You are here » Home » Companies » Company Overview » Tube Investments of India Ltd

Tube Investments of India Ltd.

BSE: 540762 Sector: Others
BSE 00:00 | 02 Jun 400.10 7.85






NSE 00:00 | 02 Jun 400.05 8.25






OPEN 398.10
52-Week high 577.00
52-Week low 255.00
P/E 22.59
Mkt Cap.(Rs cr) 7,518
Buy Price 397.05
Buy Qty 1.00
Sell Price 404.80
Sell Qty 10.00
OPEN 398.10
CLOSE 392.25
52-Week high 577.00
52-Week low 255.00
P/E 22.59
Mkt Cap.(Rs cr) 7,518
Buy Price 397.05
Buy Qty 1.00
Sell Price 404.80
Sell Qty 10.00

Tube Investments of India Ltd. (TIINDIA) - Director Report

Company director report

Dear Shareholders;

The Directors take pleasure in presenting the 11th Annual Report togetherwith the audited financial statements of the Company for the year ended 31stMarch 2019.

1. Business Environment

As one of the fastest-growing major economies India accounts for about 15% of theWorld's economic growth growing at an average rate of about 7% in the last five years.With investment picking up and domestic consumption remaining strong India's economicgrowth is likely to register a soft growth of about 7.2% in FY 2018-19 and about 7.4% inthe year after. While investment continued to strengthen with higher levels of spending oninfrastructure consumption remained the major contributor to growth. Goods and ServicesTax (GST) a unified consumption tax on all goods and services eradicated the disparityof taxes among different State Governments and the multilayer tax system. It has pooledthe resources of the Central and the State Governments under a single tax which canbenefit both. GST has caused an increase in tax base easier movement of goods acrossState borders and reduction in tax rate from 28% to 18% for several products. India alsoachieved a significant improvement in 'ease of doing business' ranking. Other majorstructural reforms in the areas of Insolvency and Bankruptcy Code bank recapitalisationand Foreign Direct Investment are expected to support India's growth story.

Globally the steady expansion under way since mid-2016 continues with the growth for2019 projected to be at 3.5% and estimated growth at 3.6% in the year after. During theyear US tariff actions on a range of products plus retaliation by its trade partnersfurther complicated global trade relations.

During the year under review the Indian automobile sector managed to grow 5% driven bya buoyant first half year. In the four wheeler segment the passenger vehicle andcommercial vehicle sale volumes were up by 3% and 18% respectively. In the two wheelersegment scooters sales during the year remained flat and motorcycles grew by 8%.

2. Standalone Financial Highlights (र in Cr.)
Particulars 2018-19 2017-18
Sale of Products - Gross 4983.05 4409.67
Excise Duty on Sales - (74.57)
Sale of Products - Net 4983.05 4335.10
Profit Before Exceptional Items and Tax 371.08 217.94
Provision for Impairment on Investments (Net) (9.00) (25.25)
Profit Before Tax 362.08 192.69
Tax Expense (118.57) (56.23)
Profit After Tax 243.51 136.46

No transfer to the General Reserves has been proposed for the year under review.

3. Performance Overview

During 2018-19 the Company achieved a turnover of र 4983 Cr. growing 15% overthe previous year's र 4335 Cr. The Profit before Depreciation Interest ExceptionalItems and Tax was at र 563 Cr. as against र 403 Cr. in the previous year. TheProfit before Tax and Exceptional Items was at र 371 Cr. as against र 218 Cr. inthe previous year an impressive growth of 70%.

On account of various market factors changes in future project potential andaccumulated losses the Company has recognised during the year an impairment loss ofर 12 Cr. in the Statement of Profit and Loss in respect of investment made in JointVenture Company.

The Cycles and Accessories segment recorded revenue of र 1238 Cr. as compared toर 1300 Cr. (net of taxes) during 2017-18 a de-growth of 5% since the Cycles marketcontinues to be sluggish. The operating profit before interest and tax stood at र 11Cr. as compared to र 0.34 Cr. during the previous year.

The Engineering segment registered revenue of र 2896 Cr. as compared to र2299 Cr. (net of taxes) during the previous year a growth of 26%. The operating profitbefore interest and tax stood at र 254 Cr. as compared to र 175 Cr. during2017-18 registering a growth of 45%. The increase in exports and stabilisation of theLarge Diameter Tube manufacturing facility contributed to the increase in profits of thesegment.

The Metal Formed Products segment recorded revenue of र 1360 Cr. as compared toर 1150 Cr. (net of taxes) during the previous year a growth of 18%. The operatingprofit before interest and tax stood at र 123 Cr. as compared to र 102 Cr.during the previous year a growth of 21%.

4. Business Review - Standalone

4.1. Cycles and Components TI's Presence

The Cycles and Components segment of the Company comprises of bicycles of the Standardand Special variety including alloy bikes & specialty performance bikes cyclingaccessories bicycle components sold as spares and home fitness equipment.

Industry Scenario

Bicycles fall under two distinct categories - Standards and Specials. While Standardcycles are largely used for commuting especially in small towns & rural areasSpecial cycles cater to recreational usage where the product is used for fun fitness andleisure activities. 2018-19 was a year of recovery for the bicycle industry. As per theindustry estimates the industry volumes grew by 3%. Specials grew by 6% over previousyear and the Standards segment registered a drop of 2% over previous year in trade. Ordersfrom the Government Schemes witnessed a negative growth of 7% over previous year. Due toincreasing aspirations higher purchasing power international exposure to usage patternsand growing fitness consciousness the use of high-end Special bicycles continued toreceive impetus contributing to the continued steady growth of sale volumes year-on-year.

