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Ucal Fuel Systems Ltd.

BSE: 500464 Sector: Auto
BSE 00:00 | 24 Jun 168.05 -2.05






NSE 00:00 | 24 Jun 168.25 -1.70






OPEN 171.00
52-Week high 183.00
52-Week low 101.30
P/E 13.21
Mkt Cap.(Rs cr) 372
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 171.00
CLOSE 170.10
52-Week high 183.00
52-Week low 101.30
P/E 13.21
Mkt Cap.(Rs cr) 372
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Ucal Fuel Systems Ltd. (UCALFUEL) - Director Report

Company director report

The Directors hereby present the 34th Annual Report together with theaudited accounts of the company for the year ended 31st March 2020.


The performance of the company for the year ended 31st March 2020 is asfollows:

(Rs. in lakhs)

Particulars For the year ended
31.03.2020 31.03.2019
Revenue from operations 50967.70 59612.98
Total Expenditure 43964.26 49934.85
Operating Income 7003.44 9678.13
Other Income 766.39 391.11
Profit before Interest Depreciation Tax and Exceptional items 7769.83 10069.24
Interest 2185.44 2295.15
Depreciation 2051.98 1768.39
Profit before Tax & Exceptional items 3532.41 6005.70
Exceptional items (10509.00) -
Profit/(Loss) before Tax (6976.59) 6005.70
Tax Expense/(credit) 1598.45 2127.44
Profit/(Loss) after Tax (8575.04) 3878.26
Balance of profit brought forward from last year 21316.27 20060.19
Amount available for appropriation 12741.23 23938.45
Transfer to general reserve - -
Dividend paid during the year (1990.23) (2211.36)
Tax on dividend (392.93) (437.75)
Other comprehensive Income/(Loss) (93.10) 26.93
Balance profit carried to Balance Sheet 10264.97 21316.27


The Directors are constrained from declaring a dividend for the financial year2019-2020. Though the companies operations resulted in a pre-tax profit in view of therecognition of impairment loss on the investments made in Ucal Holdings Inc. (UHI) awholly-owned subsidiary as mandated under the Accounting standards the company suffered asubstantial loss. The financial year 2020-2021 is a major business transition year for theautomotive / auto component industry because of change in emission norms from BSIV toBSVI. The Covid pandemic that hit the world has added to the unpredictability of thebusiness in the financial year 2020-2021 Hence the board has decided to preserve the cashto meet any exigency that may arise in financial year 2020-2021. The board of directors isfully aware of the desires and aspirations of the individual shareholders of getting areturn on their investment in the form of dividend. The Board believes that this financialyear 2019-2020 is a year of exception for non payment of dividend.


There has been no transfer to the general reserve of the company for the financial year2019-2020.


The paid-up equity share capital of the company as on 31st March 2020 was^221136250. The company has not issued any shares nor granted stock options or sweatequity during the financial year 2019-2020.


The net revenue from the operations of the company stood at Rs. 50968 lakhs in thefinancial year 2019-2020 as against Rs. 59613 lakhs in the financial year 2018-19resulting in a decreased revenue of 14.5%. This can be attributed to the reduced offtakeby the existing customers owing to the ensuing change in the emission norms from 1stApril 2020 and also due to a general slowdown in the economy. The earnings beforeInterest Tax and Depreciation (EBITDA) stood at Rs. 7770 lakhs in the financial year2019-2020 as against Rs. 10069 lakhs in the financial year 2018-19 as in addition to adecrease in the net revenue from operations there was also a constraint in raising sellingprices despite an increase in the input cost.

The exports stood at Rs. 740 lakhs in the financial year 2019-2020 as compared to Rs.550 lakhs in the financial year 2018-19. Continuous efforts are on to enhance thecompany's presence in the export market. The spares sales of the company in the financialyear 2019-2020 stood at Rs. 6690 lakhs as against Rs. 5976 lakhs in the previousfinancial year. The offtake by the dealers and the Original Equipment Manufacturers (OEMs)increased in 2019-2020 resulting in a 12% increase. The company has put in extra effortsto expand its dealership network and become competitive in the spares market which isbeset with spurious products.

