The directors have pleasure in presenting the fifty fourth annual report and theaudited financial statements for the year ended 31st March 2016.
1. FINANCIAL HIGHLIGHTS
| || ||(Rs. in Cr) |
|Details ||Year ended 31.03.2016 ||Year ended 31.03.2015 |
|Sales and other income ||1517.17 ||1401.11 |
|Profit before finance cost and depreciation ||235.78 ||178.05 |
|Less: Finance Cost ||32.83 ||36.88 |
|Depreciation ||54.95 ||59.82 |
|Profit after finance cost and depreciation ||148.00 ||81.35 |
|Add : Exceptional Item (Income) ||6.03 ||3.06 |
|Profit before tax ||154.03 ||84.41 |
|Less: Provision for : || || |
|Income tax ||12.00 ||9.50 |
|Tax relating to earlier years ||(1.57) || |
|Deferred tax ||4.00 ||3.75 |
|Profit after tax ||139.60 ||71.16 |
|Surplus brought forward from previous year ||103.23 ||77.63 |
|Total ||242.83 ||148.79 |
|Appropriations: || || |
|First interim dividend paid ||42.49 ||18.21 |
|Second interim dividend paid ||40.46 ||8.09 |
|Third interim dividend payable || ||12.14 |
|Dividend tax paid ||0.06 || |
|Transfer to general reserve || ||7.12 |
|Balance carried to Balance Sheet ||159.82 ||103.23 |
|Total ||242.83 ||148.79 |
The board of directors of the Company at its meeting held on 9th February 2016declared a first interim dividend of Rs.21/- per share (420%) for the year 2015-16absorbing a sum of Rs.42.55 Cr. including dividend distribution tax. The same was paid tothe shareholders on 20th February 2016. The board at its meeting held on 22nd March 2016declared a second interim dividend of Rs.20/- per share (400%) for the year 2015-2016absorbing a sum of Rs.40.46 Cr. The same was paid to the shareholders on 28th March 2016.
Hence the total amount of both dividends paid for the year ended 31st March 2016 willaggregate to Rs. 41/- per share (820%) absorbing a sum of Rs.83.01 Cr on 20232085equity shares of Rs.5/- each. The Company has set-off its dividend distribution taxpayable under Section 115-O(1A) of the Income Tax Act 1961 against the dividenddistribution tax paid by one of its subsidiary company on its dividend declared to theextent available.
The board does not recommend any further dividend for the year under consideration.
During the year 2015-16 the domestic macro-economic conditions largely remainedconsistent with that of the previous year. The Gross Domestic Product (GDP) registered agrowth of 7.4% (2014-15: 7.3%). The Consumer Price Index (CPI) has been subdued at 4.9%.
Global economic environment continued to be weak and uncertain during 2015-16. In theUS the sluggish economy continued and consumer sales activity remained relatively tepid.The GDP in the US market registered a growth of 2.4% (2014:2.4%). The GDP in EU registereda growth of 1.5% (2014: 0.9%).
The following table highlights the performance of the Company during 2015-16:
| ||FY ||FY ||Variance |
|Particulars ||2015-16 ||2014-15 ||(in %) |
|Sales (Tonnage) ||45675 ||44065 ||3.6 |
|Sale of goods (Rs. in Cr) ||1343.4 ||1283.8 ||4.6 |
|Domestic sales (Rs. in Cr) ||796.5 ||752.9 ||5.8 |
|Export sales (Rs. in Cr) ||546.9 ||530.9 ||3.0 |
|Profit before Tax (Rs. in Cr) ||154.0 ||84.4 ||82.5 |
4. MANAGEMENT DISCUSSION AND ANALYSIS REPORT
I. Industry Structure and Development: Domestic
The segment wise performance in the Indian automotive industry is given in thefollowing table.
| ||FY ||FY ||Variance |
|Category ||2015-16 ||2014-15 ||(in %) |
|Two Wheelers ||18937104 ||18433027 ||2.7 |
|Passenger Vehicles ||3443567 ||3222577 ||6.9 |
|Commercial Vehicles ||787393 ||701887 ||12.2 |
The Indian auto industry (domestic sales and exports) posted an overall growth of 3.5%(Source: SIAM). The industry's performance was muted during FY15-16 with motorcycletractor light commercial vehicle and construction equipment segments remaining weak.
The following table highlights the North American and European truck registrationfigures in vehicle units: (in Nos)
| || ||FY ||FY ||Variance |
|Market ||Category ||2015-16 ||2014-15 ||(in %) |
|North America ||Class 8 Trucks ||289109 ||286094 ||1.1 |
|North America ||Class 4-7 Trucks ||234736 ||216785 ||8.3 |
|Europe ||Medium & || || || |
| ||Heavy trucks ||270099 ||226117 ||19.5 |
Class 8 trucks reached the end of the cyclical upturn by mid of 2015. The sales andfactory shipments declined by over 12% in the second half of the financial year.
II. Business Outlook and Overview
With no visible shift in the economic momentum GDP growth rate in India for FY 2016-17is likely to hover around 7.3% to 7.5%. A number of factors like low inflationcomfortable current account deficit (CAD) robust services growth mild recovery inagriculture and supportive fiscal policy may help sustain growth rate at current levels.