Over 80% of the country's requirements are met by four major players. The smallerregional players and imports constitute the balance. TI Cycles enjoys a share of 21% ofthe total organised market (Trade Government Exports and Others) with a much highershare in the premium segment.

Review of Performance

TI Cycles sold 34.4 lakh bicycles during the year which is 8.4% lower as compared to2017-18. The thrust on Specials segment was driven by a concerted effort to enhanceconsumer experience through exclusive retail outlets under our exclusive retail brand'Track & Trail' 43 new Track & Trail outlets were opened in 2018-19 taking thetotal number to 239. The segment also made an entry into e-commerce with a presence onwell-known e-commerce portals like Flipkart and Amazon besides its own

In 2018-19 88 new model bicycles were launched and 23 older models were refreshedcontributing to 23.6% of the trade sales volume from such new products. Multipleinnovations were introduced for the first time in the industry notable among them beingthe Speedbar on Hercules

Assassin and a range of ergonomic handlebars. Hercules Assassin received the BestMobility Design award in the Automotive category for 2018-19 from the Confederation ofIndian Industry (CII). Two patents were also filed for design innovation.

On the consumer outreach front the business consistently ran digital campaigns for itsmajor brands BSA Ladybird Hercules Roadeo Mach City and Montra delivering asignificant lift in brand awareness. During the year a range of premium bicycles underlicence from Disney and Marvel were launched. The iconic US cycling brand Schwinn wasalso introduced in the premium end of the market for kids.

The operating profit before interest and tax stood at र 11 Cr. as compared toर 0.34 Cr. during 2017-18.

4.2. Engineering

TI's Presence

The Engineering Segment of the Company consists of cold rolled steel strips andprecision steel tubes viz. Cold Drawn Welded tubes (CDW) and Electric Resistance Weldedtubes (ERW). These products primarily cater to the needs of the automotive boilerbicycle general engineering and process industries. The Company is further engaged in themanufacture of large diameter welded tubes mainly for non-auto application which arelargely imported.

Industry Scenario

During 2018-19 the overall growth in the automotive industry's production volume was6.26%. The passenger vehicle commercial vehicle and two-wheeler segments registeredgrowth of 0.14% 24.2% and 5.82% respectively over the last fiscal. In the two wheelersegment the sale volumes in scooters de-grew by 0.32% while motorcycles grew by 8.8%.

In Cold Rolled Steel Strips in a market which is dominated by integrated steelmanufacturers the Company continued to be a 'niche player' by focussing on special gradescatering to varied applications in different sizes and grades.

Review of Performance

The Engineering segment continued on the growth path on the back of growth in thedomestic auto industry and in exports by taking good advantage of the capabilitiesregional plants and distribution network of the segment.

During the year volumes of the tubes business grew 12% while the cold rolled steelstrips business grew 2%. The Large Diameter Tube manufacturing plant which caters to therequirements of the power infrastructure off-highway and general engineering segmentsgrew by 27% on the back drop of growth in commercial vehicles and shut down of overseascompetitor's facilities. The plant reached its optimum capacity utilisation during theyear and plans

have been drawn up for increasing the capacity of this facility to take advantage ofincreased demand.

During the year under review the segment registered revenue of र 2896 Cr. ascompared to र 2299 Cr. (net of taxes) during the previous year. The operating profitbefore interest and tax stood at र 254 Cr as compared to र 175 Cr. during2017-18 registering a strong growth of 45%.

Increase in volumes in the domestic market modernisation of facility and furtherenhancement in efficiencies were the key business emphasis areas aiding improvedprofitability during the financial year 2018-19.

Engineering exports grew from 26770 MT to 30814 MT during the year despite drop inexports to US market due to prevailing high tariffs.

With regard to the ongoing investigation by the US Department of Commerce on complaintof alleged dumping of cold-drawn steel mechanical tubes from India and some othercountries the Countervailing Duty (CVD) and Anti-dumping Duty (AD) on the Company'sexports to the US market will be revised based on the first review by the US Department ofCommerce scheduled some time in May 2019 in which the business is planning toparticipate.

4.3. Metal Formed Products TI's presence

Automotive & industrial chains fine blanked products stamped productsroll-formed car doorframes and cold rolled formed sections for passenger coachesconstitute the Metal Formed Products segment.

Industry scenario

During 2018-19 despite growth of scooters remaining flat the two wheeler segment grew6% driven by motor cycles growth of 9%. The growth of passenger vehicles segment remainedflat during the year. The segment is one of the major players manufacturing roller chainsand fine blanked parts for the automotive industry in India. The replacement market forchains and sprockets continued to register a good growth due to the increasing two wheelerpopulation. The domestic demand for industrial chains has a good growth.

With international car majors continuing to invest in the country and increasinglyusing India as an export base many component manufacturers have the opportunity to caterto the global needs of automobile manufacturers and their Tier 1 suppliers. The passengercoach segment witnessed huge growth as the Ministry of Railways is focussing on passengersafety by initiating conversion of all old type coaches into stainless steel. This segmenthas achieved considerable volume growth over previous year supplying to variouscustomers.

