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VST Tillers Tractors Ltd.

BSE: 531266 Sector: Auto
BSE 00:00 | 26 Apr 1297.65 0.80






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OPEN 1327.10
52-Week high 3082.00
52-Week low 1285.00
P/E 16.64
Mkt Cap.(Rs cr) 1,121
Buy Price 1290.10
Buy Qty 1.00
Sell Price 1318.00
Sell Qty 1.00
OPEN 1327.10
CLOSE 1296.85
52-Week high 3082.00
52-Week low 1285.00
P/E 16.64
Mkt Cap.(Rs cr) 1,121
Buy Price 1290.10
Buy Qty 1.00
Sell Price 1318.00
Sell Qty 1.00

VST Tillers Tractors Ltd. (VSTTILLERS) - Director Report

Company director report

Dear Shareholder

Your Directors have pleasure in presenting the 50th Annual Report of the Company andthe Audited Statement of accounts for the year ended March 31 2018.


(Rupees in lakhs)

Period Year 2017-18 Year 2016-17
TOTAL INCOME 80916 70382
TOTAL EXPENSES 65693 59124
TAX 4025 3318
EARNING PER SHARE (Basic and Diluted) 129.61 95.73


The year under report was partially impacted in first half of the year with weakmonsoon in June in States of Karnataka Tamil Nadu and Kerala. In other parts of thecountry the monsoon was normal during the Kharif season. Structural changes in the subsidyschemes in few States change over to DBT schemes in few states and price fixation delaysimpacted the sales of Power tillers during the year 2017-18.

The number of Power Tillers sold during the year was 30143 units as against theprevious year sale of 25515 units registering growth in sales of 25%. The company marketshare moved to 60%.

Your company registered growth of 18% in Tractor numbers. 11367 tractors were sold asagainst 9635 tractors in 2016-17. The company market share is around 15.5% in the compactsegment category. Your company will be investing over 240 crores from the year 2016-17until 2020-21 in infrastructure upgradation and new product development. The company haslaunched new Tractor models Tractor variants and Tiller models. During the year 2016-17your company launched the 27 HP Viraat model to the market and the upgraded version‘VST SHAKTI VIRAAT PLUS’ in April 2017. Both these models are with 8+2 constantmesh gear box. The Viraat Plus has gained market share while the Samrat model is laggingas we need to change the mindset of the farmers to adapt engine with Electronic governor.The new model’s introduction penetration in new areas industry growth and ourmarketing communication has enabled growth in sales during the year 2017-18.

The Custom Hiring & Service Centers that are under the VST umbrella which wasallocated under the scheme launched by the Government of Karnataka are runningsuccessfully. The new plant for Power Tiller at Malur became operational in March 2018.This new plant is capable of higher productivity. The entire production of Power Tillerwill be done in this plant effective August 2018. The existing plant at Bengaluru will beused for manufacture of higher HP range of Tractors and the Self-propelled Power reapers.


The Board has recommended 500% Dividend (150% Normal dividend and 350% special dividendon account of Golden Jubilee year) i.e. Rs.50/- per equity share of Rs.10 each for thefinancial year 2017-18 and the same will be disbursed on or after 13th August 2018 ifapproved by the shareholder at the 50th AGM.

The total outflow will be Rs.518452993 including the dividend distribution tax ofRs.86476593 lakhs

Transfer to reserves

There was no proposal for transfer to general reserve for the year 2017-18.


Industry – Opportunities & Challenges

Need to mechanize agriculture will continue to be a necessity due to limitedavailability of labour and high cost of labour. The trend in any segment is towardsmechanization/automation to reduce the manual effort. Your company is in the business to‘Create Sustainable Crop Solutions To Enhance Farm Productivity’. The companyproducts mainly target the small and marginal farmers who account for more than 70% of theland holding. Shortage of rural labour force continues to be the key driver for businessgrowth. The income of our farmers need to increase and this is possible with increase inproductivity in the land size that they own. Your company is offering total crop solutionsto the farmers at competitive pricing which will assist in their business. The company hasdeveloped packages for various crops like Paddy Cotton Sugarcane Horticulture Grapesetc. for Compact tractors and Power tillers.

Delays in announcing subsidy schemes by the State Governments bureaucracy associatedwith the administration of schemes weak Monsoon etc. will continue to be the challengefor your company. Entry of more and more competition tractors in the compact segment isdemanding your company to come out with more and more variants to counter the competition.The commodity prices have increased over 20% in 2017-18. Many suppliers are seeking priceincreases. Due to price increase of components the contribution margin will get eroded andhence can have adverse impact on the company operating margins.