In FY 2016-17 implementation of the seventh pay commission and government outlaysunder various schemes such as MUDRA OROP are expected to support urban / semi-urbansegments like passenger vehicle and two-wheeler. Rural demand will be contingent onhealthy monsoon.
Given the economic outlook the automobiles and auto-component sectors are expected togrow at similar levels in FY 2016-17.
Over the medium to long term growth in the auto component industry is likely to behigher than the underlying automotive industry growth given the increasing localization byOEMs higher component content per vehicle. Auto component export is another key growthdriver. The "Make in India" pitch may further boost the growth of the componentindustry.
Globally IMF continues to lower the GDP growth forecast. For 2016 the forecast hasbeen reduced from 3.6% to 3.4%. Growth in advanced economies is expected to remain at2.1%.
In the US consumer spending and employment growth has been healthy keeping theeconomy in the positive range. Instability in the financial markets may result in growthslipping to near recession conditions. Current data indicates that the US economy iscontinuing on its long-term near 2% GDP growth rate.
The US truck market (Class 8) volumes are expected to significantly decline by over20-25% in 2016. The market is expected to downshift to a lower but more sustainablelevel.
The EU truck markets are expected to continue recovering in 2016 supported by graduallyimproving economic outlook. Lower fuel prices credit availability and deferredreplacement demand are all positive factors that are expected to support growth in 2016.
III. Opportunities & Threats
The Company supplies aluminum castings in machined condition for commercial vehiclespassenger cars and two wheeler segments of the automotive industry.
The revenue of the Company is derived from Medium & Heavy Commercial Vehicles(MHCV) (50%) followed by car industry (26%) and two wheeler industry (24%).
In the medium to long term the projected growth of domestic auto industry andambitious export plans of the Indian OEMs are likely to benefit the Company.
In view of stringent emission norms and fuel economy regulations the thrust towardslight-weighting is bound to increase leading to higher content of aluminum in all vehicletypes. The Company is well placed to leverage these emerging opportunities. This willprovide for increased growth opportunities since the company is already a preferredsource for aluminum castings to major OEM's in India and abroad.
India is emerging as one of the major manufacturing hubs thanks to availability ofwell-educated engineers skilled workforce and good supply base.
Several Indian die casting companies and OEMs are either setting up new capacities orexpanding existing capacities resulting in increased competition.
Intense competition makes it extremely difficult to seek price increases to compensatethe effects of inflation bringing the margins under severe pressure. However theCompany's supply contracts provide for periodic price adjustments indexed to theinternational prices of aluminum and this should offer some protection against volatilityof commodity prices.
IV. Risks and concerns Economy
There are possible risks on the horizon both external and domestic. Spill-overs fromweak global growth and potential global financial market volatility could be disruptive.
The international markets remain fragile. There are rising uncertainties concerningChina's economy and its impact on both emerging and developed economies. After 2016recession risks start to rise considerably.
Overall globally downside risks continue to persist reflecting global headwinds andgeo-political uncertainty.
In India delayed monsoon could pose challenges for rural growth. Uncertaintiessurrounding inflation path still remains (emanating from likely upturn in commodityprices especially oil).
The Indian commercial vehicle industry has strong correlation with the agriculturalgrowth infrastructure development the mining industry and is cyclical.
Competition has increased in the Indian market due to entry of new players andexpansion plans of existing ones. The Company is aware of the increasing competition andis taking customer focused measures to remain competitive in the market place.
As no major economic recovery in China is expected international prices of aluminum isexpected to remain at levels witnessed in FY 2015-16.
With significant exports import of raw materials and capital goods and foreigncurrency liabilities the Company is always exposed to currency fluctuations. The Companyhas a well-defined forex hedging policy to mitigate the risks.
The stipulation and requirements of the automobile industry demands high qualityproducts. Robust quality management systems meeting international standards like TS 16949are in place to ensure excellent product quality. However appropriate recall and productliability insurance in line with standard industry practice have been taken.
Just-in-time delivery is another important contractual obligation. Robust quality andproject management systems are in place to avoid delay in deliveries due to quality issuesor project implementation.
The Company adds capacity to meet the projected demand of customers. The Companyclosely monitors the progress of customer projects / volumes and appropriately deploys theassets to protect from both underutilization and capacity shortages to meet the demand.
Risk Management Policy
The Board has established a Risk Management Policy which formalizes the Company'sapproach to overview and manage material business risks. The policy is implemented througha top down and bottom up approach identifying assessing monitoring and managing keyrisks across the Company's business units.
Risks and effectiveness of their management are internally reviewed and reportedregularly to the Board. The Management has reported to the Board that the Company's riskmanagement and internal compliance and control system is operating efficiently andeffectively in all material respects.
The board is satisfied that there are adequate systems and procedures in place toidentify assess monitor and manage risks. The Audit Committee also reviews reports bymembers of the management team and recommends suitable action. Risk Mitigation Policy hasbeen approved by the board.
V. Internal control systems and their adequacy
The Company has a proper and adequate internal control system to ensure that all theassets of the Company are safeguarded and protected against any loss and that all thetransactions are properly authorized and recorded. Information provided to management isreliable and timely. Company ensures adherence to all statutes.
