Your Directors have pleasure in presenting the Forty Sixth AnnualReport of the Company together with Audited Accounts for the year ended 31stMarch 2020.
|FINANCIAL RESULTS: || ||($ in lakhs) |
| ||Year ended ||Year ended |
|Details || || |
| ||31.03.2020 ||31.03.2019 |
|Revenue from Operations ||25814.17 ||28625.86 |
|Profit before interest depreciation and tax ||995.28 ||1308.73 |
|Less : Interest ||152.82 ||164.93 |
|Profit before depreciation and tax ||842.46 ||1143.80 |
|Less : Depreciation ||542.33 ||494.50 |
|Profit before tax and exceptional items ||300.13 ||649.30 |
|Add : Exceptional item || || |
|Profit before tax ||300.13 ||649.30 |
|Less : Provision for Taxation || || |
|Current Tax ||52.68 ||133.67 |
|Deferred Tax Liability / (Asset) (net) ||(4.32) ||(189.79) |
|Profit after tax ||251.77 ||705.42 |
|Add : Surplus / (Deficit) brought forward ||1236.10 ||530.68 |
|Less : Transfer to Other Comprehensive Income || || |
|Surplus Carried over ||1487.87 ||1236.10 |
AUTOMOBILE INDUSTRY SCENARIO-2019-20
India's economic growth in 2019-20 was 4.2% with significantdeceleration in the fourth quarter. The automotive industry demonstrated significantvolatility and markedly different growth dynamics in each segment. While the CV segmentdisplayed significant growth in the first half of the year unprecedented deceleration wasrecorded in the second half. Sales growth was muted in the 2W and non-existent for thepassenger vehicle segment.
SBL'S SALES PERFORMANCE
Your company's net sales decreased by nearly 10% during the year2019-20 as compared to financial year 2018-19 with a decrease of 18.2% in the domesticmarket and a marginal increase of 1.2% in the export market.
The suspension of operations and dispatches of goods from 24thof March 2020 due to the nation-wide lock down on account of COVID 19 outbreakcontributed disproportionately to the decreased turnover. It would however be inaccurateto blame the entire decline on the pandemic and the restrictions that flowed from it.While the company has managed to be selected to supply friction for nearly everycommercial vehicle model in the BS VI range the poor national economic indicators thereduction in demand for new haulage capacity and the upcoming model changes caused arecord fall in CV sales. This can be seen from the significant decrease of 28.9% in OESales.
Net sales for the year 2019-20 were therefore $ 253.62 crores asagainst $ 281.29 crores in the previous year.
Exports constitute nearly half your company's revenue and while the USmarket demonstrated robust demand during the year under consideration due to restrictionson dispatch of orders in the last 10 days of the FY there was only a marginal increase of1.2% in net Export sales during the FY 2019-20.
Net Foreign Exchange earned by your company in the year under reviewwas $ 88.40 crores as against
$ 84.02 crores in 2018-19.
Your Company was accredited with Two Star Export House status inaccordance with the provisions of Foreign Trade Policy 2015-2020 with a certificateissued by the Director General of Foreign Trade Chennai for a period of five years from 9thMarch 2018 to 8th March 2023.
EFFORTS & INITIATIVES TAKEN
Measures taken to reduce Raw material loss in production and energyconservation continue to yield benefits. Your Company continues to take steps to increaseshare of existing customers and to add new customers and new products both in Domesticand Export markets.
It was expected that Your Company would close the year withsignificantly improved profits considering first half revenue and PBT trends. Howeverlack lustre second-half domestic CV demand coupled with suspension of operations anddispatches in the last 10 days of March 2020 has impacted the performance of the yearresulting in PBT of $ 300.13 lacs for the FY 2019-20.
Your Directors are constrained to skip Dividend for the year keepingin mind uncertain times ahead. Your Directors assure you that various steps are beingtaken to improve the performance of the Company.
OUTLOOK FOR 2020-21 IN THE CONTEXT OF COVID-19 PANDEMIC
The COVID-19 Pandemic and consequent lockdowns of the Nation has causeda significant shock to the Indian Economy and various rating agencies estimate that Indiamay witness GDP contraction of 5% in 2020-21 and that it may take up to two years beforenormal growth is restored.
