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Tube Investments of India Ltd.

BSE: 540762 Sector: Others
NSE: TIINDIA ISIN Code: INE974X01010
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OPEN 419.00
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VOLUME 16815
52-Week high 432.00
52-Week low 211.00
P/E 31.73
Mkt Cap.(Rs cr) 7,539
Buy Price 401.65
Buy Qty 200.00
Sell Price 402.45
Sell Qty 75.00
OPEN 419.00
CLOSE 413.35
VOLUME 16815
52-Week high 432.00
52-Week low 211.00
P/E 31.73
Mkt Cap.(Rs cr) 7,539
Buy Price 401.65
Buy Qty 200.00
Sell Price 402.45
Sell Qty 75.00

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

Company director report

Dear Shareholders

The Directors take pleasure in presenting the 10th Annual Report togetherwith the audited financial statements of the Company for the year ended 31stMarch 2018.

1. Business Environment

With growth in the Gross Domestic Product (GDP) averaging 7.5% between 2014-15 and2016-17 India can be rated as among the best performing economies in the world. Althoughgrowth is expected to decline to 6.7% in 2017-18 bringing the four year average to 7.3%the broad story of India's GDP growth to be significantly higher than most economies ofthe world remains intact. It is all the more creditable that this growth has been achievedin a milieu of lower inflation improved current account balance and notable reduction inthe fiscal deficit to GDP ratio.

In addition to the introduction of Goods & Services Tax (GST) the year alsowitnessed noteworthy steps being taken towards resolving the problems associated withNon-Performing Assets (NPAs) of banks further liberalization of Foreign Direct Investment(FDI) etc. thereby strengthening the reform momentum. After remaining in the negativeterritory for a couple of years growth of exports rebounded into the positive zone during2016-17 and further strengthened in 2017-18. There was an augmentation in the foreignexchange reserves of the country which closed at an all-time high of US$414 billion. Aswith any major reform implementation of the GST is fraught with issues that businessesare still grappling with so as to familiarize themselves with the nuances of the newlegislation. The months just before and after GST implementation saw a slowdown inbusiness activity which had a dampening impact on the economy as businesses were assessingthe impact of the legislation before taking major business decisions. Government played avery active role in clarifying many vexed and contentious issues simplifying and relaxingmany of the compliance processes due to which business activity has steadily picked upnow.

Globally economic activity continued to firm up during the year. The global output isestimated to have grown by 3.7% in 2017 0.5% higher than in 2016. Global growth forecastsfor 2018 and 2019 have been projected at 3.9% reflective of the increased growth momentumand the expected impact of the recently approved U.S. tax policy changes to cut corporateincome-tax rates.

However the system of rules and regulations that governed world trade for the lastseveral decades is under serious threat. Perhaps the clearest threat to world trade comesfrom the US Administration which decided to impose tariffs of 25% on steel articles and10% on aluminium products imported from all countries except Canada and Mexico ostensiblyto protect the local industry. At the very least this shift is likely to mean asubstantial change in the way international trade is organised.

The recent developments suggest the danger of an all-out trade war between countries.

In an eventful year that followed the demonetisation and ban on sale and registrationof BS (Bharat Stage)-III vehicles in the previous year the Indian automobile sectormanaged to grow 14% during 2017-18. In the four wheeler segment passenger vehicle andcommercial vehicle sale volumes were up by 8% and 20%. In the two wheeler segmentscooters grew by 20% and motor cycles grew by 14%.

2. Standalone Financial Highlights

Rs. in Cr.
Particulars 2017-18 2016-17
Sale of Products - Gross 4409.98 4207.77
Excise Duty on Sales (74.57) (282.63)
Sale of Products - Net 4335.41 3925.14
Profit Before Exceptional Items and Tax 217.94 201.50
Provision for Impairment on Investments (25.25) -
Profit Before Tax 192.69 201.50
Tax Expense (56.23) (42.55)
Profit After Tax 136.46 158.95

3. Performance Overview

During 2017-18 the Company achieved a net turnover of '4335 Cr. growing 10% over theprevious year's Rs.3925 Cr. The Profit before Depreciation Interest Exceptional Itemsand Tax was at Rs.403 Cr. as against Rs.395 Cr. in the previous year. The Profit beforeTax and Exceptional Items was at Rs.218 Cr. as against Rs.202 Cr. in the previous year agrowth of 8%.