Internal Financial Controls
The Company has an established Internal Financial Control framework including internalcontrols over financial reporting operating controls and anti-fraud framework. Theframework is reviewed regularly by the management and tested by internal audit team andpresented to the audit committee. Based on periodical testing the framework isstrengthened from time to time to ensure adequacy and effectiveness of InternalFinancial Controls.
VI. Operations Review A. Manufacturing
The Company has been using Total Quality Management (TQM) as the foundation of itsmanagement. The Company implemented the best practices like Total Productivity Management(TPM) and Lean Manufacturing in its manufacturing facilities. It also has in placebest-in-class practices for safety pollution control work environment water and energyconservation.
Continuous improvement projects are implemented to improve the product quality andproductivity in all the manufacturing locations. The Company's journey of achievingmanufacturing excellence was recognized and rewarded by the following customers during FY2015-16.
| Hyundai ||- Award for disaster management |
| Cummins ||- Best supplier - Six Sigma category |
| Daimler ||- Special award for globally competitive supplies |
| DAF-PACCAR ||- Certificate of honor for excellent PPM |
Achieving customer delight by consistently providing products of excellent quality isthe prime motto of the Company. This is achieved through state-of-art technologytraining effective quality system continuous improvement and total employee involvement.
Poka-yokes process audits use of statistical tools for process optimization andonline process controls also contribute towards improving and achieving consistency inproduct quality. The quality system is certified for ISO/ TS 16949 requirements.
TQM is a way of life in the Company. 100% employee involvement has been successfullyachieved for many years.
Employees have completed 733 projects by applying statistical tools through QualityControl Circles (QCC) in 2015-16. The average number of suggestions implemented peremployee was 42.
C. Cost Management
Cost management is a continuous journey and the Company manages the same throughdeployment of costs across all departments. A cross functional team is working on projectsfocussed on Value Added / Value Engineering (VA/VE) and operational efficiency. TPM andlean initiatives are deployed Company-wide to achieve reduction in manufacturing cost.
D. Information Technology
The Company uses ERP system that integrates all business processes across the Company.Suppliers and customers are also integrated into the system for better planning andexecution. During the year several dashboards were added to improve the productivityquality and reduce the cost of operations. Projects were also implemented to furtherenhance the Information Security.
VII. Human Resource Development
The Company considers employees as vital and most valuable assets. Human ResourceDevelopment (HRD) is aligned to business needs to enhance business performance andresults. HRD is practised through an overall HRD framework with its constituents asresourcing employee engagement performance & compensation management competencybased development career & succession planning and organization development. Each ofthese constituent has a structured approach and process to deliver.
As a part of the long term strategies of the Company collaborative education programhas been initiated with three reputed institutes to develop role-ready engineers withCompany-specific knowledge at the entry level.
Career development workshop is conducted to identify high potential employees. Suchemployees are groomed for taking up higher responsibilities. A reward and recognitionsystem is in place to motivate and also provide fast track growth for the high potentialemployees.
Our engineers and executives are sponsored for advanced study offered by both Indianand foreign institutions. Customized technical and leadership competency improvementprograms are developed and delivered through reputed institutions.
The Company continuously measures and reports employee engagement every year andidentifies improvement areas to work on. An excellent industrial relations environmentcontinues to prevail at all the manufacturing units of the Company.
As on 31st March 2016 the Company had around 2255 employees on its rolls.
VIII. Environment & Safety
The Company is fully committed to the ultimate goal of employee safety. Safetymanagement is integrated with the overall Environment Health and Safety (EHS).
The Company has been certified under Integrated Management System (IMS) combining ISO14001 and OHSAS 18001 systems and procedures.
Statements in the management discussion and analysis report describing the Company'sobjectives projections estimates and expectations may be "forward lookingstatements" within the meaning of applicable securities laws and regulations. Actualresults could differ materially from those expressed or implied. Important factors thatcould make a difference to the Company's operations include among others economicconditions affecting demand/supply and price conditions in the domestic and overseasmarket in which the Company operates changes in the Government regulations tax laws andother statutes and incidental factors.
5. DIRECTORS' RESPONSIBILITY STATEMENT
In accordance with the provisions of Section 134(5) of the the Act 2013 with respectto Directors' Responsibility Statement it is hereby stated -
i. that in the preparation of annual accounts for the financial year ended 31st March2016 the applicable Accounting Standards had been followed and that there were nomaterial departures;
ii. that the directors had selected such accounting policies and applied themconsistently and made judgments and estimates that were reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit of the Company for the year under review;
iii. that the directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
iv. that the directors had prepared the accounts for the financial year ended 31stMarch 2016 on a "going concern basis";
v. that the directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and vi. that the directors had devised proper systems to ensure compliancewith the provisions of all applicable laws and that such systems were adequate andoperating effectively.
6. CORPORATE SOCIAL RESPONSIBILITY (CSR)
CSR activities have already been textured into the Company's value system throughSrinivasan Services Trust (SST) the CSR arm of the Company established by the groupcompanies in 1996 with the vision of building self-reliant rural community.
