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Swaraj Engines Ltd.

BSE: 500407 Sector: Engineering
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OPEN 1549.95
52-Week high 1549.95
52-Week low 807.35
P/E 29.65
Mkt Cap.(Rs cr) 1,836
Buy Price 1513.85
Buy Qty 1.00
Sell Price 1523.00
Sell Qty 5.00
OPEN 1549.95
CLOSE 1525.55
52-Week high 1549.95
52-Week low 807.35
P/E 29.65
Mkt Cap.(Rs cr) 1,836
Buy Price 1513.85
Buy Qty 1.00
Sell Price 1523.00
Sell Qty 5.00

Swaraj Engines Ltd. (SWARAJENG) - Director Report

Company director report


Your Directors present their 34th Annual Report together with Audited Accounts for thefinancial year ended 31st March 2020.


(Rs. in Crores)

Year Ended Year Ended
31st March 2020 31st March 2019
Net Operating Revenue 773.30 871.74
Profit before Other Income Depreciation 100.43 131.65
Finance Charges Exceptional items and Tax
Other Income 12.78 15.38
Profit before Depreciation Finance Cost Exceptional items and Tax 113.21 147.03
Finance Cost 0.01 0.09
Depreciation and Amortisation Expense 20.13 19.54
Profit before Exceptional Items & Tax 93.07 127.40
Exceptional Items
Profit Before Tax 93.07 127.40
Tax Provision
– Current 24.67 43.61
– Deferred (2.64) 1.37
Profit After Tax 71.04 82.42
Other Comprehensive Income (net of Tax) (0.43) (0.14)
Total Comprehensive Income 70.61 82.28

Performance Review

Fiscal 2020 was a challenging year for the tractor industry as after posting growth forconsecutive 3 years it witnessed slowdown in demand during the year. Nationwide lockdownimposed by the Government from 25th March 2020 to curtail the spread of COVID-19 hadfurther impacted the business segments towards the year end. However the Company'soperations remained suspended from 23rd March 2020 in view of the lockdown announced byPunjab Govt. and accordingly the estimated engine sale loss for the month of March was of3000 units.

In this backdrop tractor industry degrew by 10% and your Company could post a sale of89928 units during FY 2019-20 against 99638 units sold during previous year. Impacted bylower engine sales volume the net operating revenue for FY 2019-20 stood at Rs. 773.30crores as against Rs. 871.74 crores of previous year. With continued focus on cost frontthe Company's earnings before interest taxes depreciation and amortization (EBITDA)reached to Rs. 100.43 crores as against previous year's Rs. 131.65 crores. While profitbefore tax for the year stood at Rs. 93.07 crores (previous year - Rs. 127.40 crores)profit after tax (before other comprehensive income) at Rs. 71.04 crores (previous year -Rs. 82.42 crores) translated into Basic Earning Per Share of Rs. 58.57 (previous year -Rs.67.96). Total comprehensive income (net of tax) for the year stood at Rs. 70.61 crores asagainst Rs. 82.28 crores of previous year.

No material changes and commitments which could affect your Company's financialposition for FY 2019-20 have occurred between the end of the financial year of yourCompany and date of this report.


The fund position of the Company remained comfortable throughout the year under review.The Company after meeting the capital expenditure & working capital requirements tosupport operations has earned an income of Rs. 12.68 crores (previous year - Rs. 15.02crores) on its surplus funds.


Your Directors are pleased to recommend an equity dividend of Rs. 25.00 per share ofthe face value of Rs. 10.00 for the financial year ended 31st March 2020. Further theBoard over and above the said normal dividend has also recommended a special dividend ofRs. 15.00 per share taking the total dividend to Rs. 40.00 per share for the financialyear 2019-20 (previous year - Rs. 50.00 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 2019-20 will absorb a sum of Rs. 48.53 crores (previous year - Rs. 73.11 croresincluding dividend distribution tax and surcharge). Further the Board of your Company hasdecided not to transfer any amount to the General Reserves for the year under review.

Current Year's Review

The initial period of current financial year 2020-21 is going to be challenging as thenation is currently going through a tough phase in view of COVID-19 pandemic. With theGovernment's focus on rural development good rabi crop and prediction of normal monsoonit is expected that the tractor demand will be slowly resorted once interim restrictionscurrently imposed by the Government get removed/eased out.