On account of various market factors changes in future project potential andaccumulated losses the Company has recognised during the year an impairment loss ofRs.25.25 Cr. in the Statement of Profit and Loss in respect of investment made in jointventures.

The Cycles and Accessories segment recorded revenue net of excise duty of Rs.1303 Cras compared to Rs.1343 Cr. during 2016-17 a de-growth of 3% since the Cycles market wassluggish. The operating profit before interest and tax stood at Rs.0.33 Cr. as compared toRs.36 Cr. during the previous year. The lower profit was mainly due to the mix betweenInstitutional and Trade sales and costs incurred towards closure of the Nashik Plant withthe objective of achieving cost efficiency and consolidation of overall capacity at twolocations viz. Ambattur (Chennai) and Rajpura (Punjab).

The Engineering segment registered revenue net of excise duty of Rs.2317 Cr. ascompared to Rs.1866 Cr. during the previous year a growth of 24%. The operating profitbefore interest and tax stood at Rs.175 Cr. as compared to Rs.146 Cr. during 2016-17registering a growth of 20%. The increase in exports and stabilisation of the LargeDiameter Tube manufacturing facility contributed to the increase in profits of thesegment.

The Metal Formed Products segment recorded revenues net of excise duty of Rs.1157 Cr.as compared to Rs.1038 Cr. during the previous year a growth of 11%. The operatingprofit before interest and tax stood at Rs.102 Cr. as compared to Rs.88 Cr. during theprevious year a growth of 16%.

4. Business Review - Standalone

4.1. Cycles and Components

TI's Presence

The Cycles and Components segment of the Company comprises bicycles of the Standard andSpecial 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 areasSpecials cycles cater to recreational usage where the product is used for fun fitnessand leisure activities. As per the industry estimates bicycle industry volumes grew by 5%during 2017-18. While orders from the Government Schemes witnessed a growth of 30% overprevious year trade volumes witnessed a decline of around 10% during the year. The year2017-18 was a very challenging one for the bicycle industry with

the Standards segment registering a drop of 21% over previous year in trade. On theother hand due to increasing aspirations higher purchasing power international exposureto usage patterns and growing fitness consciousness the use of high-end special bicyclescontinued to receive impetus contributing to the continued steady growth of sale volumesyear-on-year.

Nearly 80% of the country's requirements are met by four major players. The smallerregional players and imports constitute the balance. The Company enjoys a share of overone-fourth of the total organised market with a much higher share in the premium segment.

Review of Performance

The segment sold over 37.6 lakh bicycles during the year which was however lower by4.9% when compared with 2016-17. The thrust on Specials segment was driven by a concertedeffort to enhance consumer experience through exclusive retail outlets under the brand"Track & Trail". 48 new Track & Trail outlets were opened in 2017-18 andmany more migrated from the older format taking the total of exclusive "Track &Trail" outlets to 227. The segment also made a strong entry into e-commerce with apresence in well-known e-commerce portals like Flipkart and Amazon apart from its owne-commerce portal www.trackandtrail.in .

I n 2017-18 67 new model bicycles were launched and 60 old models were refreshedcontributing to 41% of the turnover from such new products and refreshes. Multipleinnovations were introduced for the first time in the industry notable among them beingthe Anti-Slip Chain and a range of ergonomic handlebars. One of the marquee models Brut+received the best design award in the Automotive category for 2017-18 from theConfederation of Indian Industry (CII).

On the consumer outreach front a large scale school contact programme was conductedacross the States of Maharashtra Uttar Pradesh and Karnataka reaching about 2.7 lacchildren. The objective of the programme was to get children (in the age group of 8-14years) excited about cycling while teaching them road safety basics of cycling andself-defence for girls. Through the year the bicycle brands of the segment wereconsistently active on the digital medium. Mach City a brand which helps urban adultsrediscover cycling was awarded the Best Social Media brand by Social Samosa a leadingonline platform for analysis and research relating to social media.

*

As the Company has started ramping up its production in 2017-18 in the newlycommissioned state-of-the- art bicycle manufacturing plant at Rajpura (Punjab) which hasan installed capacity of 250000 bicycles per month the segment has closed down theNashik facility to derive cost efficiencies through consolidation of overall capacities.