The nationwide lockdown declared from 23rd March 2020led to stoppage of operations in your company resulting in loss of production and dispatchin the last week of March 2020 impacting the performance of the Company.
With restrictions for resumption of operations from commencement of 2ndlockdown concerted efforts were made to obtain necessary approvals from the Government toresume operations at the earliest possible date to meet customer orders. Extraordinaryefforts were made to safely mobilize manpower and resume operations as soon as possiblewherever possible. With continuing Governmental restrictions on manpower and slowresumptions of operation by our domestic customers operations are focused mainly oncatering to existing Export orders and reduced OE& Domestic After Market orders.
The short term outlook for the Indian economy is rather grim anddomestic sales are expected to decline substantially which will have a knock on effect onyour company's production & sales. SBL has built its exports to nearly 50% of itsrevenue which has helped sustain operations at tolerable utilization levels from May 2020.In order to cope with this unprecedented crisis your company has taken a number of stepsto reduce fixed costs through right sizing the operation and improvements in Machines&Methods.
With economic visibility significantly limited by unprecedenteduncertainty agile and dynamic responses will be demanded to manage the volatilesituation. Your company will take all necessary measures to handle the impact of theeconomic deceleration and underutilization of capacity and to staunch and contain lossesin the current financial year. At the same time we will continue with essentialmodernization and product development to ensure that we emerge from this COVID-19 crisiswith improved capabilities and renewed vigor purpose and resolve.
RESEARCH AND DEVELOPMENT:
Your Company's R&D facility located in Padi has been recognized asan approved R&D unit by the Department of Scientific & Industrial Research (DSIR)Ministry of Science & Technology Government of India New Delhi and the recognitionis valid up to 31st March 2021.
During the year under review thrust was given for development of newproducts viz. Commercial Vehicle Linings & Clutch Facings both for new and existingcustomers. Efforts for achieving reduction in energy costs were continued in the yearunder review.
The total expenditure for R&D incurred in 2019-20 was $ 12.16crores as against $ 9.96 crores in the previous year.
Your Company does not hold any deposit from the public.
The Board of Directors of the Company met four times during thefinancial year.
Audit Committee and Stakeholders' Relationship Committee of the Boardof Directors met four times during the year.
Nomination and Remuneration Committee met three times during the yearand Corporate Social Responsibility Committee of the Board of Directors met once duringthe year.
During the year the Board has filled the vacancy caused by demise ofLate chairman Mr. K Mahesh by appointing Ms. Shobhana Ramachandran as Director of theCompany.
Mr. K Ramesh Director tendered his resignation w.e.f 12thAugust 2020 and the resultant vacancy was filled by the Board of Directors on 12thFebruary 2020 by appointing Ms. Shripriya Mahesh Ramanan as Director of the Company.
Their appointment requires approval of shareholders in the ensuingAnnual General Meeting. The resolutions for approval of appointment of Ms. ShobhanaRamachandhran & Ms. Shripriya Mahesh Ramanan as Directors are included in the noticeof the Annual General Meeting.
Mr. Krishna Mahesh Director of the Company who retires by rotation andbeing eligible for re-appointment offers himself for re-appointment as Director of theCompany for approval by the Shareholders of the Company by an Ordinary Resolution.
DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS
The Company has received necessary declaration from all IndependentDirectors of the Company under Section 149(7) of the Companies Act 2013 that theIndependent Directors of the Company meet with the criteria of their Independence laiddown in Section 149 (6) of the Act.
The format of the Disclosure is given as Annexure I.
The Company adopted a Whistle Blower Policy establishing vigilmechanism to provide a formal mechanism to the Directors and employees to report theirconcerns about unethical behavior actual or suspected fraud or violation of the Company'sCode of Conduct or ethics policy. The Policy provides for adequate safeguards againstvictimization of employees who avail the mechanism and also provides for direct access tothe Chairman of the Audit Committee. It is affirmed that no personnel of the Company havebeen denied access to the Audit Committee. The policy of Vigil mechanism is available onthe Company's website www.tvsbrakelinings.com. No complaint has been received from anyemployee since inception of the vigil mechanism.