Review of Performance

Sale of automotive chains and industrial chains grew by 6% and 19% respectively whencompared to 201718 in volume terms. The Company continued to expand its presence in theaftermarket segment benefiting from the two-wheeler population growth. Fine blankedcomponents volumes grew by 15% primarily through new parts developed for the four wheelersegment.

Doorframe sale volumes were higher at 12% during 201819 due to higher sales on selectmodels with two of the renowned auto majors. The focus is on generating more business fromthe auto Original Equipment Manufacturers (OEMs) leveraging the Tier-1 position withspecific emphasis on roll form products and other tubular parts used in passenger cars. Inaddition strengthening the current position in respect of coach parts expanding thecustomer base and foraying into agri-rotovators blades and other farm implements are someof the opportunities that are looked into closely to sustain the drive towards growth.

The chains business segment will continue its core business processes to handle bothvolume fluctuations and change in the product mix to meet customers' demand. Thereplacement market continues to provide opportunities for growth notwithstanding goodcompetition and the business expects to strengthen on the sales structure deepen itscoverage and launch new products for new categories.

During the year under review the segment recorded revenue of र 1360 Cr. ascompared to र 1150 Cr. (net of taxes) during the previous year a growth of 18%. Theoperating profit before interest and tax stood at र 123 Cr. as compared to र 102Cr. during the previous year a growth of 21%.

5. Dividend

The Board of Directors has recommended a final dividend of र 0.75 per share onequity share of face value of र 1 each for the financial year ended 31stMarch 2019. Together with the interim dividend of र 1.75 per share paid on 24thFebruary 2019 on which a Dividend Distribution Tax (DDT) of र 8 Cr. was paid thetotal dividend for the year works out to र 2.50 per share on equity share of facevalue of र 1 each. The final dividend if approved by shareholders will be paid onor after 28th July 2019. It would involve payment of DDT of about र 2.9Cr.

The dividend pay-out is in accordance with the Company's policy on DividendDistribution. The said Policy as approved by the Board is uploaded and is available on thefollowing link on the Company's website article/values/601.Details thereof also form part of this Annual Report for the information of shareholdersas Annexure- A.

6. Share Capital

The paid up Equity Share Capital as on 31st March 2019 was र 18.77 Cr.

7. Finance

Cash and Cash Equivalents as at 31st March 2019 were र 26.28 Cr. TheCompany continues to focus on judicious management of its working capital. The Company hastaken many steps during the year to improve the working capital turns. The working capitalparameters were kept under strict check through continuous monitoring.

7.1. Non-Convertible Debentures

During the year Non-Convertible Debentures (NCDs) aggregating र 250 Cr. wereredeemed and no fresh NCDs were issued during the year. As on 31st March 2019NCDs aggregating र 200 Cr. were outstanding.

7.2. Deposits

The Company has not accepted any fixed deposits under Chapter V of the Companies Act2013 and as such no amount of principal and interest was outstanding as on 31stMarch 2019.

7.3. Particulars of Loans Guarantees or Investments

During the year under review the Company has not given any loans or guarantees underthe provisions of Section 186 of the Companies Act 2013. The Company purchased 150663equity shares of the face value of र 10 each fully paid up at par of M/s. WatsunInfrabuild Private Limited for an aggregate amount of र 0.15 Cr. during the year.As part of treasury management the Company also deploys any short-term surplus in unitsof mutual funds the details relating to which form part of the Notes to the financialstatements provided in this Annual Report.

7.4. Consolidated Financial Highlights

(र in Cr.)
Particulars 2018-19 2017-18
Revenue from contract with customers (net) 5774.77 4999.95
Profit Before Exceptional Items and Tax 383.49 230.17
Exceptional items 3.00 (3.26)
Profit Before Tax and Exceptional Items 386.49 226.91
Tax Expense (126.81) (58.32)
Profit for the year before Minority Interest and share of profit from Associate 259.68 168.59
Share of loss from Associate 8.85 (13.08)
Net Profit for the Year 250.83 155.51

8. Business Review - Subsidiaries and Joint Ventures

8.1. Shanthi Gears Ltd (SGL)

SGL a subsidiary of the Company recorded revenue of र 243 Cr. in 2018-19 againstर 220 Cr. in the previous year. Profit before tax was र 42 Cr. (previous year:र 33 Cr.). During the year SGL renewed its focus on re-establishing itself in themarket and gaining new customers.

SGL continued to look at enlarging its market presence create a robust channelenhance its process capabilities and launch new products to meet the growing expectationsof customers.

During the year under review the Company participated in the Buyback Scheme announcedby SGL to all its eligible shareholders to purchase up to 50 lakh shares at aconsideration of र 140/- per share. The Company tendered 49 lakh shares of which3238958 equity shares were accepted on a proportionate basis by SGL taking into accountthe overall response to the Buyback. The Company received a consideration of र 45.35Cr. as Buyback consideration on the 5th April 2019 from SGL. Post-Buyback theCompany holds 70.47% of SGL's paid up share capital as against 70.11% held pre-Buyback.

SGL also declared and paid a Special Dividend of र 5 per share for the financialyear 2018-19.