The Company's operations which were suspended since 23rd March 2020 have now resumedfrom 5th May 2020 after obtaining the necessary permissions from the local authoritiesand will increase its activity level gradually.


The Company has laid down adequate internal financial controls with reference tofinancial statements commensurate with the size scale and complexity of its operations.Based on the results of such assessments carried out by Management no reportable materialweakness or significant deficiencies in the design or operation of internal financialcontrols was observed. Nonetheless your Company recognizes that any internal controlframework no matter how well designed has inherent limitations and accordingly regularaudits and review processes ensure that such systems are reinforced on an ongoing basis.Your Company has migrated to SAP ERP system as a business enabler during FY19. Thetransactional controls built into the SAP ERP system has helped to further strengthen theprocesses related to segregation of duties appropriate level of approval mechanisms andmaintenance of supporting records.


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.


All related party transactions that were entered during the financial year 2019-20 werein the ordinary course of the business and were on arm's length basis. All such relatedparty transactions are placed before the Audit Committee for approval whereverapplicable. Prior omnibus approval for normal transactions is also obtained from the AuditCommittee for the related party transactions which are of repetitive nature as well as forthe transactions which cannot be foreseen and the same are subsequently shared with AuditCommittee on quarterly basis. The policy on materiality of and dealing with related partytransactions as approved by the Audit Committee and the Board of Directors is uploaded onthe website of the Company and the link for the same is The disclosure of material related partytransactions pursuant to Section 134(3)(h) of the Companies Act 2013 in Form AOC-2 isannexed herewith as "Annexure-A".


Mr. Subhash Mago upon completion of his current tenure as Whole-Time Director &Chief Executive Officer on 31st March 2020 ceased to be a Director of the Company witheffect from 1st April 2020. Your Board has placed on record its sincere appreciation ofthe valuable contributions made by Mr. Mago during his tenure as Director of the Company.

Mr. Harish Chavan has been appointed as Additional Director of the Company with effectfrom 1st April 2020. Mr. Chavan holds office upto the date of the forthcoming AnnualGeneral Meeting. The Company has received notice under Section 160 of the Companies Act2013 from Member signifying intention to propose Mr. Harish Chavan for the office ofDirector at the forthcoming Annual General Meeting.

In terms of Section 152 of the Companies Act 2013 Mr. Rajesh Jejurikar and Mr. R.R.Deshpande shall retire by rotation at the forthcoming Annual General Meeting and beingeligible offer themselves for re-appointment.

Board Evaluation

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 out anannual performance evaluation of the Board its Committees and individual Directors.Criteria for performance evaluation is covered in the Corporate Governance Report.

Remuneration Policy

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 five Meetings of Board and five 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 January 2020.

The 33rd Annual General Meeting of the Company was held on 30th July 2019.

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 March2020 the applicable accounting standards have been followed; b) in the selection ofaccounting policies consulted the Statutory Auditors and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as at 31st March 2020 and of the profit ofthe Company for the year ended on that date; c) proper and sufficient care has been takenfor the maintenance of adequate accounting records in accordance with the provisions ofthe Companies Act 2013 for safeguarding the assets of the Company and for preventing anddetecting fraud and irregularities; d) the Annual Accounts have been prepared on a goingconcern basis; e) adequate Internal Financial Controls to be followed by the Company havebeen laid down and such Internal Financial Controls were operating effectively during theFinancial Year ended 31st March 2020; f) proper systems have been devised to ensurecompliance with the provisions of all applicable laws and such systems were adequate andoperating effectively throughout the Financial Year ended 31st March 2020.

Audit Committee

During the year ended 31st March 2020 the Audit Committee comprised of the followingDirectors viz. Mr. Dileep C. Choksi (Chairman of the Committee) Mr. Sudhir Mankad Mr. S.Durgashankar and Mrs. Neera Saggi. Consequent to the resignation of Dr. T.N. Kapoor asIndependent Director with effect from the close of business hours on 31st March 2019 theBoard reconstituted the Audit Committee by inducting Mr. Sudhir Mankad as Member of theAudit Committee in place of Dr. T.N. Kapoor with effect from 1st April 2019. Except Mr.S. Durgashankar all the Members are Independent Directors. All the Members of theCommittee possess strong accounting and financial management knowledge. The CompanySecretary of the Company is the Secretary of the Committee.

