Your Directors present their 31st Annual Report together with Audited Accounts for thefinancial year ended 31st March 2017.
A. FINANCIAL RESULTS AND OPERATIONAL REVIEW :
| || ||(Rs. in Crores) |
| ||Year Ended 31st March 2017 ||Year Ended 31st March 2016 |
|Net Operating Revenue ||666.14 ||525.91 |
|Profit before Other Income Depreciation Finance Charges || || |
|Exceptional items and Tax ||104.68 ||73.76 |
|Other Income ||17.18 ||16.30 |
|Profit before Depreciation Finance Charges Exceptional items and Tax ||121.86 ||90.06 |
|Finance Cost ||0.12 ||0.05 |
|Depreciation and Amortisation Expense ||16.28 ||13.80 |
|Profit before Exceptional Items & Tax ||105.46 ||76.21 |
|Exceptional Items ||- ||- |
|Profit Before Tax ||105.46 ||76.21 |
|Tax Provision || || |
|- Current ||37.96 ||23.30 |
|- Deferred ||(1.33) ||1.60 |
|Profit After Tax ||68.83 ||51.31 |
|Other Comprehensive Income (net of Tax) ||0.20 ||(0.11) |
|Total Comprehensive Income ||69.03 ||51.20 |
Financial year 2016-17 turned out to be an overall good year for the Company. Thetractor industry with which your Company's business has direct linkage posted a decentgrowth of 18% after witnessing de-growth in last two consecutive years. This has in turnfacilitated your Company to achieve its all-time high engine sales volume of 82297 unitswith a growth of 28% over last year's sale of 64088 units. Based on this solid increasein engine sales volume SEL for the first time has crossed the milestone of achieving Rs.100 crores+ profit by posting a pre-tax profit of Rs. 105.46 crores.
With the increased engines sale volume net operating revenue of your Company for thefinancial year 2016-17 reached Rs. 666.14 crores as against Rs. 525.91 crores for the lastyear. The higher sales coupled with continued focus on cost control initiatives yourCompany was able to improve its operating margin by 170 basis points over last year - from14.0% to 15.7%. Consequently operating profit for the year stood at Rs. 104.68 crores(last year - Rs. 73.76 crores) - an improvement of 42%. Profit before tax for the yearstood at Rs. 105.46 crores (previous year - Rs. 76.21 crores). While Profit after tax(before other comprehensive income) of Rs. 68.83 crores (previous year - Rs. 51.31 crores)translates into Basic Earning Per Share of Rs. 55.42 (previous year - Rs. 41.31) thetotal comprehensive income (net of tax) stood at Rs. 69.03 crores against previous year'sRs. 51.20 crores.
Taking note of the emerging demand scenario in the coming years and to timely cater thecustomer requirements your Company has also finalised another capacity expansionprogramme to increase its capacity to 120000 engines per annum from existing 105000engines per annum by the end of next fiscal. This capacity expansion will be fullyfinanced through the internal resources.
The fund position of the Company remained comfortable throughout the year under reviewand after meeting the capital expenditure and working capital requirements to supportoperations the Company has generated an income of Rs. 16.90 crores (previous year - Rs.16.09 crores) on surplus funds.
Your Directors are pleased to recommend an equity dividend of Rs.18.00 per share of theface value of Rs. 10 each for the financial year ended 31st March 2017. Further keepingin view the overall fund position of the Company the Board over and above the saidnormal dividend has also recommended a special dividend of Rs. 25.00 per share takingthe total dividend to Rs. 43.00 per share for the financial year 2016-17 (previous year -Rs. 33.00 per share).
If approved by the Shareholders at the ensuing Annual General Meeting the above equitydividend will be paid to those shareholders whose names shall appear in the Register ofMembers as on the Book Closure date. The total equity dividend outgo for the financialyear 2016-17 including dividend distribution tax surcharge and education cess willabsorb a sum of Rs. 64.28 crores (previous year - Rs. 49.33 crores). Further the Board ofyour Company has decided not to transfer any amount to the General Reserves for the yearunder review.