The Profit/(Loss) After Tax (PAT) for the financial year 2019-2020 stood at Rs. (8575)lakhs as against a profit of Rs. 3878 lakhs of the previous financial year. The company'searnings per share is "Nil" for the financial year 2019-2020 due to theexceptional item of Rs. 10509 lakhs which is the provision for impairment of value ofinvestment made in Ucal Holdings Inc as mandated under the Accounting Standards. Howeverthe consolidated financial statements of the company show a profit of Rs. 2115 lakhs withan earnings per share of Rs. 9.56 as the provision for impairment of value of investmentmade in Ucal Holdings Inc. gets offset in the consolidated financial statements.

To augment its capacity to meet the requirements of its customers under the stringentBSVI emission norms the company has spent Rs. 6092 lakhs in capital investment in thefinancial year 2019-2020 as compared to Rs. 3855 lakhs spent in the financial year2018-19. The company continues its thrust on R&D and has spent Rs. 1585 lakhs in thefinancial year 2019-2020 as against an amount of Rs. 1375 lakhs spent in the previousfinancial year.

The new BSVI emission norms came into effect from 1st April 2020 and thecompany has successfully developed and commercialised the electronic carburettor and otherrelevant components. Efforts are on to expand the indigenous market for the same. Thecompany continues to supply the mechanical carburettor for the export market in additionto supplying spares to both OEMs and dealers.


Ms. Rekha Raghunathan (DIN: 00057774) retires by rotation at the ensuing Annual GeneralMeeting and being eligible offers herself for reappointment. Necessary resolution for herreappointment has been set out in detail in the Notice convening the ensuing AnnualGeneral Meeting. The Board recommends her reappointment as Director of the company.

Ms. Lakshminarayanan Priyadarshini (DIN: 06592671) was appointed Additional Director(non-executive and Independent category) in the Board meeting held on 7thDecember 2020 subject to the appointment being approved by the shareholders at theensuing Annual General Meeting. Appropriate resolutions for the appointment has been setout in detail in the Notice convening the ensuing Annual General Meeting. The Boardrecommends her appointment as Independent Director.

Mr. Ram Ramamurthy's (DIN: 06955444) term as Whole-time Director ends on 3rdSeptember 2020. It is proposed to reappoint him as Whole-time Director for a furtherperiod of two years from 4th September 2020 to 3rd September 2022 ona remuneration as set out in the Notice convening the ensuing Annual General Meeting. TheBoard recommends the reappointment of Mr. Ram Ramamurthy as Whole-time Director as per theterms and conditions laid down in the Notice to the ensuing Annual General Meeting.Appropriate resolutions for the reappointment and remuneration have been set out in detailin the Notice convening the ensuing Annual General Meeting.

Dr. V Sumantran (DIN: 02153989) resigned from the Board at the end of the working dayof 24th July 2020. The Company has benefited greatly from his association andthe Board places on record its sincere appreciation for the services rendered by himduring his tenure as director.

The information on Board meetings committees of the Board independent directorsBoard diversity remuneration policy familiarization program for independent directorsand Board evaluation are mentioned in the Corporate Governance Report.

Brief resume/details of Directors who are to be reappointed as mentioned herein hasbeen furnished along with the explanatory statement in the Notice convening the ensuingAnnual General Meeting.


In terms of section 134(3)(c) read with section 134(5) of the Companies Act 2013 thedirectors to the best of their knowledge and belief and according to information andexplanation obtained by them confirm that

(a) In the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to any material departures;

(b) Such accounting policies have been selected and applied consistently and suchjudgments and estimates have been made that are reasonable and prudent so as to give atrue and fair view of the state of affairs of the company at the end of the financial year31st March 2020 and of the profit and loss of the company for the year ended 31stMarch 2020

(c) 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) The annual accounts have been prepared on a "going concern" basis.

(e) Proper internal financial controls to be followed by the company have been laiddown and such internal financial controls are adequate and are operating effectively.

(f) Proper systems to ensure compliance with the provisions of all applicable laws havebeen devised and such systems are adequate and are operating efficiently.


Mr. Ram Ramamurthy stepped down as Chief Financial Officer of the Company with effectfrom the end of the working day of 1st August 2020. Consequent to his steppingdown Mr.V. Ramanathan has been appointed as Chief Financial Officer with effect from 2ndAugust 2020.