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. In the pastsuch products were largely imported.

Industry Scenario

During 2017-18 the overall automotive industry growth was at 15%. The passengervehicle commercial vehicle and two-wheeler segments registered growth of 5% 10% and 16%respectively over the last fiscal. In the two wheeler segment the sale volumes inscooters grew by 20% while motorcycles grew by 16%.

In Cold Rolled Steel Strips in a market which is dominated by integrated steelmanufacturers the Company continued to be a Rs.niche player' by focussing on specialgrades catering 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 18% while the cold rolled steelstrips business grew 11%. The Large Diameter Tube manufacturing plant which caters to therequirements of the power infrastructure off-highway and general engineering segmentsfurther stabilized during the year. Plans have been drawn up for optimum utilisation ofthis facility and improvement in the market share.

During the year under review the segment registered revenue net of excise duty ofRs.2317 Cr. as compared to Rs.1866 Cr. during the previous year. The operating profitbefore interest and tax stood at Rs.175 Cr. as compared to Rs.146 Cr. during 2016-17registering a strong growth of 20%.

Increase in volumes in the domestic market modernisation of facility and furtherenhancement in efficiencies were the key business emphasis areas aiding improvedprofitability during 2017-18.

The US Department of Commerce had initiated an investigation on the imports ofcold-drawn steel mechanical tubes from India and some other countries in response to acomplaint of dumping from the local manufacturers. Based on frivolous grounds the USDepartment of Commerce has determined a Countervailing Duty (CVD) of 42.60% and anAnti-dumping Duty (AD) of 5.87% on the Company's export of cold-drawn tubes to the USmarket. Taking into account the 25% tariff imposed under Section 232 of the US TradeExpansion Act 1962 the total tariff works out to 73.5% making the export of cold-drawntubes to the US unviable. The CVD and AD will be revised based on the first review by theUS Department of Commerce scheduled some time in May 2019.

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 railway wagons andpassenger coaches constitute the Metal Formed Products segment.

Industry scenario

During 2017-18 the two wheeler segment grew 16% driven by scooter growth of 20% andthe passenger vehicles segment by 5%. The segment is one of the major playersmanufacturing roller chains and fine blanked parts for the automotive industry in India.The replacement market for chains and sprockets continued to register a good growth due tothe increasing two wheeler population. The domestic demand for industrial chains has grownmoderately.

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. Within therailway segment the freight sub-segment is yet to show any sign of a major revival. Thepassenger coach segment witnessed huge growth as the Ministry of Railways is focussing onpassenger safety by initiating conversion of all old type coaches into stainless steel.This segment has achieved 41% growth over previous year supplying to various customers.

Review of Performance

Sale of automotive chains and industrial chains grew by 18% and 8% respectively whencompared to 201617 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 29% primarily through new parts developed for the four wheelersegment. Though exports volume registered a growth of 5% over 2016- 17 the challengesfaced continued due to the difficult demand conditions in Europe.

Doorframe sale volumes were higher at 6% during 2017- 18 due to higher sales on selectmodels with two of the renowned auto majors. The focus is on generating more business fromthe auto OEMs leveraging the Tier-1 position with specific emphasis on roll form productsand other tubular parts used in passenger cars. In addition growing the casings verticalwith efforts spread across sectors catering to new customers for both four wheeler and twowheeler auto electrical manufacturers strengthening the current position in respect ofcoach parts expanding the customer base and foraying into agri-rotovators blades andother farm implements are some of the opportunities that will be looked into closely tosustain the drive towards growth.

During the year the doorframe operations at Halol which catered exclusively to therequirements of a major auto MNC for one of its car models was suspended and the fixedassets moved to other locations due to the said auto MNC discontinuing the said car model.

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 net of excise duty ofRs.1157 Cr. as compared to Rs.1038 Cr. during the previous year a growth of 11%. Theoperating profit before interest and tax stood at Rs.102 Cr. as compared to Rs.88 Cr.during the previous year a growth of 16%.

5. Dividend

The Board of Directors has recommended a Dividend of Rs.0.50 (fifty paise) per share onequity share of face value of Rs.1 each for the financial year ended 31stMarch

2018. Together with the interim dividend of Rs.1.25 per share paid on 28thFebruary 2018 the total dividend for the year works out to Rs.1.75 per share on equityshare of face value of Rs.1 each. The final dividend if approved by shareholders will bepaid on or after 17th August 2018.