Current Year's Review
With government's continued thrust on agri sector and the forecast of normal monsoonfor this year the tractor industry is expected to maintain its growth trajectory in thecurrent fiscal as well. In this backdrop the engine business of your Company is alsoexpected to benefit from industry growth.
B. INTERNAL FINANCIAL CONTROL SYSTEMS
The Company has laid down adequate internal financial controls with reference tofinancial statements commensurate with the size scale and complexity of its operations.During the year such controls were tested and no reportable material weakness in itsoperating effectiveness was observed.
C. MANAGEMENT DISCUSSION AND ANALYSIS REPORT
The Management Discussion and Analysis Report for the year under review as stipulatedunder the SEBI (Listing Obligations and Disclosures Requirements) Regulations 2015 formspart of this Annual Report.
D. RELATED PARTY TRANSACTIONS
All related party transactions that were entered during the financial year 2016-17 werein the ordinary course of the business and were on arm's length basis. There were nomaterially significant related party transactions made by the Company which may have apotential conflict of the interest with its Promoters Directors Key Managerial Personnelor other persons. All such related party transactions are placed before the AuditCommittee for approval wherever applicable. Prior omnibus approval for normaltransactions is also obtained from the Audit Committee for the related party transactionswhich are of repetitive nature as well as for the transactions which cannot be foreseenand the same are subsequently shared with Audit Committee on quarterly basis. The policyon materiality of and dealing with related party transactions as approved by the AuditCommittee and the Board of Directors is uploaded on the website of the Company and thelink for the same is (http://www.swarajenterprise.com/ policies). The disclosure ofrelated party transactions pursuant to Section 134(3)(h) of the Companies Act 2013 inForm AOC-2 is annexed herewith as "Annexure A".
E. BOARD AND COMMITTEES Directors
Consequent upon his resignation Shri Rajan Wadhera ceased to be a Director of theCompany with effect from 24th April 2017. Further Shri M.N. Kaushal upon completion ofhis tenure as Whole Time Director on 31st March 2017 also ceased to be a Director of theCompany with effect from 1st April 2017. Your Board has placed on record its sincereappreciation of the significant and notable contributions made by Shri Wadhera and ShriKaushal during their tenure as Directors of the Company. Shri Rajesh Jejurikar and ShriSubhash Mago were appointed as Additional Directors of the Company with effect from 25thApril 2017. Further the Board has also appointed Shri Subhash Mago as Whole TimeDirector of the Company designated as Whole Time Director & Chief Executive Officerfor a period from 25th April 2017 to 31st March 2020. Shri Jejurikar and Shri Mago holdoffice upto the date of the forthcoming Annual General Meeting. The Company has receivednotices under Section 160 of the Companies Act 2013 from Member signifying intention topropose Shri Rajesh Jejurikar and Shri Subhash Mago for the office of Director at theforthcoming Annual General Meeting.
All the Independent Directors of the Company have submitted declaration under Section149(7) of the Companies Act 2013 that each of them meets the criteria of independence asprovided in Section 149(6) of the Companies Act 2013 and Regulation 16 of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 and there has been no change inthe circumstances which may affect their status as Independent Director during the year.
In terms of Section 152 of the Companies Act 2013 Shri S. Durgashankar and Dr. PawanGoenka shall retire by rotation at the forthcoming Annual General Meeting and beingeligible offer themselves for re-appointment.
Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 a system has been put in place to carry outperformance evaluation of the Board its Committees and individual Directors. Criteria forperformance evaluation is covered in the Corporate Governance Report.
The Board has on the recommendation of the Nomination and Remuneration Committeeframed a policy on appointment of Directors and Senior Management and their remuneration.The Remuneration Policy is covered in the Corporate Governance Report.