All the recommendations of the Audit Committee were accepted by the Board.

F. CORPORATE GOVERNANCE 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 the complaints received if any regarding sexual harassment. During theyear no complaint was received.

Risk Management

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)

During the year under review the following were designated as the Key ManagerialPersonnel (KMP) of the Company pursuant to Sections 2(51) and 203 of the Companies Act2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014: Mr. Subhash Mago Whole-Time Director & Chief Executive Officer Mr. M.S. GrewalCompany Secretary Mr. Rajinder Arora Chief Financial Officer While there was no change inthe KMPs during the year under review consequent to completion of his current tenure asWhole-Time Director and Chief Executive Officer on 31st March 2020 Mr. Subhash Magoceased to be a Director of the Company with effect from 1st April 2020. Further Mr. M.S.Grewal has been appointed as Chief Executive Officer of the Company with effect from 1stApril 2020 and in his place Mr. Rajesh Kumar Kapila has been appointed as CompanySecretary of the Company with effect from 1st April 2020. Accordingly with effect from1st April 2020 following are designated as the KMPs of the Company: Mr. M.S. GrewalChief Executive Officer Mr. Rajinder Arora Chief Financial Officer Mr. Rajesh KumarKapila Company Secretary

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 of SEBI (Share Based EmployeeBenefits) Regulations 2014 ("SBEB Regulations"). Pursuant to the said Schemethe Nomination and Remuneration Committee during FY 2019-20 have granted 7979 options toeligible employees and allotted 3295 equity shares against the vesting. No employee hasbeen issued stock options during the year equal to or exceeding 1% of the issued capitalof the Company at the time of grant. Information as required under the SBEB Regulations isprovided in the Annual Accounts which has been uploaded on the Company's website and canbe accessed at the web-link

Industrial Relations

Industrial relations remained cordial throughout the year under review.

Particulars of Employees

The statement of Disclosure of Remuneration under Section 197(12) of the Companies Act2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is annexed herewith as "Annexure-B". The Company had oneemployee who was in receipt of remuneration of not less than Rs. 10200000 during theyear ended 31st March 2020 or not less than Rs. 850000 per month during any part of theyear. Details of employee remuneration as required under provisions of Section 197(12) ofthe Companies Act 2013 read with Rule 5(2) & 5(3) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are available at the Registered Officeof the Company during working hours 21 days before the Annual General Meeting and shallbe made available to any Shareholder on request.

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.

The Company's plant is certified under OHSAS 45001:2018 and EMS ISO 14001:2015.


Statutory Auditors and Auditors' Report

M/s B.K. Khare & Co. Chartered Accountants (ICAI Firm Registration Number105102W) were appointed as the Statutory Auditors of the Company to hold office for aterm of 5 years from the conclusion of the 31st Annual General Meeting ("AGM")held on 24th July 2017 until the conclusion of the 36th AGM of the Company to be held inthe year 2022.

Pursuant to the Notification issued by the Ministry of Corporate Affairs on 7th May2018 amending Section 139 of the Companies Act 2013 the mandatory requirement forratification of appointment of Auditors by the Members at every AGM has been omitted andhence your Company has not proposed ratification of appointment of M/s B.K. Khare &Co. Chartered Accountants at the forthcoming AGM.

The Report given by the Auditors on the financial statements of the Company is part ofthe Annual Report. There has been no qualification reservation or adverse remark ordisclaimer given by the Auditors in their Report.

Secretarial Auditors

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 or disclaimer.

Cost Records and Cost Audit

The Company is maintaining cost records as prescribed under the provisions of Section148(1) of the Companies Act 2013. The Board had appointed M/s V. Kumar & AssociatesCost Accountants (Firm Registration Number 100137) as Cost Auditor for conducting theaudit of cost records of the Company for the Financial Year 2019-20.

The Board of Directors on the recommendation of the Audit Committee appointed M/s V.Kumar & Associates Cost Accountants (Firm Registration Number 100137) as the CostAuditors of the Company for the Financial Year 2020-21 under Section 148 of the CompaniesAct 2013. M/s V. Kumar & Associates have confirmed that their appointment is withinthe limits of Section 141(3)(g) of the Companies Act 2013 and have also certified thatthey are free from any disqualifications specified under Section 141(3) and proviso toSection 148(3) read with Section 141(4) of the Companies Act 2013.