Over 20 years of service SST has played a pivotal role in changing lives of people inrural India by creating self-reliant communities that are models of sustainabledevelopment.
The Company is eligible to spend on their ongoing projects / programs falling withinthe CSR activities specified under the Act 2013 as mandated by the Ministry of CorporateAffairs for carrying out the CSR activities.
The Committee formulated and recommended a Corporate Social Responsibility Policy interms of Section 135 of the Act 2013 along with a list of projects / programmes to beundertaken for CSR spending in accordance with the Companies (Corporate SocialResponsibility Policy) Rules 2014.
Based on the recommendation of the CSR Committee the board has approved the projects /programs carried out as CSR activities by SST having a track record of more than theprescribed years in undertaking similar programmes / projects.
During the year 2015-16 the Company had spent Rs.47 Lakhs constituting more than 2%of average net profits for the immediate past three financial years towards CSRactivities through SST.
Presently SST is working in 3449 villages spread across Tamil Nadu KarnatakaMaharashtra Himachal Pradesh and Andhra Pradesh covering about 2090000 population and463500 families. Its major focus areas are Economic development health care qualityeducation environment and infrastructure.
Of the 3449 villages 2654 villages (1672620 population and 367170 families) havebeen funded by the Company during the year.
Achievements in 2654 villages are:
227667 families living in these villages have a monthly income of aboveRs.15000/-. They have financial security.
1880 farmers groups have been formed with 31323 members.
Improved agriculture practices enabled 151862 farmers owning 164124 hectaresto increase the yields than the state average by 15%.
136050 families earn more than Rs 3500/- per month through livestock.
Formed 7064 Self Help Groups. These groups have 106720 women as members.
Of the 106720 members 99170 members are in income generation activities.They earn a minimum income of Rs. 2500/- per month.
60512 children in the age group below 5 are not malnourished.
275970 women are freed from anemia.
232436 households made access to toilet facilities.
The morbidity percentage reduced from 9% to 5%.
Enrolment in anganwadis increased from 86% to 100% and attendance is 99%.
1073 anganwadis have met all the Integrated Child Development Services Scheme(ICDS) standards.
88% involvement of mother volunteers in the functioning of anganwadis. Theyvolunteer their time to ensure proper functioning.
100% enrolment of children in schools. There are no drop outs in the schools.
Number of percentage of slow learners reduced in schools from 27% to 14%.
Out of 1204 schools 807 schools are now model schools.
73345 illiterate women out of 118872 have been made literates.
Environment and Infrastructure:
214120 households dispose solid waste through individual and common compostpits. 82 tons of vermi compost generated per month from wastes.
Sewage water from 218234 households disposed through soak pits kitchengardens and drain.
Safe drinking water is available to 2137 villages.
Community takes care of their development needs. 5302 social leaders are active inthis effort.
As required under Section 135 of the Act 2013 read with Rule 8 of the Companies(Corporate Social Responsibility Policy) Rules 2014 the annual report on CSR containingthe particulars of the projects / programmes approved and recommended by CSR Committee andapproved by the board for the financial year 2015-16 are given by way of Annexure IVattached to this Report.
7. FINANCIAL PERFORMANCE & POSITION OF SUBSIDIARIES & ASSOCIATECOMPANIES
The following are the subsidiaries and associates of the Company:
|Name of the Company ||Status |
|TVS Motor Company Limited ||Subsidiaries of |
|Sundaram-Clayton (USA) Limited ||Sundaram-Clayton Limited |
|Sundaram Auto Components Limited || |
|TVS Housing Limited || |
|TVS Motor Company (Europe) B.V. || |
|TVS Motor (Singapore) Pte. Limited ||Subsidiaries of |
|PT. TVS Motor Company Indonesia ||TVS Motor Company Limited |
|Sundaram Business Development || |
|Consulting (Shanghai) Company || |
|Limited || |
|Sundaram Holding USA Inc. ||Subsidiary of Sundaram Auto |
| ||Components Limited |
|TVS Training and Services Limited || |
|Sundram Non-Conventional Energy ||Associates of |
|Systems Limited ||Sundaram-Clayton Limited |
|Emerald Haven Realty Limited || |
TVS Motor Company Limited (TVSM)
TVS Motor Company Limited is engaged in the business of manufacture of two and threewheelers. During the year 2015-16 TVSM achieved a turnover of Rs. 11295 Cr and earned aprofit after tax of Rs. 432 Cr during the year 2015-16.
TVSM declared a first interim dividend of Re.1/- per share (100%) for the year 2015-16absorbing a sum of Rs. 55.65 Cr including dividend distribution tax. It also declared asecond interim dividend of Rs. 1.50 per share (150%) for the year 2015-16 absorbing a sumof Rs. 85.07 Cr including dividend distribution tax.
Hence the total amount of both dividends for the year ended 31st March 2016 aggregatedto Rs.2.50 per share (250%) on 475087114 equity shares of Re.1/- each.
Sundaram-Clayton (USA) Limited
Sundaram-Clayton (USA) Limited a wholly owned subsidiary of the Company is engaged inthe business of providing Professional Employer Organisation ("PEO") services tothe employees of the Company. The Company earned revenue of USD 10137 and net incomeafter adjustment of expenses amounted to USD 319 for the year ended 31st March 2016.