Board Meetings and Annual General Meeting
A calendar of Meetings is prepared and circulated in advance to the Directors. Duringthe year four Meetings of Board and four meetings of the Audit Committee were convenedand held. The details are covered in the Corporate Governance Report. The intervening gapbetween the Meetings was within the period prescribed under the Companies Act 2013.
The Independent Directors of the Company meet at least once in every financial yearwithout the presence of Non-Independent Directors Executive Director and any othermanagement personnel. The meeting(s) is conducted in a manner to enable the IndependentDirectors to discuss matter pertaining to inter alia review of performance ofNon-Independent Directors and the Board as a whole assess the quality quantity andtimeliness of flow of information between the Company's management and the Board that isnecessary for the Board to effectively and reasonably perform their duties. During theyear one meeting of Independent Directors was held on 28th November 2016.
The 30th Annual General Meeting of the Company was held on 26th July 2016.
Directors' Responsibility Statement
Pursuant to Section 134(5) of the Companies Act 2013 your Directors based onrepresentations received from the Operating Management and after due enquiry confirmthat:
a) in the preparation of Annual Accounts for the financial year ended 31st March 2017the applicable accounting standards have been followed;
b) in the selection of accounting policies consulted the Statutory Auditors andapplied them consistently and made judgments and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the Company as at31st March 2017 and of the profit of the Company for the year ended on that date;
c) proper and sufficient care has been taken for 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 irregularities;
d) the Annual Accounts have been prepared on a going concern basis;
e) internal financial controls to be followed by the Company have been laid down whichare adequate and operating effectively;
f) proper systems have been devised to ensure compliance with the provisions of allapplicable laws and such systems are adequate and operating effectively.
The Audit Committee currently comprises of the following Directors viz. Shri Dileep C.Choksi (Chairman of the Committee) Dr. T.N. Kapoor Shri S. Durgashankar and Smt. NeeraSaggi. Except Shri S. Durgashankar all the Members are Independent
Directors. All the Members of the Committee possess strong accounting and financialmanagement knowledge. The Company Secretary of the Company is the Secretary of theCommittee.
All the recommendations of the Audit Committee were accepted by the Board.
F. CORPORATE GOVERNANCE
A Report on Corporate Governance along with a Certificate from the Auditors of theCompany regarding the compliance of conditions of Corporate Governance as stipulated underSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 forms part of theAnnual Report.
Vigil Mechanism/Whistle Blower Policy
The Company has a vigil mechanism through Whistle Blower Policy to deal with instanceof fraud and mismanagement if any. The details of the Policy is explained in theCorporate Governance Report and also posted on the website of the Company.
The Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013
The Company has put in place anti sexual harassment policy in line with therequirements of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. The policy is gender neutral. Internal complaints committee has beenset up to redress complaints received if any regarding sexual harassment. During theyear no complaint was received.
Pursuant to the requirement of Regulation 17 of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Company is having Risk Managementframework covering identification evaluation and control measures to mitigate theidentified business risks.
Key Managerial Personnel (KMP)
The following have been designated as the Key Managerial Personnel of the Companypursuant to Sections 2(51) and 203 of the Companies Act 2013 read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014: Shri M.N. KaushalWhole Time Director (ceased w.e.f. 1st April 2017) Shri Subhash Mago Chief ExecutiveOfficer (appointed w.e.f. 1st October 2016) Shri M.S. Grewal Company Secretary ShriRajinder Arora Chief Financial Officer
Employees' Stock Option Scheme
The Nomination and Remuneration Committee of the Board of the Directors of the Companyinter alia administers and monitors the Employees' Stock Option Scheme-2015 ("theScheme") of the Company. The Scheme is in compliance with SEBI (Share Based EmployeeBenefits) Regulations 2014 and there have been no change in the said Scheme during theyear. Pursuant to the said Scheme the Nomination and Remuneration Committee during FY2015-16 have granted 9389 options to eligible employees which will become due for exercisefrom FY 2017-18 onwards.