8.2. Financiere C10 SAS (FC10)

FC10 the Company's wholly-owned subsidiary in France recorded consolidated revenue ofEuro 34 Mn in 2018 (previous year: Euro 30 Mn). The Profit before Tax for the year wasEuro 0.07 Mn (previous year: Euro 0.01 Mn.). The consolidated results of FC10 includeresults of its subsidiaries viz. Sedis SAS Sedis GmbH and Sedis Co Ltd in UK.

8.3. TI Tsubamex Private Limited (TTPL)

TTPL is a joint venture of the Company with M/s. Tsubamex Company Limited Japan toengage in the business of design and engineering of sheet metal dies and fixtures andproviding related services The Company presently holds 78.3% of TTPL's equity capital.

Since its incorporation TTPL has been facing operational challenges in terms ofwinning new orders and also in meeting rising customer expectations on quality and priceparameters. The small size of its operations and high working capital intensity havefurther made the business situation difficult for TTPL as its customers being OEMsrequire technically superior products. Under the circumstances TTPL sold its identifiedmanufacturing assets to M/s. Nagata Auto Engineering India Private Limited for anaggregate consideration of र 8 Cr. excluding taxes. The amount realised through thesale is being utilised by TTPL to repay its creditors.

TTPL recorded revenue of र 6 Cr. in 2018-19 compared with र 26 Cr. in2017-18 and recorded a loss before tax of र 11 Cr. during 2018-19 compared with theloss before tax of र 7 Cr. in the previous year.

The Company has provided for impairment in the value of its investment for र 12Cr. in its books of account for the financial year under review. In the previous year theCompany had provided impairment in the value of investments for र 11.50 Cr.Accordingly the entire investments have been impaired as at 31st March 2019.

8.4. Great Cycles (Private) Limited (GCPL)

GCPL is the Company's subsidiary in Sri Lanka acquired in March 2018. The Company holds80% of GCPL's equity capital.

During the year under review GCPL recorded revenue of र 16 Cr. and registeredProfit before Tax of र 2 Cr.

8.5. Creative Cycles (Private) Limited (CCPL)

CCPL is the Company's subsidiary in Sri Lanka acquired in March 2018. The Company holds80% of CCPL's equity capital.

During the year under review CCPL recorded revenue of र 55 Cr. and registeredProfit before Tax of र 1 Cr.

8.6. TI Absolute Concepts Private Limited (TIACPL)

During the year under review the Company exited TIACPL by divesting its 50% stake inthe joint venture company in favour of the joint venture partner viz. Absolute SpecialityFoods Chennai Private Limited at a consideration of र 3 Cr. Consequently TIACPLceased to be a joint venture company during the year.

TIACPL had been facing operational difficulties due to competitive operatingenvironment including certain restrictive regulatory orders affecting the food andbeverage industry.

The Company had provided for impairment in the value of its investment of र 13.75Cr. in its books of account during the previous financial year 2017-18 itself.

The Statement containing salient features of the financial statements of the Company'sSubsidiaries/Associate Companies /Joint Ventures is attached as Annexure-B. TheConsolidated Financial Statements of the Company and its subsidiaries prepared inaccordance with the Indian Accounting Standards form part of the Annual Report.

9. Financial Review

9.1. Profits & Profitability

The Profit before Tax and exceptional items registered a growth of 70% through highervolumes better operating efficiencies input and fixed cost reduction initiatives andreduction in interest costs.

All the business segments of the Company maintained their focus on servicing customersimproving efficiencies controlling working capital and reducing resources employed in thebusiness.

9.2. Capital Expenditure

The Company continues to assess the trends emerging in the industry and the changingrequirements of its customers and invests appropriately for the long-term with a view toservicing its customers in a more timely and efficient manner. The Company's new plant inRajpura Punjab for precision tube manufacturing was operational during the financial yearand the Company has planned for further expansion in the coming financial year.

9.3. Interest Cost

The Company's interest cost reduced to र 51.68 Cr. in 2018-19 from र 56.38Cr. in the previous year mainly on account of lower borrowing. With strong focus on cashgeneration the Company achieved a significant level of debt reduction of र 166 Cr.during the year. The total borrowings were reduced to र 513 Cr. as on 31stMarch 2019 from र 679 Cr. as on 31st March 2018.

9.4 Financial Ratios

The key financial ratios of the Company in which there were significant changes (morethan 25%) during the financial year compared to the previous financial year with reasonstherefor are as under:

Sl. No. Financial Ratio* FY 2018-19 FY 2017-18

% change over previous year

1 Interest Coverage Ratio 10.72 6.69 60% Reduction in borrowing & finance charges and increase in the Profit before Interest Tax and Depreciation.
2 Debt-Equity Ratio 0.36 0.56 36% Reduction in debt and increase in net worth due to higher profits.
3 Net Profit Margin 4.9% 3.2% 55% Improvement in profits and reduction of fixed and interest cost.
4 Return on Net Worth 17.1% 11.2% 52% Higher profits for the year.
5 Return on Capital Employed (in %) 21.4% 14.3% 50% Higher profits and maintenance of capital employed at lower level despite increase in sales.
6 Sales Growth 14.9% 10.4% 43% Higher sales driven primarily by growth in Auto Industry in H1 of FY 2018-19 Railways and exports.