Sundaram Auto Components Limited (SACL)
During the year SACL a wholly owned subsidiary of TVSM achieved a turnover ofRs.2737 Cr including Rs.491 Cr in Plastics Component business. SACL earned a profit aftertax of Rs.28.64 Cr during the year 2015-16.
SACL increased its customer base by addition of new customers for manufacture ofcluster components and heating ventilating and air-conditioning parts.
SACL productionized 314 new parts for various customers. SACL received the followingawards:
"Outstanding Supplier for achieving Delivery Target" from TOYODA GOSEI
"Q1" certification from FORD India
"SQ mark" certification from Hyundai Motors India Ltd.
"Best Supplier Kaizen award" from India Japan Lighting Pvt. Ltd.
SACL on 24th December 2015 declared a first interim dividend of Rs.4.00 per share(40%) for the year 2015-16 absorbing a sum of Rs.5.56 Cr including dividend distributiontax.
SACL again on 7th March 2016 declared a second interim dividend of Rs.3.00 per share(30%) for the year 2015-16 absorbing a sum of Rs.4.18 Cr including dividend distributiontax.
Hence the total amount of both dividends paid for the year ended 31st March 2016aggregates to Rs.7.00 per share (70%) thereby absorbing a sum of Rs.9.74 Cr includingdividend distribution tax.
TVS Housing Limited (TVSH) - Subsidiary / Emerald Haven Realty Limited (EHRL) -Associate
EHRL is the developer of the Nedungundram Chennai project of TVSH. Phase 1 wasdeveloped as apartments and Phase 2 was launched as villas and row houses. As of 31stMarch 2016 all the 448 apartments have been sold and customers have taken possession ofthe apartment. Despite the tough real estate market condition in Chennai the response forthe villa and row house have been quite good. As the phase 2 is nearing completion theCompany has already sold about 90% of the units. The Company is confident that theremaining units would be sold during 2016-17.
PT. TVS Motor Company Indonesia (PT. TVSM)
During 2015-16 motorcycle industry in Indonesia declined by 12% (from 7.6 millionunits in 2014-15 to 6.6 million units in 2015-16). The decline was mainly due to lowereconomic growth and weak consumer sentiments due to subdued commodity prices and furthertightening of credit. While the bebek segment declined by 33% sports motorcycle segmentwent down by 23%. The scooter category marginally declined by 5%. Within 2 wheelers thescooter segment continued to dominate with a category share of 75%.
During the year PT. TVSM launched the 110 cc Dazz scooter with Fuel Injection Systemin Indonesian market. It also launched the new
Apache 200 cc sports motorcycle. PT. TVSM continued its focus on exports to ASEAN andAfrican countries. PT. TVSM commenced its exports to Latin American market by enteringColombia.
The decline in two wheeler industry resulted in lower domestic sales during 2015-16.PT. TVSM sold total of 17100 vehicles as against 23300 vehicles sold in the previousyear. However the focus on ASEAN and African markets helped PT. TVSM to export 15000no's registering an increase of 4% over the previous year. The EBITDA loss for the yearof 6.8 Mn USD is marginally lower than EBITDA loss of 7.7 Mn USD OF 2014-15. Focus during2016-17 will be to build on the portfolio and substantially reduce the EBITDA loss.
TVS Motor Company (Europe) B.V & TVS Motor (Singapore) Pte. Limited
TVSM had earlier incorporated both these entities with a view to serve as specialpurpose vehicles for making and protecting the investments made in overseas operations ofPT. TVSM.
Sundaram Business Development Consulting (Shanghai) Company Limited (SBDC)
SBDC was initially established to explore options of sourcing auto components and localassembly of two wheelers etc. in China. After a complete review board felt that it maynot be viable to carry out manufacturing activities in China and therefore steps weretaken for closure of operations of SBDC. All required formalities were completed in April2016. Hence in the books a provision of Rs.1.07 Cr has been made for diminution in thevalue of investments.
Sundaram Holding USA Inc.
The Company made an investment of USD 250 consisting of 250 shares with face value ofUSD 1 each in Sundaram Holding USA Inc. (SHUI) constituting 25% of its paid up sharecapital. SHUI was incorporated under the applicable provisions of laws of United States ofAmerica for carrying out the business of the Company in USA.
SACL another subsidiary of the Company has also invested USD 750 consisting of 750shares with face value of USD 1 each in SHUI constituting 75% of its paid up sharecapital.
Hence SHUI became the subsidiary of SACL effective 9th September 2015 and thereby thesubsidiary of the Company by virtue of the provisions of Section 2(87) of the Act 2013.
TVS Training and Services Limited (TVS TSL)
TVS TSL is engaged in the business of establishing and providing vocational trainingservices to various industries and is participating in the National Skill DevelopmentProjects. During the year the Company earned an income of Rs. 12.65 Cr and profit aftertax for the year ended 31st March 2016 was Rs.0.36 Cr.
Sundram Non-Conventional Energy Systems Limited (SNCES)
SNCES is engaged in the business of generation of power. During the year the Companyearned revenue of Rs. 2.71 Cr and profit after tax was Rs.1.41 Cr.