Industrial relations remained cordial throughout the year under review.
Particulars of Employees
The information required pursuant to Section 197 read with Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed herewith as"Annexure B". Futher there was no employee who was in receipt of remunerationof not less than Rs. 10200000 during the year ended 31st March 2017 or not less thanRs. 850000 per month during any part of the year.
Safety Health and Environmental Performance
Your Company's commitment towards Safety Occupational Health and Environment is beingcontinuously enhanced. The Company encourages involvement of all its employees inactivities related to safety including promotion of safety standards. This is also toensure sustainable business growth. The Company has a well-established SafetyOccupational Health and Environmental Policy which inter alia ensures safety of publicemployees plant and equipment by ensuring compliance with all statutory rules andregulations on regular basis. During the year no major accident has occurred. YourCompany also imparts training to its employees as per the predefined training calendarcarries out statutory safety audits of its facilities as per legal requirement andpromotes eco-friendly activities. Showing its commitment to improve the well-being of itsemployees Medical Check-ups both curative and preventive have been organized regularlyincluding educating the employees on Industrial Hygiene at the work place. The Company'splant is certified under OHSAS 18001:2007 and EMS ISO 14001:2004.
Statutory Auditors and Auditors' Report
M/s Davinder S. Jaaj & Company Chartered Accountants Statutory Auditors of theCompany hold office till the conclusion of the ensuing Annual General Meeting. Pursuantto Section 139 of the Companies Act 2013 the Board of Directors on the recommendation ofAudit Committee has appointed M/s B.K. Khare & Co. Chartered Accountants (ICAI FRN105102W) as the Statutory Auditors of the Company to hold office from the conclusion ofthe forthcoming Annual General Meeting (AGM) until the conclusion of the fifthconsecutive AGM of the Company (subject to ratification of their appointment by theMembers at every AGM held after the ensuing AGM). M/s B.K. Khare & Co. have confirmedthat their appointment if approved will be within the limits of Section 141(3)(g) of theCompanies Act 2013 and have also certified that they are free from disqualificationspecified under Section 141(3) of the Companies Act 2013. The Members are requested toappoint Auditors and fix their remuneration.
The Audit Report issued by the Auditors of the Company forms part of the Annual Reportand does not contain any qualification reservation or adverse remark.
Pursuant to Section 204 of the Companies Act 2013 and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Company has appointed M/s A. Arora& Co. Company Secretaries in practice (CP No. 993) to undertake the Secretarial Auditof the Company. The Report of the Secretarial Audit is annexed herewith as "AnnexureC". The Secretarial Audit Report does not contain any qualification reservation oradverse remark.
Pursuant to Section 148(3) of the Companies Act 2013 read with The Companies (CostRecords and Audit) Amendment Rules 2014 the Board of Directors on the recommendation ofAudit Committee has appointed M/s V. Kumar & Associates Cost Accountants as the CostAuditors of the Company for the financial year ending on 31st March 2018. M/s V. Kumar& Associates have confirmed that their appointment if approved will be within thelimits of Section 141(3)(g) of the Companies Act 2013 and have also certified that theyare free from disqualification specified under Section 141(3) of the Companies Act 2013.The Audit Committee has also received a certificate from the Cost Auditors certifyingtheir independence and arm's length relationship with the Company. As per the provisionsof the Companies Act 2013 the remuneration payable to the Cost Auditor is required to beplaced before the Members in a General Meeting for their ratification. Accordingly aresolution seeking Members ratification for the remuneration payable to M/s V. Kumar &Associates Cost Accountants is included in the Notice convening the Annual GeneralMeeting.