The audit committee conforms to the requirements of Section 177 of the Companies Act2013 and Regulation 18 of the Securities and Exchange Board of India (Listing Obligationsand Disclosure Requirements) Regulations 2015. With the resignation of Dr. V. Sumantranfrom the board the members of the Audit Committee as on date of this report are Mr. S.Natarajan Mr. S. Balasubramanian and Mr. Jayakar Krishnamurthy. Mr. S. Natarajancontinues as the Chairman of the Audit committee. The committee met 6 times during theyear. Detailed disclosure on the terms of reference and meetings are mentioned in thecorporate governance report.


M/s R. Subramanian and Company LLP Chartered Accountants Chennai (RegistrationNumber: 004137S/S200041) were appointed statutory auditors of the company for a period offive consecutive years commencing from the conclusion of the 31st AnnualGeneral Meeting held on 28th September 2017 till the conclusion of the 36thAnnual General meeting subject to the ratification of their appointment by theshareholders at the Annual General Meeting every year. However as per the amendment inSection 40 of the Companies Amendment Act 2017 the ratification of the appointment ofstatutory auditor at the Annual General Meeting every year is not required. The emphasisof matter specified in the Independent auditor's report on the Standalone FinancialStatements has been explained in Note No. 38 (c) of the notes to accounts.


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 hadappointed M/s. P. Sriram & Associates a firm of practising company secretaries assecretarial auditor of the company to undertake secretarial audit of the company for thefinancial year 2019-2020. The report of the secretarial auditor is given in Annexure-I andforms part of this report. It does not contain any qualification reservation adverseremark or disclaimer. The Board of Directors has reappointed M/s. P. Sriram &Associates as secretarial auditor for the financial year 2020-2021. Necessary consent hasbeen received from them to act as secretarial auditor.


M/s. P. Chandrasekar Chartered Accountants continue as internal auditors of thecompany. Their scope of work is periodically reviewed and updated by the audit committee.It includes among other things a review of the operational efficiency effectiveness ofsystems and controls in existence review of the processes to safeguard the assets of thecompany and assessing the strength of the internal control in all areas. The internalauditor's report is discussed with the concerned stakeholders and corrective remedialaction is taken on a regular basis in consultation with the audit committee. The internalauditors were present at the audit committee meetings as and when required.


The cost audit for the financial year 2019-20 was conducted by Mr. L. Thriyambak whowas appointed by the Board as the cost auditor of the Company for the financial year2019-20.


The company has two wholly-owned subsidiaries.-.

Ucal Polymer Industries Limited (UPIL)-The revenue from operation of UPIL stood at Rs.4994 lakhs in the financial year 2019-2020 as against Rs. 5917 lakhs in the financialyear 2018-2019. The decreased revenue can be attributed to the decreased offtake by UCALFuel Systems Limited (UFSL) which continues to be the only major customer of UPIL. The netprofit after tax stood at Rs. 648 lakhs in the financial year 2019-2020. UPIL continues tosupport the operations of UFSL by providing it an advantage in terms of pricing qualityand timeliness of supplies. UPIL has successfully met the new business requirements ofUFSL as per BSVI emission norms.

Ucal Holdings Inc. (UHI)-The revenue from operations of UHI was Rs. 21780 lakhs inthe financial year 2019-2020 as against Rs. 27784 lakhs in the financial year 2018-2019.In terms of US dollar the revenue from operations was $ 300 lakhs during financial year2019-2020 as compared to $ 411 lakhs in the financial year 2018-2019 recording a decreaseof 27%. UHI has earned a net profit/ (loss) after tax of Rs. (757) lakhs during thefinancial year 2019-2020 as against a profit of Rs. 484 lakhs in the financial year2018-2019. The reduced revenue from operations and the profitability is due to the downturn in the US economy which had a direct impact on the operations of the company.


The consolidated financial statements for the year ended 31st March 2020 ofthe company and its subsidiaries together with the auditor's report thereon are enclosed.The statement pursuant to sub section(3) of Section 129 of the Companies Act 2013 readwith Rule 5 of Companies (Accounts) Rules 2014 in the prescribed form AOC-1 relating tothe subsidiary companies is given in Annexure-II.

The consolidated results of the company and its subsidiaries show that a net profitafter tax of U2115 lakhs has been achieved during the financial year 2019-2020 as againstRs. 4581 lakhs in the financial year 2018-2019. The consolidated financial statements of2019-2020 have been prepared taking into account the audited financial statements of allthe subsidiary companies for the financial year 2019-2020 and all adjustments have beengiven effect to in the consolidated statements.