The policy on Dividend Distribution as approved by the Board is uploaded and availableon the following link on the Company's website http://www.tiindia.com/ article/values/601.The Policy also forms part of this Annual Report for the information of shareholders asAnnexure-A.

6. Share Capital

The paid up Equity Share Capital as on 31st March 2018 was Rs.18.75 Cr.

7. Finance

Cash and Cash Equivalents as at 31st March 2018 were Rs.19.25 Cr. TheCompany continues to focus on judicious management of its working capital. Receivablesinventories and other working capital parameters were kept under strict check throughcontinuous monitoring.

7.1. Non-Convertible Debentures

During the year Non-Convertible Debentures (NCDs) aggregating Rs.125 Cr. were redeemedand NCDs for Rs.100 Cr. were issued. As on 31st March 2018 NCDs aggregatingRs.450 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 were outstanding as on 31stMarch 2018.

7.3. Particulars of Loans Guarantees or Investments

During the year the Company has not given any loans or guarantees under the provisionsof Section 186 of the Companies Act 2013. The Company made the following investments:

- Subscribed to 4000000 Equity Shares of

'10 each of TI Tsubamex Private Ltd for an aggregate amount of Rs.4 Cr;

- Subscribed to 3750000 Equity Shares of

'10 each of TI Absolute Concepts Private Ltd. for an aggregate amount of Rs.3.75 Cr.;

- Acquired by way of purchase 4000000 Equity Shares of Sri Lankan Rupees (SLR) 10each of Great Cycles (Private) Ltd. for an aggregate consideration of Rs.16.98 Cr.

- Acquired by way of purchase 4000000 Equity Shares of SLR 10 each of Creative Cycles(Private) Ltd. for an aggregate consideration of Rs.6.47 Cr.

8. Consolidated Financial Highlights

Rs. in Cr.
Particulars 2017-18 2016-17
Revenue from Operation 5116.28 4820.20
Profit Before Exceptional items and Tax 230.17 228.55
Exceptional items (3.26) -
Profit Before Tax and Exceptional Items 226.91 228.55
Tax Expense (58.32) (46.75)
Profit for the year before Minority Interest and share of profit from Associate 168.59 181.80
Share of loss from Associate (13.08) (7.45)
Net Profit for the Year 155.51 174.35

9. Business Review - Subsidiaries and Joint Ventures

9.1. Shanthi Gears Ltd (SGL)

SGL a subsidiary of the Company recorded revenue net of excise duty of Rs.214 Cr. in2017-18 against Rs.184 Cr. in the previous year. Profit before tax was Rs.33 Cr. (previousyear: Rs.29 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.

9.2. Financiere C10 SAS (FC10)

FC10 the Company's wholly-owned subsidiary in France recorded a consolidated revenueof Euro 33 Mn in 2017 (previous year: Euro 30 Mn). The profit/loss before tax for the yearwas Euro 0.14 Mn (previous year: loss before tax Euro 0.19 Mn). The consolidated resultsof FC10 include results of its subsidiaries viz. Sedis SAS (France) Sedis GmbH (Germany)and Sedis Co Ltd (UK).

9.3. 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.

During the course of 2017-18 TTPL successfully completed and delivered varied projectsfor different auto OEMs and their Tier 1 suppliers. The highlight was delivery of skinpanel dies for an auto major's new project. The company was able to attract recruit andtrain tool & die engineers from reputed polytechnics such as Nettur Technical TrainingFoundation (NTTF) and Murugappa Polytechnic. This paved the way for reducing dependence onhigh cost contract shop floor personnel. Efforts are in progress to reduce the fixed costsfurther.

The joint venture partner is providing continuous support by way of assigning specificexperts to work alongside TTPL's employees and impart specific skills in die assembly anddie finishing.

TTPL recorded a revenue net of excise duty of Rs.25.72 Cr. for 2017-18 and recorded aloss before tax of Rs.6.98 Cr. (previous year: Rs.5.81 Cr.).

9.4. Great Cycles (Private) Limited (GCPL)

GCPL is the Company's subsidiary in Sri Lanka acquired in March 2018. The Companypresently holds 80% of GCPL's equity capital.

