIL MECHANISM/ WHISTLE BLOWER POLICY

The Company has adopted a whistle blower policy to provide formalmechanism to the Directors and the employees to report their concerns about unethicalbehaviour actual or suspected fraud or violation of the Company's code of conduct orethics policy or to report genuine concerns or grievances including instances of leak orsuspected leak of unpublished price sensitive information pursuant to SEBI (Prohibition ofInsider Trading) Regulations 2015. It provides for adequate safeguards againstvictimization of Directors and employees who avail the mechanism and provides for directaccess to the Chairman of the Audit Committee.

Whistle Blower Policy of the Company is available on the Company'swebsite at web link: http://smlisuzu.com/Financials/WhistleBlowerPolicy.aspx

SECRETARIAL STANDARDS

The Company has duly complied with the applicable Secretarial Standardson meeting of Board of Directors (SS-1) and General Meetings (SS-2) issued by theInstitute of Company Secretaries of India (ICSI).

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134 (3) (c) and 134 (5) of the Companies Act 2013the Directors to the best of their knowledge and ability confirm that:

(a) in the preparation of the annual accounts for the year ended 31stMarch 2020 the applicable accounting standards have been followed and properexplanations provided relating to material departures if any;

(b) they have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as at 31 st March 2020and of the profit of the Company for the year ended on that date;

(c) they have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;

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

(e) they have laid down internal financial controls to be followed bythe Company and that such internal financial controls are adequate and are operatingeffectively;

(f) they have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and operatingeffectively.

FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS

The details of familiarisation programme for Independent Directors inrespect of their roles rights & responsibilities nature of the industry in whichCompany operates business model of the Company and related matters are available on thewebsite of the Company at web link: http://smlisuzu.com/Financials/FamiliarisationProgramme.aspx

SECRETARIALAUDIT

Pursuant to the provisions of Section 204 of the Companies Act 2013and The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 M/sA. Arora & Co. a firm of Company Secretaries in practice were appointed as theSecretarial Auditors of the Company to carry out the Secretarial Audit of the Company forFY 2019-20.

The Secretarial Audit Report for the year under review does notcontain any qualification and is attached as Annexure E.

STATUTORY AUDITORS

The term of M/s. B S R & Associates LLP Chartered Accountants theStatutory Auditors of the Company is completing at the ensuing Annual General Meeting(AGM) of the Company.

Pursuant to the recommendation of the Audit Committee the Board ofDirectors of the Company at their meeting held on 21st July 2020 have proposed theappointment of M/s. Walker Chandiok & Co LLP Chartered Accountants (Firm RegistrationNo. 001076N/N500013) as the Statutory Auditors of the Company for a period of five yearsfrom the conclusion of this AGM till the conclusion of 41 st AGM of the Company.

M/s. Walker Chandiok & Co LLP Chartered Accountants have submittedtheir written consent to the Company that they are eligible and qualified to be appointedas Statutory Auditors of the Company in terms of Section 139 of the Companies Act 2013and also satisfy the criteria provided in Section 141 of the Companies Act 2013.

Auditors' Report issued by M/s. B S R & Associates LLPStatutory Auditors on the Audited Financial Statement of the Company for the year underreview does not contain any qualification.

INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIAL STATEMENTS

Based on the work performed by the internal statutory and secretarialauditors and the reviews carried out by the Management and the relevant Board Committeesthe Directors are of the opinion that the Company has in place adequate internalfinancial controls with reference to financial statements commensurate with the size andnature of the business of the Company. During the year such controls were tested and noreportable material weaknesses in the design or operation were observed.

Ongoing investigation in respect of the allegations received by theCompany on certain operational and financial matters as reported in the previousDirectors' Report has already been completed.

Based on the assessment of the said allegations and the investigationreport the Board is of the view that while there may have been some control deficienciesthere is no evidence available that indicates any material financial impropriety whichimpacts the books of accounts of the Company. The Company continues to work towardsfurther strengthening of its internal controls and processes.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGS AND OUTGO

The required information on conservation of energy technologyabsorption and foreign exchange earnings and outgo as stipulated in the Companies Act2013 is attached as Annexure F.

COST RECORDS

There are no cost records which are prescribed under Section 148(1) ofthe Companies Act for any of the products manufactured / services rendered by the Company.

BUSINESS RESPONSIBILITY REPORT

The Securities and Exchange Board of India vide its notification dated26th December 2019 has mandated the inclusion of the Business Responsibility Report(BRR) as part of the Annual Report for top 1000 listed entities based on marketcapitalization. In compliance with the Notification BRR for FY 2019-20 is attached as AnnexureG and forms part of this Report.

ACKNOWLEDGMENTS

Your Directors express their grateful appreciation for the co-operationreceived from the concerned Government departments banks dealers and other businessconstituents during the year under review. Your Directors also wish to place on recordtheir deep sense of appreciation for the committed services of the employees of theCompany at all levels.

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