In terms of section 136 of the Companies Act 2013 the company has not attached thefinancial statements of the subsidiary companies. However the financial information ofthe subsidiary companies is disclosed in the annual report. The annual accounts reportsand other documents of the subsidiary companies will be available for inspection duringbusiness hours by any shareholder of the company at the registered office of the companyand also at the registered office of the concerned subsidiary and has also been posted onthe website of the company The annual accounts reports and otherdocuments of the subsidiary companies will be dispatched to the shareholders upon receiptof a request from them.


The company's CSR activities are in the field of education sports health sanitationand preservation of culture and heritage. As per Section 135 of the Companies Act 2013the CSR Policy was formulated by the CSR Committee and thereafter approved by the Board.The CSR policy is displayed on the website of the company weblink: csrp.pdf. Mr. S. Balasubramanian is the chairman of thecommittee and Mr. Ram Ramamurthy and Mr. Jayakar Krishnamurthy are the other members ofthe committee. For the financial year 2019-2020 the report on corporate socialresponsibility is given as Annexure-III and forms part of the Board's Report.


During the financial year 2019-2020 the company has not accepted any deposits from thepublic within the meaning of Section 73 of the Companies Act 2013 read with Companies(Acceptance of Deposits) Rules 2014 and there is no outstanding amount on account ofprincipal or interest on deposits from public as on date.


The company has an efficient internal control system commensurate with its size andnature of business to safeguard the assets of the company and to ensure effectiveutilisation of resources. These controls ensure that transactions are completed on timeand in an accurate manner and by following proper procedures and systems. The internalauditors cover a wide area of operations and this is being continuously reviewed by theaudit committee. Internal audit is conducted on a quarterly basis by a team of internalauditors and the reports together with the action taken reports are reviewed by the auditcommittee periodically. A system of management controls is also in place to ensure higherlevels of efficiency and to keep the organisation competitive. All the critical functionsof the company i.e. Sourcing and Procurement Manufacturing Costing Finance Dispatchand Sales are handled through Oracle system which is well-integrated. Checks and controlshave been built into the system to handle the transactions. Existing internal controlsprovide adequate assurance to the management for all the transactions covering operationsinventory fixed assets financial records and compliance to statuary requirements. Thesystems and controls are reviewed periodically to ensure their effectiveness. The Boardhas adopted various policies like Material Subsidiary Policy Whistle Blower PolicyRelated Party Transactions Policy to safeguard the assets of the company to ensure timelyinformation and to prevent and detect frauds and errors.


Information required under Section 134(3)(m)of the Companies Act 2013 read with Rule 8of the Companies (Accounts) Rules 2014 on energy conservation technology absorptionforeign exchange earnings and outgo is given in Annexure-IV.


An extract of Annual Return in form MGT-9 is given in Annexure-V and forms part of thisreport.


Particulars of loans and advances given guarantees given securities provided andinvestments made are provided in the Note Nos 3411 and 43 of the notes to accounts ofthe Standalone Financial Statements.


The lockdown due to the Covid pandemic and the transition to BSVI emission norms had animpact on the turnover and the profitability of the company for the first two quarters ofthe financial year 2020-21. The impact of COVID-19 will be felt in the Financial Year2020-21 as it is expected to further drag the slowness in the auto / auto componentindustry and the revival is bound to be slow. The Company has gradually resumed operationsin its facilities as per the guidelines issued by the Ministry of Health and FamilyWelfare. The Company has taken steps to build in all the safety and precautionary measuresacross all its facilities and locations. In spite of the various challenges due to thelockdown the overall financial position of the company continues to remain stable.


The company did not enter into any material transaction with any related party whichmay have potential conflict with the interest of company at large during the financialyear 2019-2020 as per Section 188 of Companies Act 2013. All transactions entered intowith related parties were at an arm's length basis and in the ordinary course of business.Form AOC-2 as required under Section 134(3)(h) of the Companies Act 2013 read with Rule8(2) of the Companies (Accounts) Rules 2014 is given in Annexure-VI and forms part ofthis report. The company's related party transactions have been entered into for meetingthe requirements of operations and at an arm's length basis and in the ordinary course ofbusiness.