9.5. Creative Cycles (Private) Limited (CCPL)

CCPL is the Company's subsidiary in Sri Lanka acquired in March 2018. The Companypresently holds 80% of CCPL's equity capital.

9.6. TI Absolute Concepts Private Limited (TIACPL)

TIACPL is the joint venture between the Company and M/s. Absolute Speciality FoodsChennai Private Limited with regard to the operation of bicycle theme based restaurantsunder the concept of Rs.Ciclo Cafe'.

During the year under review the Company had invested in the aggregate Rs.3.75 Cr. inthe equity share capital of TIACPL with the joint venture partner also making an equalcontribution as envisaged under the Joint Venture Agreement. The Company presently holds50% of TIACPL's equity capital.

Ciclo Cafes operated by TIACPL are functioning at Kotturpuram (Chennai) Hyderabad andBengaluru.

TIACPL achieved a turnover of Rs.11 Cr. for 2017-18 and recorded a loss before tax ofRs.16 Cr.

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.

Further consequent to the demerger sanctioned by the National Company Law TribunalChennai vide its Order dated 17th July 2017 and effective 1stApril 2016 viz. the Appointed Date under the Scheme of Arrangement

(Demerger) Cholamandalam Investment and Finance Company Limited ceased to be anAssociate of the Company Cholamandalam MS General Insurance Company Limited ceased to besubsidiary of the Company and Cholamandalam MS Risk Services Limited ceased to be theJoint Venture of the Company.

10. Financial Review

10.1. Profits & Profitability

The Profit before Tax and Exceptional Items registered a growth of 8% throughcontinued control on costs better operating efficiencies stabilisation of Large DiameterTube manufacturing Plant and reduction of interest costs. On certain occasions theCompany was not able to fully recover the increase in cost from its customers.

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

10.2. Capital Expenditure

The Company's Large Diameter Tube manufacturing Plant got stabilized during the currentyear. The Company continues to invest in facilities with a view to servicing its customersin a more timely and efficient manner modernising its assets and aims to be the best inclass. The Company continues to assess the trends emerging in the industry and thechanging requirements of its customers and invest appropriately for the longterm. TheCompany completed the construction of a new plant in Rajpura Punjab to manufactureprecision tubes. The installation of major equipment has been completed and trialproduction is underway. The Company is also investing further in fine blanking area tomeet the growing customer demand.

10.3.Interest Cost

The Company's average cost of borrowing reduced to 7% p.a. since interest cost for theyear was lower due to the lower quantum of borrowings and lower interest rates.

10.4.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-defined organisation structure roles andresponsibilities documented policies and procedures to prevent business risks through aframework of internal controls and processes. These controls 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 systemsand processes.

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 utilization 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.

10.5. 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 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 also for 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.

11. Enterprise Risk Analysis and Management

The Company has an established risk assessment and minimization 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 twice viz. on 6thNovember 2017 and 13th February 2018 and reviewed the risks and mitigationplans of the SBUs of the Company.

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

11.1. Bicycles and Components

Risk Why considered as Risk Mitigation Plan/Counter Measure
Product Obsolescence Risk Availability of alternatives Higher variety especially of premium bikes
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
• Higher fixed cost related to volume Cost reduction measures to enhance profitability
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

11.2. Engineering

Risk Why considered as Risk Mitigation Plan/Counter Measure
User Industry Concentration Significant exposure to auto sector • New products/applications to existing customers
Risk Time lag in pass through of input cost changes
• Introduction of new products catering to non-auto users
• Leverage application engineering skills for tubular solutions
• Drive operational efficiencies vigorously
• Cost reduction through operational excellence initiatives
Technology Obsolescence Cheaper alternatives for auto applications affecting revenue streams • Imbibing new and relevant technologies
Risk • Equipment upgradations
Raw Material Risk Volatility in steel price • Alliance with steel producers
Inconsistency in quality • Global sourcing
High inventory holding • Strategic sourcing
• Rationalization and standardization 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