*Ratios are tracked by the Company on a standalone basis

9.5. Internal Control Systems

Internal control systems in the organisation are looked at as the key to its effectivefunctioning. The Company believes that internal control is one of the key pillars ofgovernance which provides freedom to the management within a framework of appropriatechecks and balances. Given the nature of business and size of operations the Company hasdesigned and instituted a robust internal control system that comprises well-definedorganisation structure roles and responsibilities documented policies and procedures toprevent business risks through a framework of internal controls and processes. Thesecontrols ensure:

a) Recording of transactions are accurate complete and properly authorised;

b) Adherence to Accounting Standards compliance to applicable Statutes Companypolicies and procedures and timely preparation of financial statements;

c) Effective usage of resources and safeguarding of assets;

d) Prevention and detection of frauds/errors; &

e) Efficient conduct of operations.

To ensure efficient internal control systems the Company has a well-establishedindependent and multi-disciplinary in-house Internal Audit function that carries outperiodic audits across locations and functions. The scope and authority of the InternalAudit function is derived from the Internal Audit charter duly approved by the Management.The Internal Audit function reviews compliance vis-a-vis the established design of theinternal control as also the efficiency and effectiveness of operations. Internal Auditfunction is responsible for providing assurance on compliance with operating systemsinternal policies and legal requirements as well as suggesting improvements to systems andprocesses.

The summary of the Internal Audit findings and status of implementation of action plansfor risk mitigation are submitted to the Audit Committee every quarter for review andconcerns if any are reported to the Board. This process ensures robustness of internalcontrol system and compliance with laws and regulations including resource utilisation andsystem efficacy.

Revenue and capital expenditures are governed by approved budgets and the levels aredefined by a delegation of authority mechanism. Review of capital expenditure isundertaken with reference to benefits expected in line with the policy for the same.

Investment decisions are subject to formal detailed evaluation and approved by therelevant authority as defined in the delegation of authority mechanism. The AuditCommittee reviews the plan for internal audit significant internal audit observations andfunctioning of the Company's Internal Audit department on a periodic basis.

9.6. Internal Financial Control Systems with reference to the Financial Statements

The Company has complied with the specific requirements of the Companies Act 2013which call for establishment and implementation of an Internal Financial Control frameworkthat supports compliance with requirements of the said Act in relation to the Directors'Responsibility Statement.

The Company's business processes are enabled by an Enterprise-wide Resource Platform(ERP) as its core IT system. The operating management is not only responsible for revenueand profitability but for also maintaining financial discipline and accountability. Thesystems and processes are continuously improved by adopting best in class processesautomation and implementing latest Information Technology tools.

The Company has a formal system of internal financial control to ensure the reliabilityof financial and operational information and regulatory and statutory compliances. TheCompany's business processes are enabled by the ERP for monitoring and reporting processesresulting in financial discipline and accountability.

10. Enterprise Risk Analysis and Management

The Company has an established risk assessment and minimisation framework. Thisframework provides a mechanism to identify the risk evaluation of likelihood of happeningand consequences. It also provides for assessment of options to mitigate the risk anddevelop appropriate risk management plans. There are normal constraints of timeefficiency and cost.

The Risk Management Committee of the Board of Directors reviews the risk mitigationplans periodically to monitor the key risks of the Company and evaluate the management ofsuch risks for effective mitigation.

During the year under review the Risk Management Committee met on 8th May2018 and 26th March 2019 and reviewed the risks and mitigation plans of theSBUs of the Company.

Some of the risks associated with the business and the related mitigation plans arediscussed hereunder. The risks given below are not exhaustive and the evaluation of riskis based on management's perception.

10.1 Bicycles and Components

Risk Why considered as Risk Mitigation Plan/Counter Measure
Product Obsolescence • Availability of alternatives • Higher variety especially of premium bikes
Risk • Increased affordability for motorised vehicles • Products based on customer need
• "Cycling" as a concept beyond commuting - leisure fitness fun and recreation
• Shrinking road space for cycling
Sourcing Risk • Dependence on vendor base • Continuous upgrading of vendor capability
• Consistent quality and supplies • Relationship building
• 25% of vendors located in residential area • Imports from quality sources
• Reconfigure & relocate vendor base
Competition Risk • Competition from domestic suppliers • Enhancing the Brand awareness
• Imports • Introducing new models with a healthy innovation funnel
• Consistent quality and timely delivery
• Enhancing price competitiveness
Volume & Profitability Risk • Rapid decline in Standards segment • Drive growth in Premium cycles segment
• Low price competition in Specials segment • Build capability to compete in Specials segment at various price points
• Growth in Premium segment not sufficient to offset the overall drop in volume • Cost reduction measures to enhance profitability
• Higher fixed cost related to volume
Technology Risk • Lack of capacity and capability to handle large scale shift to alloy bikes • Capability building for manufacture and assembly of alloy bikes
• Establishing reliable source for high end bikes


10.2. Engineering
Risk Why considered as Risk Mitigation Plan/Counter Measure
User Industry • Significant exposure to auto sector • New products/applications to existing customers
Concentration Risk • Time lag in pass through of input cost changes • Introduction of new products catering to non-auto users
• Drive operational efficiencies vigorously
• Leverage application engineering skills for tubular solutions
• Cost reduction through operational excellence initiatives
Technology • Cheaper alternatives for auto applications affecting revenue streams • Imbibing new and relevant technologies
Obsolescence Risk • Equipment upgradations
Raw Material Risk • Volatility in steel price • Alliance with steel producers
• Inconsistency in quality • Global sourcing
• High inventory holding • Strategic sourcing
• Rationalisation and standardisation of grades
• Move to products with higher value addition
Competition Risk • Competition from integrated steel mills • Consistent quality and timely delivery
• New entrants with financial strength • Import substitution development of new grades.
• Imports • Product range of offering leveraging all businesses of the Company
• Innovate on products process and applications
• Leveraging metallurgy skills
Export related risks • Increased trade protectionism and import tariff • Identification of new export markets and customers
• Global competition • Capability building
• Need for higher capability • Enhanced domestic sales

