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Swaraj Engines Ltd.

BSE: 500407 Sector: Engineering
BSE 00:00 | 18 Feb 1274.80 -28.90






NSE 00:00 | 18 Feb 1276.20 -17.20






OPEN 1301.75
52-Week high 2139.05
52-Week low 1256.35
P/E 18.49
Mkt Cap.(Rs cr) 1,546
Buy Price 1275.00
Buy Qty 5.00
Sell Price 1315.50
Sell Qty 5.00
OPEN 1301.75
CLOSE 1303.70
52-Week high 2139.05
52-Week low 1256.35
P/E 18.49
Mkt Cap.(Rs cr) 1,546
Buy Price 1275.00
Buy Qty 5.00
Sell Price 1315.50
Sell Qty 5.00

Swaraj Engines Ltd. (SWARAJENG) - Director Report

Company director report


Your Directors present their 32nd Annual Report together with Audited Accounts for thefinancial year ended 31st March 2018.

(Rs. in Crores)
Year Ended 31st March 2018 Year Ended 31st March 2017
Net Operating Revenue 771.16 666.14
Profit before Other Income Depreciation Finance Charges Exceptional items and Tax 121.59 104.54
Other Income 18.96 17.21
Profit before Depreciation Finance Cost Exceptional items and Tax 140.55 121.75
Finance Cost 1.01 0.01
Depreciation and Amortisation Expense 16.82 16.28
Profit before Exceptional Items & Tax 122.72 105.46
Exceptional Items
Profit Before Tax 122.72 105.46
Tax Provision
– Current 43.26 37.96
– Deferred (0.64) (1.33)
Profit After Tax 80.10 68.83
Other Comprehensive Income (net of Tax) (0.29) 0.20
Total Comprehensive Income 79.81 69.03

Performance Review

The tractor industry continued its growth journey in fiscal 2018 as well. Riding on theoverall growing tractor industry scenario and resultant enhanced engine demand from itskey customer - Swaraj Division of Mahindra & Mahindra Limited FY 2017-18 was asplendid year for your Company and it has posted its highest ever engine sales volumerevenue and profit.

On the strength of higher engines sale volume of 92022 units during FY 2017-18(previous year - 82297 units) - up by 11.8% net operating revenue grew by 15.8% andreached to Rs. 771.16 crores as against Rs. 666.14 crores of previous year. With betterproduct mix and its continued focus on cost control initiatives the Company's operatingprofit stood at Rs. 121.59 crores as against previous year's Rs. 104.54 crores - animprovement of 16.3%. While profit before tax for the year stood at Rs. 122.72 crores(previous year - Rs. 105.46 crores) profit after tax (before other comprehensive income)of Rs. 80.10 crores (previous year - Rs. 68.83 crores) translated into Basic Earning PerShare of Rs. 64.62 (previous year - Rs. 55.42). Total comprehensive income (net of tax)for the year stood at Rs. 79.81 crores as against Rs. 69.03 crores of previous year.

Your Company has also successfully implemented and migrated to new indirect tax regime- Goods & Services Tax (GST) -with effect from 1st July 2017. The transition to GSTwas seamless by carrying out timely changes in the key systems/ processes.


The fund position of the Company remained comfortable throughout the year under review.Further after meeting the capital expenditure & working capital requirements tosupport operations and also the funds utilised for buyback offer the Company has earnedan income of Rs. 18.63 crores (previous year - Rs. 16.90 crores) on 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 2018. Furtherkeeping in view the overall fund position of the Company the Board over and above thesaid normal dividend has also recommended a special dividend of Rs. 25.00 per sharetaking the total dividend to Rs. 50.00 per share for the financial year 2017-18 (previousyear - Rs. 43.00 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 2017-18 including dividend distribution tax surcharge and education cess willabsorb a sum of Rs. 73.10 crores (previous year - Rs. 64.28 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

In the backdrop of normal monsoon forecast and Government's thrust on agricultural andrural segments the tractor industry is expected to maintain its growth trajectory in thecurrent fiscal as well. With the overall positive sentiments the engine business of yourCompany is also expected to move in tandem with the tractor industry.

To timely cater the customer requirements the Company's ongoing capacity expansionprogramme for increasing its engine manufacturing capacity to 120000 engines per annumis near completion. Considering the upcoming expected demand the Board of Directors ofyour Company has approved a further capacity expansion to 135000 engines per annum whichlike the earlier expansion programmes will also be fully financed through the internalresources.