I. CORPORATE SOCIAL RESPONSIBILITY AND RELATED MATTERS
Corporate Social Responsibility
Keeping with Company's core value of Good Corporate Citizenship your Company iscommitted to its social responsibility by taking various initiatives which would benefitthe society at large. During the year your Company took initiatives to provideventilator/life saving equipments to Pediatrics Intensive Care Unit (PICU) at PGIMERChandigarh support for the education of special children by providing laptops to SOREM -an NGO promoted by the Govt. and dedicated to the cause of children with MentalRetardation Cerebral Palsy and Autism provided three hearse vans for use at PGIMERChandigarh and also upgraded infrastructure of Govt. School adopted by your Company atvillage Kambali. Further your Company continued its efforts towards girl education treeplantation at various locations organizing medical camps celebration of festivals withunderprivileged public awareness camps for road safety and pollution etc. Your Companycontinued its support to the two nearby villages adopted under Swaraj Engines SwachhBharat Integrated Sanitation Programme. The Company has also contributed Rs. 50 lacs tothe Prime Minister National Relief Fund.
Further in compliance with Section 135 of the Companies Act 2013 read with theCompanies (Corporate Social Responsibility Policy) Rules 2014 the Company's CorporateSocial Responsibility (CSR) Committee during the year comprised of Shri Sudhir Mankad(Chairman) and S/Shri Vijay Varma Rajan Wadhera and M.N. Kaushal as other members.Consequent to changes in the Board of Directors the Committee has been reconstituted witheffect from 25th April 2017 by inducting Shri Rajesh Jejurikar and Shri Subhash Mago asMembers in place of Shri Rajan Wadhera and Shri M.N. Kaushal. The Annual Report on CSRactivities is annexed herewith as "Annexure D".
Your Company is conscious of its responsibility towards preservation of naturalresources and continuously taking various initiatives to reduce the consumption ofelectricity and water.
Energy Conservation Technology Absorption and Foreign Exchange Earnings and Outgo
Particulars in respect of the above activities stipulated under Section 134(3)(m) ofthe Companies Act 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 isannexed herewith as "Annexure E".
J. SECRETARIAL Share Capital
The Issued and Paid-up Share Capital of the Company remained unchanged during the yearand stood at Rs.12.42 crores at the end of the financial year 2016-17.
Extract of Annual Return
The details forming part of the extract of the Annual Return in Form MGT-9 is annexedherewith as "Annexure F".
Particulars of Loans Guarantees and Investments
During the year under review the Company has not extended any loans given guaranteesor provided securities and made investment pursuant to Section 186 of the Companies Act2013.
The Company has not accepted deposit from the public falling within the ambit ofSection 73 of the Companies Act 2013 and the Companies (Acceptance of Deposits) Rules2014.
The Company has not made any loans/advances and investment in its own sharesassociates etc. during the year.
The Company is not paying any commission to the Whole Time Director(s). However WholeTime Director(s) is eligible for grant of Stock Options of the Company subject toapproval of the Nomination and Remuneration Committee.
The Company has no holding/subsidiary company.
Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions / events happened on these items during theyear under review: 1. issue of equity shares with differential voting rights or sweatequity.
2. significant or material orders passed by the Regulators / Courts / Tribunal whichimpact the going concern status of the Company and its future operations.
3. voting rights which are not directly exercised by the employees in respect of sharesfor the subscription/purchase for which loan was given by the Company (as there is noscheme pursuant to which such person can beneficially hold shares as envisaged underSection 67(3)(c) of the Companies Act 2013).
4. fraud reporting by the auditors.
Your Directors take this opportunity to acknowledge the contributions of all thestakeholders and are grateful for the cooperation of various Government Authoritiesexcellent support received from the Shareholders Banks and other Business Associates. TheDirectors also recognise and appreciate the hard work and efforts put in by all theemployees and their continued contribution to the Company.
| ||FOR AND ON BEHALF OF THE BOARD |
|Place : Mumbai ||(SUDHIR MANKAD) |
|Date : 25th April 2017 ||Chairman |