There was no change in the nature of business of the company during the year underreview.


During the year 2019-2020 no significant and material orders were passed by the courtsregulators or tribunals affecting the going concern status of the company and its futureoperations.


No company has become or ceased to be the company's subsidiary joint venture orassociate company during the financial year 2019-2020.


Mr. Jayakar Krishnamurthy Mr. Ram Ramamurthy Ms.Rekha Raghunathan and Mr. Syed AbdulHadi hold the office of key managerial personnel of the company as on 31stMarch 2020. Mr. Ram Ramamurthy stepped down as Chief Financial Officer with effect fromthe end of the working day of 1st August 2020. Consequent to his stepping downMr.V Ramanathan has been appointed as Chief Financial Officer with effect from 2ndAugust 2020. Mr. V. Ramanathan will also be a Key Managerial Personnel for the purpose ofCompliance of Section 203 of Companies Act 2013. The Information required pursuant toSection 197 of the Companies Act 2013 read with Rule 5 of the Companies (Appointment& Remuneration of Managerial Personnel) Rules 2014 in respect of directors keymanagerial personnel and employees are given in Annexure-VII.


During the year cordial and healthy relations were maintained with all sections/levelsof employees.


The company has a whistle blower policy to deal with instances of fraud andmismanagement. The details are explained in the Corporate Governance Report and are alsoposted on the company's website


The company has in place a policy for prevention of sexual harassment. An internalcommittee has been set up at each plant to redress sexual harassment complaints. Allemployees are covered under this policy. No complaint was received during the financialyear 2019-2020.


Key business risks are identified and reviewed on a regular basis. A strategydevelopment committee has been formed to strategise on ways to mitigate the various risks.The necessary actions and precautions are taken on time to deal with various risksassociated with the company and the Board discusses the same from time to time. Thedetails are given in Corporate Governance Report.


The company has framed a code of conduct for prevention of insider trading based onSecurities and Exchange Board of India (prohibition of insider trading) Regulations 2015.This code is applicable to all the board members/employees/officers of the company. Thisensures prevention of dealing with shares by people who have access to unpublished pricesensitive information.


The company adheres to all the requirements of the code of corporate governance asstipulated in the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015. A report on corporate governance along with certification of the Chairman andManaging Director and Chief Financial Officer is attached in Annexure-VIII. Certificatefrom the Statutory Auditor regarding compliance of the conditions of corporate governanceas stipulated by SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015is given in Annexure-IX. The Management Discussion and Analysis Report is attached inAnnexure-X.


The Business Responsibility Report as applicable to the Company in terms of Regulation34(2) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 for thefinancial year 2019-20 is provided in Annexure-XI to this report. The Company practicesvarious business responsibility initiatives as per the framework developed under theguidance of the chairman and managing director who is also responsible for theimplementation of the same. The Business Responsibility Policies and the BusinessResponsibility Report are displayed on the website of the company weblink: and weblink:


The company has complied with all the applicable secretarial standards as issued by theInstitute of Company Secretaries of India during the year 2019-2020.


In view of government advisories on travel and public gatherings to combat theprevailing COVID-19 pandemic and to support the health and well-being of all stakeholdersthe 34th AGM would be conducted through Video Conferencing (VC) or Other AudioVisual Means (OAVM) on 31st December 2020 at 15:30 hrs IST as per theframework notified by the Ministry of Corporate Affairs. The notice convening the 34thAGM shall contain detailed instructions and notes in this regard.

The electronic copies of the annual report and the notice convening the 34thAGM would be sent to the shareholders whose e-mail addresses are registered with theCompany or their respective Depository Participants (DP). In terms of General Circularsno. 14/2020 dated April 08 2020 17/2020 dated April 13 2020 and 20/2020 dated May 052020 issued by the Ministry of Corporate Affairs (MCA) read with SEBI circular no.SEBI/HO/CFD/CMD1/CIR/P/2020/84 dated May 12 2020 the Company has not printed physicalcopies of annual report for distribution. The full Annual Report shall be made availableon the website of the Company and also shall be disseminated to the stock exchanges whereshares of the Company are listed.


The Board thanks all its employees customers bankers vendors suppliers andgovernmental agencies for their continued support. The Board is grateful to theshareholders for their continued trust and confidence in the company.