MATERIAL CHANGES & COMMITMENTS
There are no material changes and commitments affecting the financialposition of the company which have occurred between the end of the financial year (FY2019-20) of the Company to which the financial statements relate and date of the report.
DIRECTORS' RESPONSIBILITY STATEMENT
In pursuance of Section 134(5) of the Companies Act 2013 yourDirectors confirm:
1. that in the preparation of the Annual Accounts the applicableIndian Accounting Standards (Ind-AS) have been followed;
1. that they have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive true and fair view of the state of affairs of the Company at the end of the financialyear and of the profit and loss of the Company for that period;
2. that they have taken proper and sufficient care for the maintenanceof adequate accounting records in accordance with the provisions of this Act forsafeguarding the assets of the Company and for preventing and detecting frauds and otherirregularities;
3. that they had prepared the annual accounts on a going concern basis;
4. they had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and
5. the Directors had devised proper systems to ensure compliance withthe provisions of all applicable laws and that such systems were adequate and operatingeffectively.
INFORMATION ABOUT THE FINANCIAL PERFORMANCE / FINANCIAL POSITION OF THESUBSIDIARIES / ASSOCIATES / JV AND INFORMATION ABOUT SUBSIDIARY / JV / ASSOCIATE COMPANY
There is no Subsidiary or Associate Company or JV and hence these arenot applicable.
EXTRACT OF ANNUAL RETURN
As required pursuant to Section 92(3) of the Companies Act 2013 andRule 12 of the Companies (Management and Administration) Rules 2014 an extract of AnnualReturn in Form No. MGT 9 as a part of this Annual Report is given in Annexure II.
M/s. Brahmayya & Co. Chartered Accountants Chennai havingregistration number 000511S were appointed as Statutory Auditors of the Company for aperiod of 5 years in the 43rd AGM held on 4th August2017 till the conclusion of the 48th AGM.
SECRETARIAL STANDARDS & SECRETARIAL AUDIT
Your Directors confirm that Your Company has complied with theSecretarial Standards of Board Meeting (SS-1) and General Meetings (SS-2) during the year2019-20.
Pursuant to the provisions of Section 204 of the Companies Act 2013read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 the Company appointed Mr. V Suresh Practising Company Secretary to undertakethe Secretarial Audit. The Secretarial Audit Report for the Financial Year 2019-20 isannexed to this report as an Annexure III.
QUALIFICATIONS IN AUDIT REPORTS
Explanations or comments by the Board on every qualificationreservation or adverse remark or disclaimer made -(a) by the Statutory auditor in hisreport; and (b) by the Company Secretary in practice in his Secretarial audit report.
Not applicable as there are no qualifications in Statutory Auditors'Report and in Secretarial Auditors' report.
Cost Audit is not applicable to the Company from the Financial Year2014-15 based on the amended Companies (Cost Audit & Record) Rules 2014 dated 31stDecember 2014 issued by the Ministry of Corporate Affairs Govt. of India.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGEEARNINGS AND OUTGO
A. CONSERVATION OF ENERGY
(a) Energy conservation measures taken during 2019-20
Optimization of motor power to reduce the electricalenergy consumption in Presses.at Plant 5
Horizontal replication of heating method being carriedout for optimization of heating and to reduce
Redesign of layout / regrouping of machines / redesignresizing of machines being carried out to reduce the usage of power & manpower.
(b) Impact of the above measures:
The measures taken above have helped in reducingelectrical energy and Fuel cost and would continue to help in reducing the energy cost inthe months to come.
B. TECHNOLOGY ABSORPTION a) Technology measures taken during 2019-20:
Acquired new process Technology from Japan fordevelopment of products for Heavy Duty Commercial vehicle. b) Impact of above measures:
Initial supplies started for the uncovered marketsegments.