10.3. Metal Formed Products

Risk Why considered as Risk Mitigation Plan/Counter Measure
Product Risk • Revenues are model specific • Indigenisation of equipment • Pursue options for other business using the same facilities • Model specific investments to be done by OEMs • More rigorous analysis of risks before taking up the project
User Industry • Dependence on auto sector • Diversification into non-auto business
Concentration Risk • Impact of slow down • Focus on industrial applications
• Develop range of power transmission products
Customer Retention • Availability of alternative source • Cost competitiveness through operational excellence
Risk • Disruption in supplies initiatives • Leverage design strength • Leverage proximity to customer • Build technology superiority • Product - plant rationalisation
Entry of competition • Low technology barrier • Leverage position with customer as technology leader
• Impact on profit • Continuous upgrading of technical specifications • Cost reduction
• Concentration in focus markets
Entry of internationally • Better product range • Enhance product portfolio leveraging acquisition
established players in • Tie-up with local player/end user • Leverage leadership and competitive position in industry
domestic market • 'High quality' image • Strengthen collaboration with R&D team of customers
• Pursue opportunities in systems/components
• Pursue options for collaborating with other multinational player(s) of repute
Sourcing Risk • Dependence on a few vendors for certain components • Vendor relationship building
• Enhancing vendor base both locally as well as overseas
• Leveraging strength of combined entity
Pricing risk • Year-on-year price reduction expectation • Utilisation of existing assets optimal investment assumptions and reduced cost of operations
• Price recovery due to dependence on a few OEMs • Value engineering and value analysis in business
re-engineering process
• Claims from customer for lower volumes


10.4. General
Risk Why considered as Risk Mitigation Plan/Counter Measure
Human Resource Risk Ability to attract talent especially people with domain knowledge for new projects • Corporate brand building
• Robust recruitment process
• Structured induction and on the job training
Retention of talent • Coaching and team building

• Individual career and development plan

• Effective communication exercises

• Continuous engagement with identified talent pool

• Deskill operations
Currency Risk Foreign currency exposure on exports imports and borrowings • Early identification and monitoring of exposures
• Hedging of exposures based on risk profile
IT/Cyber Related Risk Confidentiality integrity and availability Access controls

Secure Network Architecture

Infrastructure redundancies & disaster recovery mechanism

Audit of controls

Project Management Delay in implementation Effective project management
Risk Increase in cost Pre-implementation planning
Potential delay in stabilisation of production Deployment of adequate resources
Effective monitoring

11. Corporate Social Responsibility (CSR)

The Company being part of the Murugappa Group is known for its tradition ofphilanthropy and community service. The Company's philosophy is to reach out to thecommunity by establishing service-oriented philanthropic institutions in the field ofeducation and healthcare as the core focus areas. The CSR Policy of the Company isavailable on the Company's website at the following link .

As per the provisions of the Companies Act 2013 the Company was required to spendर 2.67 Cr. during the financial year 2018-19. The Company spent र 2.69 Cr.towards the identified CSR projects in the fields of education health care and ruralsustainability during the year.

The Annual Report on CSR for 2018-19 is annexed to and forms part of this Report asAnnexure-C as well as in the Company's website at the following link .

12. Alteration of Memorandum of Association

During the financial year 2018-19 with the approval of the Members by means of aSpecial Resolution passed with the requisite majority at the 10th AnnualGeneral Meeting sub-clause 10 under III(B) of the Memorandum of Association of theCompany was altered to provide for/facilitate the making of contribution for politicalpurposes. No contribution for political purposes was made during the year.

The Board had by Notice of Postal Ballot & Electronic Voting dated 27thMarch 2019 further proposed for the Members' approval by means of a Special Resolutionthrough postal ballot and electronic voting an alteration to Clause III(A) [Main ObjectsClause] of the Memorandum of Association by insertion of a new sub-clause 10 to facilitatethe Company's foray into the business of vision products and components as and whendecided appropriate.

13. Corporate Governance

The Company is committed to maintaining high standards of corporate governance.

The Company was wholly in compliance with the requirements of the Listing Agreementwith the Stock Exchanges as well as the SEBI Listing Regulations.

A report on corporate governance together with a certificate from the Auditors isannexed in accordance with the terms of the SEBI Listing Regulations and forms part of theBoard's Report as Annexure-D. The Managing Director and the Chief Financial Officer havesubmitted a certificate

to the Board regarding the financial statements and other matters in terms of Part B ofSchedule II [Corporate Governance] of the SEBI Listing Regulations.

The Report further contains details as required to be provided in the Board's Report onthe policy on Directors' appointment and remuneration including the criteria annualevaluation by the Board and Directors composition and other details of Board committeesimplementation of risk management policy whistle-blower policy/vigil mechanism dividendpolicy etc.