11.3. Metal Formed Products

Risk Why considered as Risk Mitigation Plan/Counter Measure
Product Risk • Revenues are model specific • Indigenization 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 Concentration • Dependence on auto sector • Diversification into non-auto business
Risk • Impact of slow down • Focus on industrial applications
• Develop range of power transmission products
Customer Retention Risk • Availability of alternative source • Cost competitiveness through Operational
• Disruption in supplies Excellence initiatives
• Leverage design strength
• Leverage proximity to customer
• Build technology superiority
• Product - plant rationalization
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 established players in domestic market • Better product range • Enhance product portfolio leveraging acquisition
• Tie-up with local player/end user • Leverage leadership and competitive position in industry
• Rs.High quality' image • Strengthen collaboration with R&D team of customers
• Pursue opportunities in systems/ components
• Pursue options for collaborating with other multi-national 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

11.4. 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
• Retention of talent • Structured induction and On-the-Job training
• 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 Related Risk • Confidentiality integrity and availability • Access controls
• Secure Network Architecture
• Infrastructure redundancies & disaster recovery mechanism
• Audit of controls
Project Management Risk • Delay in implementation • Effective project management
• Increase in cost • Pre-implementation planning
• Potential delay in stabilization of production • Deployment of adequate resources
• Effective monitoring

12. 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 linkhttp://www.tiindia.com/article/values/467 .

As per the provisions of the Companies Act 2013 while the Company was required tospend Rs.1.26 Cr. during the financial year 2017-18 it has spent Rs.1.35 Cr. towardsthe identified CSR project in the field of education during the year.

The Basic Training Centre (BTC) established as part of the Company's CSR initiativeimparts specialized courses in welding and fitting to underprivileged students. Affiliatedto the National Council for Vocational Training Government of India (NCVT) the Centre isconsidered by the Regional Directorate of Apprentice Training Chennai (RDAT) as one ofthe best managed BTCs in the State of Tamilnadu. The Centre has taken it as a mission forcreating sustainable livelihood for both economically and socially challenged youth andnurtures them to take up professional trade helping them to be gainfully employed.

The Annual Report on CSR for 2017-18 is annexed to and forms part of this Report asAnnexure-C as well as uploaded in the Company's website at the following linkhttp://www.tiindia.com/article/ csrproiectsprograms/546.

13. Issue and listing of Equity Shares

Pursuant to the Scheme of Arrangement ["the Scheme"] as sanctioned by theOrder dated 17th July 2017 of the National Company Law Tribunal Chennai187490591 Equity Shares in the Share Capital of the Company of the face value of Rs.1each aggregating Rs.187490591 were allotted to the list of persons and as per theentitlement as on the Record Date of 28th August 2017 as submitted for thepurpose by the Registrar & Share Transfer Agent viz. Karvy Computershare PrivateLimited. Despatch of physical Share Certificates by post/crediting the demat account ofthe allottees was completed on 19th September 2017. The Equity Shares of theCompany were admitted to listing on the Stock Exchanges viz. BSE Ltd and National StockExchange of India Ltd. and commenced trading on the Stock Exchanges with effect from 2ndNovember 2017 under the Stock Symbol "TIINDIA" (NSE)/Stock Code 540762 (BSE).

14. Global Depository Receipts Programme

The Company established a Global Depository Receipts ("GDR") Programme byexecuting a Depository Agreement on 29th January 2018 with Bank of New YorkMellon New York USA ("BNYM") pursuant to which BNYM acts as the Depository forthe GDRs issued in respect of 4223460 (representing 2.25% of the Company's paid upcapital) underlying equity shares of the Company allotted pursuant to the Scheme ofArrangement for Demerger between Tl Financial Holdings Limited (formerly Tube Investmentsof India Limited - Demerged Company) and the Company (the Resulting Company).

15. Corporate Governance

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

As stated above with the listing of its equity shares on the Stock Exchanges theCompany became a listed company with effect from 2nd November 2017. TheCompany was wholly in compliance with the requirements of the Listing Agreement with theStock 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 as Annexure-D andforms part of the Board's Report. The Managing Director and the Chief Financial Officerhave submitted a certificate to the Board regarding the financial statements and othermatters in terms of Part B of Schedule II [Corporate Governance] of the SEBI ListingRegulations.

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 whistleblower policy/vigil mechanism dividendpolicy etc.

16. Business Responsibility Reporting

For the financial year 2017-18 the Company forms part of the top 500 listed entitiesof the country based on market capitalisation. Accordingly as required under the SEBIListing Regulations which mandate the inclusion of a Business Responsibility Report aspart of the Annual Report for the top 500 listed entities the Business ResponsibilityReport forms part of the Annual Report as Annexure-E.