Financial position of all subsidiaries and associate companies are provided as part ofconsolidated financial statements in Form AOC-1 in the manner required under Section 129read with the Companies (Accounts) Rules 2014 of the Act 2013.
8. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of the Company are prepared in accordance withthe provisions of Section 129 of the Act 2013 read with the Companies (Accounts) Rules2014 and Regulation 33 of SEBI (LODR) Regulations 2015 along with a separate statementcontaining the salient features of the financial performance of subsidiaries / associatesin the prescribed form. The audited consolidated financial statements together withauditor's report forms part of the Annual Report. The audited financial statements inrespect of each of its subsidiary companies will be made available to the shareholders onreceipt of a request from any shareholder of the Company and it has also been placed onthe website of the Company. This will also be available for inspection by the shareholdersat the registered office during the business hours.
The consolidated profit after tax of the Company and its subsidiaries & associatesamounted to Rs. 408.24 Cr for the financial year 2015-16 as compared to Rs. 345.19 Cr inthe previous year.
9. DIRECTORS & KEY MANAGERIAL PERSONNEL
Independent Directors (IDs)
At the annual general meeting held on 21st August 2014 M/s. Vice Admiral P J Jacob(Retd.) V Subramanian S Santhanakrishnan R Vijayaraghavan and Kamlesh Gandhi wereappointed as IDs for the first term of five consecutive years from the conclusion of thefifty second AGM not liable to retire by rotation and to receive remuneration by way offees reimbursement of expenses for participation in the meetings of the board and / orcommittees and profit related commission in terms of applicable provisions of the Act2013 within the overall limit as determined by the board from time to time.
On appointment each ID has acknowledged the terms of appointment as set out in theirletters of appointment. The appointment letter covers interalia the terms ofappointment duties remuneration and expenses rights of access to information otherdirectorships dealing in Company's shares disclosure of Director's interests insuranceand indemnity. The IDs are provided with copies of the Company's policies and charters ofvarious committees of the board.
Mr Suresh Kumar Sharma an independent director of the Company ceased to be a directorof the Company with effect from 23rd March 2016 due to his sad and untimely demise. Theboard placed on record its appreciation for the outstanding contribution made by
Mr Suresh Kumar Sharma during his tenure as director of the Company.
As required under the provisions of Companies Act 2013 the board proposed theappointment of Mr R Gopalan as Non-executive Independent director for approval ofshareholders through process of postal ballot.
In accordance with Section 149(7) of the Act 2013 all IDs have declared that they metthe criteria of independence as provided under Section 149(6) of the Act 2013.
The detailed terms of appointment of IDs is disclosed on the Company's website in thefollowing link http://www.sundaram-clayton.com/ Web%20files/Terms%20of%20IDs.pdf.
Separate meeting of Independent Directors (IDs)
The IDs were fully kept informed of the Company's activities in all its spheres. Duringthe year under review a separate meeting of IDs was held on 14th March 2016 and the IDsreviewed the performance of: (i) non-IDs viz. M/s Venu Srinivasan Chairman and ManagingDirector Dr. Lakshmi Venu and Sudarshan Venu Joint Managing Directors K Mahesh T KBalaji and Gopal Srinivasan Directors; and (ii) the board as a whole.
They also reviewed the performance of Chairman after taking into account the views ofExecutive and Non-Executive Directors.
They also assessed the quality quantity and timeliness of flow of information betweenthe Company's Management and the Board that are necessary for the Board to effectively andreasonably perform their duties. All the IDs were present at the meeting.
In terms of Section 149 of the Act 2013 read with the Companies (Appointment andQualification of Directors) Rules 2014 and Regulation 17 of SEBI (LODR) Regulations2015 the Company is required to have a woman director on its board.
Dr Lakshmi Venu joint managing director is already on the board of the Company as adirector from 22nd March 2010 and hence the Company fulfills the requirement of the Act2013 and SEBI (LODR) Regulations 2015 regarding the appointment of woman director on theboard of the Company.
Non-executive and non-independent directors (NE-NIDs)
In terms of the provisions of sub-section (6) read with explanation to Section 152 ofthe Act 2013 two thirds of the total number of directors i.e. excluding IDs are liableto retire by rotation and out of which one third are liable to retire by rotation atevery AGM.
Mr Gopal Srinivasan and Mr T K Balaji directors are liable to retire by rotation atthe AGM and being eligible offer themselves for re-appointment.
The directors therefore recommend their re-appointment as directors of the Company.
Key Managerial Personnel (KMP)
In terms of Section 2(51) and Section 203 of the Act 2013 Mr Venu SrinivasanChairman and Managing Director Dr. Lakshmi Venu Joint Managing Director Mr C N PrasadPresident & Chief Executive Officer Mr V N Venkatanathan Chief Financial Officer andMr R Raja Prakash Company Secretary are KMP of the Company.
Nomination and Remuneration Policy
The Nomination and Remuneration Committee of Directors (NRC) reviews the composition ofthe board to ensure that there is an appropriate mix of abilities experience anddiversity to serve the interests of all shareholders and the Company.