14. Business Responsibility Reporting

As required under the SEBI Listing Regulations which mandate the inclusion of aBusiness Responsibility Report as part of the Annual Report for the top 500 listedentities the Business Responsibility Report forms part of the Annual Report asAnnexure-E.

The Business Responsibility Policy of the Company is displayed in the Company's websiteat the following link .

15. Human Resources

The Company continues to leverage its strength in human capital by attracting the righttalent nurturing & developing and retaining them to meet the shortterm and long-termorganisation goals. The key HR imperatives were addressed through Organisation Structure& Design building technical & operational excellence capabilities buildingleadership & talent pool productivity improvement and employee cost reductionprograms maintaining cordial industrial relations and digitising HR processes.

The Company is successful in attracting talent from outside and during the year peoplewere hired across different levels and functions. The Company has started creating aresource pool wherein project executives/engineers have been hired and given exposure tothe different businesses functions organisation values and culture.

I n order to enable the Company to grow exponentially the Company is emphasising on ahigh performing work culture that would enable employees to transform from a fixed togrowth mind-set through empowerment across levels and by inculcating a higher sense ofaccountability through systematic interventions.

During the year for providing a clear direction and focus for the future theCompany's Vision Statement was framed involving different stakeholders. The Statementreads as "Build a Globally Admired Indian Engineering Company Creating StakeholderDelight". In line with the said Vision

Statement empowered employees are vested with clear responsibility and focus onachieving cost leadership and faster growth of their respective business.

The Company continues to conduct leadership programs where individuals go through360-degree assessment feedback forming Individual Development Plans (IDPs) performanceenhancement assignments supported through mentorship. The Company continues its focus onidentifying the high potential employees in the organisation who are groomed to occupythe key roles.

In order to make the operations efficient and profitable Total Quality Management[TQM] (at the Tubes & Chains Business Units) and Toyota Production System [TPS] (at TICycles Business Unit) initiatives have been launched with the help of renowned Japaneseconsultants.

The total number of permanent employees on the rolls of the Company as on 31stMarch 2019 is 3253.

Industrial relations continued to remain cordial at all the Company's units during theperiod under review.

The information relating to employees and other particulars required under Section 197of the Companies Act 2013 read with Rule 5 of the Companies (Appointment &Remuneration of Managerial Personnel) Rules 2014 will be provided upon request. In termsof Section 136 of the Companies Act 2013 the Report and Accounts are being sent to theMembers excluding the information on employees particulars of which are available forinspection by the Members at the Registered Office of the Company during business hours onall working days of the Company up to the date of the forthcoming Annual General Meeting.If any Member is interested in obtaining a copy thereof such Member may write to theCompany Secretary in the said regard.

The disclosure with regard to remuneration as required under Section 197 of the Actread with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 is attached and forms part of this Report as Annexure-F.

16. Prevention of sexual harassment at workplace

The Company has policy on prevention of sexual harassment at workplace in line with therequirement of the Sexual Harassment of Women at the Workplace (Prevention Prohibition& Redressal) Act 2013. An internal Complaints Committee (ICC) to redress complaintsreceived regarding sexual harassment has been constituted. The policy extends to allemployees (permanent contractual temporary and trainees). Employees at all levels arebeing sensitised about the new Policy and the remedies available thereunder. No complaintswere received and disposed off during the year under review.

17. Employee Stock Option Scheme

During the year under review the Company has granted 62562 stock options to eligibleemployees under its Employee Stock Option Plan viz. ESOP 2017.

Details in respect of the ESOP 2017 as required under the relevant SEBI Regulations aredisplayed in the Company's website at the following link .

18. Directors' Responsibility Statement

The Board of Directors confirm that the Company has in place a framework of internalfinancial controls and compliance system. The Internal Audit team periodically evaluatesthe adequacy and effectiveness of these internal controls recommends improvements andalso reviews adherence to policies based on which corrective action is taken to addressgaps if any. The internal controls are also monitored and reviewed by the Audit Committeeand the Board and also subjected to a review by the Statutory Auditors. To the best oftheir knowledge and belief and according to the information and explanations obtained bythem your Directors make the following statements in terms of Section 134(3)(c) of theCompanies Act 2013:

a) that in the preparation of the annual Financial Statements for the year ended 31stMarch 2019 the applicable accounting standards have been followed along with properexplanation relating to material departures if any;

b) that such accounting policies as mentioned in the Notes to the Financial Statementshave been selected and applied consistently and judgment and estimates have been made thatare reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Company as at 31st March 2019 and of the profit of the Company for theyear ended on that date;

c) that proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

d) that the annual Financial Statements have been prepared on a going concern basis;

e) that proper internal financial controls to be followed by the Company have been laiddown and that the financial controls are adequate and were operating effectively; and

f) that proper systems have been devised to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

19. Auditors

M/s. S R Batliboi & Associates LLP Chartered Accountants (LLP Identityno.AAB-4295) were appointed as Statutory Auditors at the 9th Annual GeneralMeeting held on 6th November 2017 for a period of five years viz. from theconclusion of the said 9th Annual General Meeting till the conclusion of the 14thAnnual General Meeting.