The Business Responsibility Policy of the Company is displayed in the Company's websiteat the following link http://www.tiindia.com/article/values/667 .

17. Human Resources

The Company continues to leverage its strength in human capital by attracting the righttalent nurturing & developing and retaining them to meet the short-term andlong-term organization goals. The key HR imperatives were addressed through OrganizationStructure & Design building technical & Operational Excellence (OPEX)capabilities building leadership & talent pool productivity improvement and employeecost reduction programs maintaining cordial Industrial Relations and digitizing HRprocesses.

The Company is successful in attracting talent from outside and during the year closeto two hundred people were hired across different levels and functions. Behavioural eventand competency based interviewing training for strengthening the talent acquisitionprocess was also initiated during the year.

Senior leaders have been investing lot of time and efforts in identifying anddeveloping succession pipeline for critical positions in the organization. The transitionmanagement programmes viz. Ascend & Aspire have been very successful and as part ofthe programme implementation of Individual Development Plans (IDPs) for talent poolidentified through these programmes is being facilitated. The IDPs are being reviewedregularly and On-the-Job projects job enlargement/ job rotation mentoring support to thetarget group are being provided. Coaching & mentoring was done for select talentacross the organization with an intent of developing future leaders. Internal employeeshave been given opportunities to take up higher roles and grow in the system.

Several initiatives have been taken up towards enhancing the technical capability ofemployees across businesses. Focus was towards building an internal team of Subject MatterExperts (SMEs) in critical areas. Employees were trained in areas like Six Sigma Value

Stream Mapping (VSM) energy management and welding through in-house trainingon-the-job training certification programs live projects and mentoring. The SMEs aredeployed in improvement projects across businesses. A Technical Training Laboratory hasalso been established for welding at the Basic Training Centre Avadi which is being usedto enhance the Metal Inert Gas (MIG) welding skills of employees as well as vendors'employees.

The OPEX programme drives operational efficiency capability development and employeeinvolvement towards continual improvement. The objective is to achieve the benchmarktargets in the eight OPEX verticals.

The total number of permanent employees on the rolls of the Company as on 31stMarch 2018 is 3365.

Industrial relations remained cordial at all the Company's units during the periodunder 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.

18. 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 sensitized about the new Policy and the remedies available thereunder. No complaintswere received and disposed off during the year under review.

19. Employee Stock Option Scheme

In accordance with the Scheme of Arrangement for Demerger sanctioned by the NationalCompany Law Tribunal during the year 363763 Stock Options under the Company's EmployeeStock Option Plan (ESOP 2017) were granted to eligible employees at the rate of 1 StockOption for each Stock Option held and outstanding in the erstwhile Tube Investments ofIndia Limited viz. the Demerged Company under the Scheme.

Further a grant of 1086480 Stock Options and 262200 Stock Options to eligibleemployees of the Company under the ESOP 2017 with graded vesting periods in respect ofeach of said grants was also made to eligible employees during the year.

During the year under review the Company has issued 45777 equity shares to eligibleemployees consequent to exercise by them of the stock options vested under the ESOP 2017.

Details in respect of the Company's ESOP 2017 as required under the relevant SEBIRegulations are displayed in the Company's website at the following linkhttp://www.tiindia.com/article/values/554 .

20. Directors' Responsibility Statement

The Board of Directors confirm that the Company has in place a framework of internalfinancial controls and compliance system which is monitored and reviewed by the AuditCommittee and the Board besides the statutory internal and secretarial auditors. To thebest of their knowledge and belief and according to the information and explanationsobtained by them your Directors make the following statements in terms of Section134(3)(c) of the Companies Act 2013:

a) that in the preparation of the annual Financial Statements for the year ended 31stMarch 2018 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 2018 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) t hat 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; &

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.

21. Auditors

M/s. S R Batliboi & Associates LLP Chartered Accountants (LLP Identityno.AAB-4295) were appointed as Statutory Auditors at the previous 9th AnnualGeneral Meeting held on 6th November 2017 for a period of five years viz.from the conclusion of the said 9th Annual General Meeting till the conclusionof the 14th Annual General Meeting. In terms of the resolution passed by theMembers the said appointment 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.