The Audit Committee has also received a Certificate from the Cost Auditors certifyingtheir independence and arms length relationship with the Company.

As per the provisions of the Companies Act 2013 the remuneration payable to the CostAuditor is required to be placed before the Members in a General Meeting for theirratification. Accordingly a Resolution seeking Members' ratification for the remunerationpayable to M/s V. Kumar & Associates Cost Auditors is included in the Noticeconvening the Annual General Meeting.


Corporate Social Responsibility (CSR)

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. In line with the Company's CSR Policy and CSR thrust areas yourCompany's CSR efforts continue to be directed towards community welfare educationvocational skills training public health and environmental conservation. Your Companycontinued its CSR initiative by providing medical equipment / upgraded infrastructure atPaediatric Intensive Care Centre at PGIMER Chandigarh and at General Medical CollegeHospital Chandigarh. Skill Development Centre started in the adopted villages (Kambala& Kambali) in collaboration with Govt. Industrial Training Institute Patiala hassupported the local youth for starting own venture or getting suitable placement.

The Mobile Medical Care initiative in collaboration with GVK EMRI (MMU) during the yearreached to 7 villages covering more than 22000 people. The new initiative of providingengines to Govt. ITIs (Diesel & Tractor Mechanic) has helped in enhancing the skill ofthe students. Under the Company's initiative called "Prerna" various trainingswere organized to empower rural agriculture farming women through integrated ruraldevelopment programme to provide and promote innovative farm practice knowledge &technology. Besides this your Company also provided medical equipment and material toGovt. Hospitals to fight COVID-19 pandemic.

The Company also continued its efforts towards Swachh Bharat in adopted villages treesplantation organizing medical and blood donation camps celebration of festivals withunder-privileged public awareness camps for road safety and pollution etc.

Further in compliance of Section 135 of the Companies Act 2013 read with theCompanies (Corporate Social Responsibility Policy) Rules 2014 the Company's CorporateSocial Responsibility (CSR) Committee currently comprises of Mr. Sudhir Mankad (Chairman)and Mr. Vijay Varma Mr. Rajesh Jejurikar and Mr. Harish Chavan as other members.Consequent to completion of his current tenure as Whole-Time Director and Chief ExecutiveOfficer of the Company on 31st March 2020 Mr. Subhash Mago ceased to be Director of theCompany and Member of CSR Committee with effect from 1st April 2020. In his place Mr.Harish Chavan has been inducted as Member of CSR Committee with effect from 1st April2020. The Annual Report on CSR activities is annexed herewith as "Annexure-D".

Sustainability Initiative

Your Company is conscious of its responsibility towards preservation of naturalresources and continuously taking various initiatives to reduce the consumption ofelectricity and water. As required under Regulation 34(2)(f) of the Listing Regulationsthe Business Responsibility Report of your Company in the prescribed format is availableas a separate section as "Annexure E" and forms part of this Annual Report.

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-F".

J. SECRETARIAL Share Capital

Consequent to allotment of 3295 equity shares of Rs. 10/- each to eligible employeesduring the year against the exercise of the options vested to them under the Company'sEmployees' Stock Option Scheme-2015 the Paid-up Equity Share Capital of the Company as on31st March 2020 stood at 12132181 equity shares of Rs. 10/- fully paid up (previousyear - 12128886).

Extract of Annual Return

The details forming part of the extract of the Annual Return in Form MGT-9 is annexedherewith as "Annexure-G". The same is available on

Particulars of Loans Guarantees and Investments

During the year under review the Company has not extended any loans given guaranteesor provided securities and made investments except placing corporate deposits as shown inNote 2.9 to the Financial Statements.


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.

Compliance with Secretarial Standards on Board and General Meetings

During the Financial Year your Company has complied with applicable SecretarialStandards issued by the Institute of Company Secretaries of India.

Change in the Nature of Business

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


The Company is not paying any commission to the Whole-Time Director(s). HoweverWhole-Time 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.

Place : S.A.S. Nagar (Mohali) (SUDHIR MANKAD)
Date : 8th May 2020 Chairman