I n terms of the resolution passed by the Members with regard to the appointment of theStatutory Auditors the same is subject to ratification by the Members at every AnnualGeneral Meeting and their remuneration will be recommended to the Shareholders at the timeof taking up such ratification of appointment each year. In the said regard by anamendment to the Companies Act 2013 under the Companies (Amendment) Act 2017 therequirement for ratification of appointment of the Statutory Auditors at each AnnualGeneral Meeting has been done away with. Accordingly there is no requirement under thepresent law for ratification of appointment of the Statutory Auditors. The remunerationpayable to them in respect for FY 2019-20 hence needs to be fixed at the Annual GeneralMeeting as required under Section 142 of the Companies Act 2013.

Accordingly the Board recommends the terms of remuneration payable to the StatutoryAuditors as set out in the resolution contained in the Notice of the ensuing AnnualGeneral Meeting.

M/s. S Mahadevan & Co. (firm no.000007) Cost Accountants were appointed as theCost Auditors of the Company for auditing the cost accounting records maintained by theCompany in respect of the applicable products for the financial year 2019-20. Necessaryresolution for ratification of their remuneration in respect of the aforesaid terms ofappointment for financial year 2019-20 forms part of the Notice for the ensuing AnnualGeneral Meeting.

20. Related Party Transactions

All related party transactions that were entered into during the financial year underreview were on an arm's length basis and were in the ordinary course of business. Thereare no materially significant related party transactions during the year which may have apotential conflict with the interest of the Company at large. Necessary disclosures asrequired under the Indian Accounting Standards have been made in the notes to theFinancial Statements.

The policy on Related Party Transactions as approved by the Board is uploaded and isavailable on the following link on the Company's website article/values/476.None of the Directors had any pecuniary relationships or transactions vis-a-vis theCompany.

21. Directors

Mr. Ramesh K B Menon Director will retire by rotation at the ensuing Annual GeneralMeeting under Section 152 of the Companies Act 2013 ("the Act") and beingeligible he offers himself for re-appointment.

Mr. Sanjay Johri was appointed as Additional Director with effect from 14thAugust 2018. He holds office up to the date of the ensuing Annual General Meeting. TheBoard recommends his appointment as Independent Director under Section 149 of the Act fora term of four years viz. from the date of the 11th AGM (2019) till the dateof the 15th AGM (2023).

Mr. Mahesh Chhabria was appointed as Additional Director with effect from 5thFebruary 2019. He holds office up to the date of the ensuing Annual General Meeting. TheBoard recommends his appointment as Independent Director under Section 149 of the Act fora term of five years viz. from the date of the 11th AGM (2019) till the dateof the 16th AGM (2024).

The present term of Ms. Madhu Dubhashi as Independent Director is till the date of theensuing 11th Annual General Meeting and she is eligible for a second term. TheBoard recommends her re-appointment as Independent Director under Section 149 of the Actfor a second term of two years viz. from the date of the 11th AGM (2019) tillthe date of the 13th AGM (2021) by means of a Special Resolution as proposed inthe Notice.

All the Independent Directors of the Company including the aforementioned IndependentDirector appointees have furnished necessary declaration in terms of Section 149(6) of theAct and the Listing Regulations affirming that they meet the criteria of independence asstipulated thereunder.

The Board takes pleasure in recommending the appointment of Mr. Sanjay Johri and Mr.Mahesh Chhabria as Independent Directors and the re-appointment of Ms. Madhu Dubhashi fora second term as Independent

Director for such term of Office as provided under the relevant item of the Notice forthe ensuing Annual General Meeting.

22. Declarations/Affirmations

During the year under review:

- t here were 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 viz. 31st March 2019 and the date ofthis Report; &

- there were no significant material orders passed by the regulators or courts ortribunals impacting the Company's going concern status and its operations in future.

23. Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Mr. R Sridharan of Messrs. R. Sridharan & Associates a firm of CompanySecretaries in Practice (C.P. No.3239) to undertake the Secretarial Audit of the Company.The Report of the Secretarial Auditor is annexed herewith and forms part of this Report asAnnexure-G.

The Company has ensured compliance of the Secretarial Standards issued by the Instituteof Company Secretaries of India during the period under review. Accordingly noqualifications or observations or other remarks have been made by the Secretarial Auditorin his said Report.

24. Annual Return

Extract of the Annual Return of the Company is annexed and forms part of the Report asAnnexure-H. The same is also available on the website of the Company at the followinglink .

25. Key Managerial Personnel

Mr. L Ramkumar retired as Managing Director of the Company upon completion of his termat the conclusion of the previous Annual General Meeting held on 13th August2018.

Mr. Vellayan Subbiah Managing Director (Designate) assumed Office as the ManagingDirector of the Company with effect from 14th August 2018.

Mr. Vellayan Subbiah Managing Director Mr. K Mahendra Kumar Chief Financial Officerand Mr. S Suresh Company Secretary are the Key Managerial Personnel (KMPs) of the Companyas per Section 203 of the Companies Act 2013.

26. Energy Conservation Technology Absorption and Foreign Exchange Earnings and Outgo

The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withRule 8 of The Companies (Accounts) Rules 2014 is annexed herewith and forms part of thisReport as Annexure-I.

The Directors thank all Customers Vendors Financial Institutions Banks StateGovernments Joint Venture Partners and Investors for their continued support to yourCompany's performance and growth. The Directors also wish to place on record theirappreciation of the contribution made by all the employees of the Company resulting in thegood performance during the year under review.

On behalf of the Board
Chennai M M Murugappan
30th April 2019 Chairman