Research & Development (R&D)
(1) Specific areas in which R&D carried out by the company
Developed and obtained approval from domestic OEMs forDrum Brake Lining for BS6 Heavy commercial vehicle applications with enhanced axle loads.
Developed and obtained approval from domestic OEMs forDrum Brake Lining for BS6 Light commercial vehicle applications.
Developed and added new features to android based vehicledata acquisition system - DEFCON (Driver Experience of Friction conditions) and collectedactual field duty cycle data for understanding and improving the performance of the newand existing products.
(2) Benefits derived as a result of the above
Continued recognition of in-house R&D by Departmentof Scientific and Industrial Research (DSIR) Government of India valid up to 31.03.2021.
Reduction in Raw material costs through upgradation inquality and yield improvement.
Obtained approval and commercialized LCV disc pads fordomestic OEM applications.
Commercialized liner for Export market "ReducedStopping Distance" applications.
(3) Future Plan of action
Development of Disc pads and Drum brake linings forvarious new vehicle applications for Domestic OEMs.
Development of Disc pads with "Reduced Coppercontent" for Export applications to meet upcoming Regulatory requirements.
(3) Development of Woven Clutch Facings for medium and heavy commercialvehicle OEM applications.
(4) Development of friction lined shoes for new generation two wheelers
(4) Expenditure on R&D
| || ||Financial Year |
|Sl. No. ||Particulars || || |
| || ||2019-20 ||2018-19 |
|A ||Capital ||28.95 ||60.26 |
|B ||Revenue ||1186.99 ||935.38 |
|C ||Total ||1215.94 ||995.64 |
|D ||Total R & D expenses as % of total turnover ||4.7% ||3.4% |
C. TECHNOLOGY ABSORPTION ADAPTATION AND INNOVATION
1. Efforts in brief made towards technology absorptionadaptation and innovation
SBL developed high damping composite matrix technologyfor meeting end user NVH requirements without compromising performance and life.
Process optimization for Quality Improvement.
Product and Process improvement by bench marking theproduct against global leaders.
2. Benefits derived as a result of the above efforts
Development of superior and competitive products forexport and domestic markets.
Quality upgradation and optimal use of resources leadingto substantial savings.
The actual RPTs entered were approved by the Audit Committee and by theBoard at the quarterly meetings during the Financial Year 2019-20. The policy on RelatedParty Transactions as approved by the Board is uploaded on the Company's website.
Particulars of Contracts or Arrangements with Related parties referredto in Section 188(1) in form AOC-2 are furnished as Annexure V.
JUSTIFICATION FOR ENTERING INTO RELATED PARTY TRANSACTIONS
The Company's Related Party Transactions have been made to meet therequirements of operations and at an arm's length basis and have been entered in theordinary course of business.
In terms of Section 134 (3) (p) of the Companies Act 2013 andRegulation 4(2)(f) of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Board reviewed and evaluated its own performance from the followingperspectives:
(a) Company Performance; (a) Risk management; (b) Corporate Ethics;
(c) Performance of the Individual Directors; and
(d) Performance of the Committees viz. Audit Committee Nominationand Remuneration Committee (NRC) and Corporate Social Responsibility Committee &Stakeholders' Relationship Committee (SRC).
The Board upon evaluation considered that the Board is well balancedand diverse and is commensurate with the business profile and size of the Company.
The Board after discussion and review noted with satisfaction of itsown performance and that of its Committees and individual Directors.
RATIO OF REMUNERATION OF DIRECTOR
As per Section 197 (12) of the Companies Act 2013 read with Rule 5 ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 thedetails of Ratio of Remuneration to each Director to the median employee's remuneration isfurnished as Annexure VI.
PARTICULARS OF EMPLOYEES
No employee of the Company was in receipt of remuneration of not lessthan $ 1.02 crores during the year or
$ 8.50 lakhs per month during any part of the said year as perSection 197 of the Companies Act 2013 read with Rule 5 (2) of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014.
LISTING WITH STOCK EXCHANGES
The Company confirms that it has paid the Annual Listing Fees for theyear 2020-21 to National Stock Exchange where the company's shares are listed.