In accordance with the requirements under Section 178 of the Act 2013 Nomination andRemuneration Policy was formulated to govern the terms of nomination / appointment andremuneration of (i) Directors (ii) KMP and (iii) Senior Management Personnel (SMP) of theCompany. The same was approved by the board at its meeting held on 24th September 2014.There is no change in the policy during the year under review.
The NRC also reviews succession planning of both SMP and board. The Company's approachin recent years is to have a greater component of performance linked remuneration for SMP.
The process of appointing a director / KMP / SMP is that when a vacancy arises or isexpected the NRC will identify ascertain the integrity qualification appropriateexpertise and experience having regard to the skills that the candidate will bring to theBoard / Company and the balance of skills added to that of which the existing membershold. The NRC will review the profile of persons and the most suitable person is eitherrecommended for appointment by the board or is recommended to shareholders for theirelection. The NRC has discretion to decide whether qualification expertise and experiencepossessed by a person are sufficient / satisfactory for the concerned position.
The NRC will ensure that any person(s) who is / are appointed or continues in theemployment of the Company as its executive chairman managing director whole-timedirector shall comply with the conditions as laid out under Part I of Schedule V to theAct 2013. The NRC will ensure that any appointment of a person as an independent Directorof the Company will be made in accordance with the provisions of Section 149 read withSchedule IV to the Act 2013 alongwith any other applicable provisions and SEBI (LODR)Regulations 2015.
Criteria for performance evaluation disclosures on the remuneration of directorscriteria of making payments to non-executive directors have been disclosed as part ofCorporate Governance Report attached herewith.
Evaluation of the board committees and directors
In terms of Section 134 of the Act 2013 and the Corporate Governance requirements asprescribed under SEBI (LODR) Regulations 2015 the board reviewed and evaluated its ownperformance from the perspectives of Companys performance strategy andimplementation risk management and corporate ethics based on the evaluation criterialaid down by the NRC.
The board discussed and assessed its own composition size mix of skills andexperience its meeting sequence effectiveness of discussion decision making follow upaction quality of information and the performance and reporting by the Committees viz.Audit Committee NRC Stakeholders Relationship Committee (SRC) and Corporate SocialResponsibility Committee (CSR).
The board upon evaluation concluded that it is well balanced in terms of diversity ofexperience encompassing all the activities of the Company. The Company endeavours to havea diverse board representing a range of experience at policy-making levels in business andtechnology and in areas that are relevant to the Company's global activities.
The board also noted that corporate responsibility ethics and compliance are takenseriously and there is a good balance between the core values of the Company and theinterests of stakeholders. The board satisfied with the Company's performance in allfronts viz. new product development operations sales and marketing finance managementinternational business employee relations and compliance with statutory / regulatoryrequirements and finally concluded that the board operates effectively and is closelyaligned to the culture of the business.
The performance of individual directors including all Independent Directors areassessed against a range of criteria such as contribution to the development of businessstrategy and performance of the Company understanding the major risks affecting theCompany clear direction to the management and contribution to the board cohesion. Theperformance evaluation has been done by the entire board of directors except the directorconcerned being evaluated.
The board noted that all directors have understood the opportunities and risks to theCompany's strategy and are supportive of the direction articulated by the management teamtowards consistent improvement.
The performance of each committee was evaluated by the board after seeking inputs fromits members on the basis of the criteria such as matters assessed against terms ofreference time spent by the committees in considering matters quality of informationreceived work of each committee overall effectiveness and decision making and compliancewith the corporate governance requirements and concluded that all the committees continuedto function effectively with full participation by all its members and the members ofexecutive management of the Company.
The board reviewed each committee's terms of reference to ensure that the Company'sexisting practices remain appropriate. Recommendations from each committee are consideredand approved by the board prior to implementation.
Number of board meetings held
The number of board meetings held during the financial year 2015-16 are provided aspart of Corporate Governance Report prepared in terms of the SEBI (LODR) Regulations 2015.
The Company at its AGM held on 21st August 2014 appointed M/s Sundaram &Srinivasan Chartered Accountants Chennai having Firm Registration No. 004207S allottedby The Institute of Chartered Accountants of India as statutory auditors of the Companyto hold office for the transitional period of three consecutive years from the conclusionof the said AGM subject to ratification at every AGM at such remuneration in addition toall applicable taxes out of pocket expenses travelling and other expenses as may bemutually agreed between the Board and the Auditors.
The Auditors' Reports for the financial year 2015-16 does not contain anyqualification reservation or adverse remark and the same is attached with the annualreport.
It is therefore proposed to re-appoint them as statutory auditors for the last year inthe transitional period of three consecutive years from the conclusion of this AGMsubject to ratification by the members at the AGM.
The Company has obtained necessary certificate under Section 141 of the Act 2013conveying their eligibility for being statutory auditors of the Company for the year2016-17.
As per Section 148 of the Act 2013 read with the Companies (Cost Records and Audit)Rules 2014 as amended the cost audit records maintained by the Company in respect of itsengine parts manufactured by the Company specified under Central Excise Tariff Actheading in Table B to Rule 3 of the above rules are required to be audited by a CostAuditor.