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.


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 2017-18 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".



Shri Rajesh Jejurikar and Shri Subhash Mago joined the Company's Board with effect from25th April 2017. Further the Board 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. The appointments of Shri Jejurikarand Shri Mago were approved by the Members in the last Annual General Meeting held on 24thJuly 2017.

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.

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 R.R. Deshpande and Shri VijayVarma 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 outperformance evaluation of the Board its Committees and individual Directors. Criteria forperformance 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 13th December 2017.

The 31st Annual General Meeting of the Company was held on 24th July 2017.

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 2018the 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 2018 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.

Audit Committee

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 theMembers of the Committee possess strong accounting and financial management knowledge. TheCompany Secretary of the Company is the Secretary of the Committee.

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


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 the Corporate Governance Report and alsoposted 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.

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)

The following have been designated as the Key Managerial Personnel (KMP) 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 Subhash Mago Whole Time Director & Chief Executive Officer

Shri M.S. Grewal Company Secretary

Shri Rajinder Arora Chief Financial Officer

Shri M.N. Kaushal Whole Time Director ceased to be a KMP of the Company with effectfrom 1st April 2017.

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 ("SBEB Regulations") and there have been no changein the said Scheme during the year. Pursuant to the said Scheme the Nomination andRemuneration Committee during FY 2017-18 have granted 3571 options to eligible employee(s)and allotted 1610 shares against the vesting. No employee has been issued stock optionsduring the year equal to or exceeding 1% of the issued capital of the Company at the timeof grant. Information as required under the SBEB Regulations is provided in the AnnualAccounts which has been uploaded on the Company's website and can be accessed at theweb-link

Industrial Relations

Industrial relations remained cordial throughout the year under review and four yearwage agreement with the workers' union was also concluded.

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 2018 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 18001:2007 and EMS ISO 14001:2004.


Statutory Auditors and Auditors' Report

M/s B.K. Khare & Co. Chartered Accountants (ICAI FRN 105102W) were appointed asStatutory Auditors of your Company at the Annual General Meeting held on 24th July 2017for a term of five consecutive years. As per the provisions of Section 139 of theCompanies Act 2013 the appointment of Auditors is required to be ratified by Members atevery Annual General Meeting. Resolution for the said ratification is being moved at theensuing Annual General Meeting.

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 Auditors

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 2019. 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 arms length relationship with the Company. As per the provisions ofthe 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.


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 upgraded infrastructure and providedmedical equipment at Paediatric Intensive Care Centre and Yoga Room in Advance CardiacCentre at PGIMER Chandigarh. Further a Skill Development Centre was also started in theadopted villages (Kambala & Kambali) in collaboration with Govt. Industrial TrainingInstitute Patiala. With a purpose to provide medical care at the door step a MobileMedical Care facilities was also initiated and about 18 camps being organised every monthsince July 2017. Further your Company continued its efforts towards tree plantation atvarious locations organizing medical camps celebration of festivals withunder-privileged 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.

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 Shri Sudhir Mankad (Chairman)and Shri Vijay Varma Shri Rajesh Jejurikar and Shri Subhash Mago as other members.Consequent to changes in the Board of Directors during the year the Committee wasreconstituted with effect from 25th April 2017 by inducting Shri Rajesh Jejurikar andShri Subhash Mago as Members in place of Shri Rajan Wadhera and Shri M.N. Kaushal. TheAnnual 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.

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".


Share Capital

During the year the Company made an offer for buyback of up to 294746 fully paid-upequity shares of face value of Rs. 10/-each at a price of Rs. 2400/- per fully paid-upequity share on a proportionate basis through the tender offer process for an aggregateamount not exceeding Rs. 70.74 crores. The buyback offer process was concluded on 26thFebruary 2018.

Consequent to the above buyback of its 294746 equity shares by the Company theIssued and Paid-up Share Capital of the Company as on 31st March 2018 stood at Rs. 12.13crores (previous year - Rs.12.42 crores).

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 except placing a deposit of Rs. 20.00 crores with Housing Development FinanceCorporation Ltd.


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

To ensure compliance with the provisions of applicable Secretarial Standards propersystems have been devised by the Company and such systems are adequate and operatingeffectively.


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 sweat equity.

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 : Mumbai (SUDHIR MANKAD)
Date : 23rd April 2018 Chairman