Accordingly the Board recommends the ratification of and the terms of remunerationpayable to the Statutory Auditors as set out in the resolution contained in the Notice ofthe ensuing Annual General 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 2018-19. Necessaryresolution for ratification of their remuneration in respect of the aforesaid terms ofappointment for financial year 2018-19 forms part of the Notice for the ensuing AnnualGeneral Meeting.

22. 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 websitehttp://www.tiindia.com/article/values/476 . None of the Directors had any pecuniaryrelationships or transactions vis-a-vis the Company.

23. Directors

Mr. M M Murugappan will retire by rotation at the ensuing Annual General Meeting underSection 152 of the Companies Act 2013 ("the Act") and being eligible he offershimself for re-appointment.

Mr. Ramesh K B Menon was appointed as Additional Director (Non-Executive Director) on16th November 2017 liable to retire by rotation and he continues up to theensuing Annual General Meeting. Necessary resolution proposing the appointment of Mr.Ramesh K B Menon as a Director liable to retire by rotation under Section 152 of theCompanies Act 2013 forms part of the Notice for the ensuing Annual General Meeting.

The Board takes pleasure in recommending the appointment of Mr. M M Murugappan and Mr.Ramesh K B Menon as Directors at the forthcoming Annual General Meeting.

Mr. L Ramkumar Managing Director of the Company retires at the conclusion of theensuing Annual General Meeting. The Board places on record its appreciation of thedistinguished services rendered by Mr. L Ramkumar during his decade long associationsince 2008 with TII as Managing Director before and after its demerger.

Consequent to the retirement of Mr. L Ramkumar as Managing Director at the conclusionof the forthcoming Annual General Meeting Mr. Vellayan Subbiah assumes charge as ManagingDirector of the Company.

Mr. S Sandilya's term as Independent Director ends at the conclusion of the ensuingAnnual General Meeting. The Board places on record its appreciation of the distinguishedservices rendered by Mr. S Sandilya during his long association since January 2005 asDirector of TII before and after its demerger.

Mr. Hemant M Nerurkar's term as Independent Director ends at the conclusion of theensuing Annual General Meeting. Mr. Nerurkar has been associated with TII since May 2014.The Board places on record its appreciation of the distinguished services rendered by Mr.Hemant M Nerurkar during his association as Director of TII before and after itsdemerger.

All the Independent Directors of the Company have furnished necessary declaration interms of Section 149(6) of the Act affirming that they meet the criteria of independenceas stipulated thereunder.

24. Declarations/Affirmations

During the year under review:

- the manufacturing business undertaking of the Demerged Company was transferred andvested into the Company pursuant to the Scheme of Arrangement sanctioned by the NationalCompany Law Tribunal Chennai by its Order dated 17th July 2017. Consequentlythe business of the Company is in the nature of manufacturing business;

- apart from the demerger of the Manufacturing Business Undertaking which has beengiven effect in the Financial Statements there were no material changes and commitmentsaffecting the financial position of the Company which have occurred between the end ofthe financial year of the Company to which the Financial Statements relate viz. 31stMarch 2018 and the date of this Report; &

- t here were no significant material orders passed by the regulators or courts ortribunals impacting the Company's going concern status and its operations in future.

25. 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 to undertake the Secretarial Audit of the Company. The Report ofthe Secretarial Audit Report 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.

26. Annual Return

Extract of the Annual Return is annexed and forms part of this Report as Annexure-H.

27. Key Managerial Personnel

Mr. L Ramkumar Managing Director Mr. K Mahendra Kumar Chief Financial Officer andMr. S Suresh Company Secretary are the Key Managerial Personnel (KMPs) of the Company asper Section 203 of the Companies Act 2013. They were appointed to their respectiveoffices as KMPs with effect from the close of business hours on 1st August2017.

Mr. Vellayan Subbiah Managing Director (Designate) - KMP was appointed with effectfrom 19th August 2017.

Mr. L Ramkumar also holds office as the Managing Director (KMP) of TI Tsubamex PrivateLimited (TTPL) the Company's die manufacturing joint venture with Tsubamex Co. LimitedJapan and also a subsidiary of the Company on Rs.nil' remuneration. He was re-appointedas Managing Director (KMP) of TTPL for the period from 1st April 2018 to 13thAugust 2018 (both days inclusive).

28. 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
7th May 2018 Chairman