In terms of the Companies (Cost Records and Audit) Amendment Rules 2014 the boardsubject to the approval of the Central Government has re-appointed Mr A N Raman CostAccountant holding Certificate of practice No. 5359 allotted by The Institute of CostAccountants of India as a Cost Auditor for conducting Cost Audit for the financial year2016-17.
The Company has also received necessary certificate under Section 141 of the Act 2013from him conveying his eligibility. A sum of Rs 3.00 lakhs has been fixed by the board asremuneration in addition to reimbursement of all applicable taxes travelling andout-of-pocket expenses payable to him for the financial year 2016 -17 and is also requiredto be ratified by the members at the ensuing general meeting as per Section 148(3) of theAct 2013.
As per Section 204 of the Act 2013 and the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 the Company is required to appoint a Secretarial Auditorfor auditing secretarial and related records of the Company.
The Secretarial Audit Report for the year 2015-16 given by Ms B Chandra PractisingCompany Secretary Chennai for auditing the secretarial and related records is attached tothis report. The Secretarial Audit Report does not contain any qualification reservationor other remarks.
Ms B Chandra Practising Company Secretary Chennai was reappointed as SecretarialAuditors for carrying out the secretarial audit for the financial year 2016-17.
11. CORPORATE GOVERNANCE
The Company has been practicing the principles of good governance over the years andlays strong emphasis on transparency accountability and integrity.
A separate section on Corporate Governance and a certificate from the statutoryauditors of the Company regarding compliance of conditions of Corporate Governance asstipulated under SEBI (LODR) Regulations 2015 forms part of this Annual Report.
The chairman and managing director and the chief financial officer of the Company havecertified to the board on financial statements and other matters in accordance withRegulation 17 (8) of the SEBI (LODR) Regulations 2015 pertaining to CEO/CFO certificationfor the financial year ended 31st March 2016.
12. POLICY ON VIGIL MECHANISM
The Company has adopted a Policy on Vigil Mechanism in accordance with the provisionsof Companies Act 2013 and Regulation 22 of SEBI (LODR) Regulations 2015 which provides aformal mechanism for all directors employees and other stakeholders of the Company toreport to the management their genuine concerns or grievances about unethical behaviouractual or suspected fraud and any violation of the Company's Code of conduct or ethicspolicy.
The policy also provides a direct access to the Chairperson of the Audit Committee tomake protective disclosures to the management about grievances or violation of theCompany's Code of Conduct.
The policy is disclosed on the Company's website in the following linkhttp://www.sundaram-clayton.com/Web%20files/Investors/Whistle% 20Blower%20Policy.pdf.
13. PUBLIC DEPOSITS
The Company has not accepted any deposit from the public within the meaning of Section76 of the Act 2013 for the year ended 31st March 2016.
14. STATUTORY STATEMENTS
Information on conservation of energy technology absorption foreign exchange etc.
Information on conservation of energy technology absorption and foreign exchangeearnings and outgo are given in Annexure I to this report in terms of the requirements ofSection 134(3)(m) of the Act 2013 read with the Companies (Accounts) Rules 2014.
Material changes and commitments
There have been 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 and the date of the report.
Significant and material orders passed by the Regulators or Courts or Tribunalsimpacting the going concern status of the Company
There are no significant and material orders passed by the regulators or courts ortribunals which would impact the going concern status of the Company and its futureoperations.
Extract of Annual Return in the prescribed form is given as Annexure II to this reportin terms of the requirement of Section 134(3)(a) of Act 2013 read with the Companies(Accounts) Rules 2014.
Details of employees receiving the remuneration in excess of the limits prescribedunder Section 197 of the Act 2013 read with Rule 5(2) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are given in Annexure III. In terms offirst proviso to Section 136(1) of the Act 2013 the Annual Report excluding theaforesaid annexure is being sent to the shareholders of the Company. The annexure isavailable for inspection at the Registered Office of the Company during business hours andany shareholder interested in obtaining a copy of the said annexure may write to theCompany Secretary at the Registered Office of the Company.
Comparative analysis of remuneration paid
A comparative analysis of remuneration paid to Directors and employees with theCompany's performance is given as Annexure V to this report.
Details of related party transactions
There were no material related party transactions under Section 188 of the Act 2013read with Companies (Meetings of Board and its Powers) Rules 2014.
Details of loans / guarantees / investments made
During the year under review the Company had not granted any loans or guaranteescovered under Section 186 of the Act 2013.
Please refer note Number IX to Notes on accounts for the financial year 2015-16 fordetails of investments made by the Company.
During the year under review the Company has not received any complaints of sexualharassment from any of the women employees of the Company in terms of Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013.
The directors gratefully acknowledge the continued support and co-operation receivedfrom the promoters of the Company viz. T V Sundram Iyengar & Sons Private LimitedSouthern Roadways Limited Sundaram Industries Private Limited and Sundaram FinanceLimited. The directors thank the vehicle manufacturers vendors and bankers for theircontinued support and assistance.
The directors wish to place on record their appreciation of the continued excellentwork done by all the employees of the Company during the year.
The directors specially thank the shareholders for their continued faith in theCompany.
| ||For and on behalf of the board || |
|Chennai ||VENU ||SRINIVASAN |
|12th May 2016 || ||Chairman |