The inability of the Central Government to come out with strict guideline/policy tocurb imports of poor quality Power Tillers without adequate service and spares is a causefor concern. State Governments are encouraging more and more Custom Hiring Centres tosupport the marginal and small farmers. This initiative may marginally impact the sales ofTillers to the farmers. More than 95% of Power Tillers are sold under government subsidyschemes. In case the subsidy allocations are reduced it can adversely affect the demandfor these products. In some States even the compact tractors are given attractive subsidy.This will have an impact on Direct sales of Tractors. While the subsidy was most prevalentin Karnataka Tamil Nadu and Andhra very recently Maharashtra government has announced asubsidy scheme for tractor. This is not necessarily a good trend for the tractor industry.Most State Governments have switched over to DBT scheme for subsidy which will have apositive impact on working capital.

Your company is diversifying to manufacture and sell higher HP tractors to the domesticmarket. Having been in compact segment tractor manufacturing and sales it may take morethan anticipated time for us to penetrate and establish the presence in higher HP segment.


With prediction of normal monsoon launch of new products models/ variants along withcontinued focus on farm mechanization to double the farmer income by the CentralGovernment it is expected that the company growth will be on par with the overall industrygrowth.


In accordance with the provisions of the Companies Act 2013 Mr. V T Ravindra(DIN-00396156) will retire at the ensuing AGM and is eligible for reappointment. Mr. ArunV. Surendra (DIN-01617103) appointed as Additional Director of the Company effective from11/05/2018. His appointment as Non-Executive Director forms part of Notice of 50th AnnualGeneral Meeting. Mr. V.T. Ravindra appointed as whole-time Director of the Companyeffective from 11/05/2018. His appointment as whole-time Director forms part of Notice of50th Annual General Meeting. During the year no non-executive director had any pecuniaryrelationship or transactions with the Company other than the sitting fees andreimbursement of expenses incurred by them for attending meetings of the Company.


The following persons are Key Managerial Personnel (KMP) of the Company under section203 of the Companies Act 2013. During the year 2017-18 Mr.R.Thiyagarajan resigned as CFOof the Company w.e.f. 01/06/2017 and Mr. P.M. Keshava appointed as CFO w.e.f. 01/06/2017.

1. Mr. V.P. Mahendra - Vice Chairman & Managing Director

2. Mr. P.M.Keshava - Chief Financial Officer

3. Mr. Chinmaya Khatua - Company Secretary


The Company strives to ensure good in Corporate Governance and levels of transparencywith all the provisions of SEBI (Listing Obligation and Disclosure Requirement)Regulation 2015. A certificate from the Auditors to this effect forms part of CorporateGovernance Report.Compliance reports in respect of all laws applicable to the Company havebeen reviewed by the Board of Directors.


Pursuant to subsection 5 of Section 134 of the Companies Act 2013 the Directorsconfirm that:

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

(b) they have selected such accounting policies and applied them consistently and madejudgements and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the company at the end of the financial year and of theprofit and loss of the company for that period; sufficient

(c) they have taken proper and care for the maintenance of adequate accounting recordsin accordance with the provisions of this Act for safeguarding the assets of the companyand for preventing and detecting fraud and other irregularities;

(d) they have prepared the annual accounts on a going concern basis;

(e) they have laid down internal financial controls to be followed by the company andthat such internal financial controls are adequate and were operating effectively.

(f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.


M/s. K.S. Rao & Co Chartered Accountants (Firm Regn No. 003109S) were appointed asAuditors of the Company for five financial years w.e.f FY 2016-17 at the 48th AnnualGeneral Meeting of the Company.


Pursuant to Section 148 of the Companies Act 2013 read with The Companies (CostRecords and Audit) Amendment Rules 2014 the cost audit records maintained by the Companyis required to be audited. Your Directors had on the recommendation of the AuditCommittee appointed M/s. Rao Murthy & Associates Cost Accountants to audit the costrecords of the Company for the financial year 2018-19 on a remuneration of Rs.250000/-lakhs (Exclusive of applicable taxes) plus out of pocket expenses. As required under theCompanies Act 2013 the remuneration payable to the cost auditor is required to be placedbefore the Members in a general meeting for their approval. Accordingly a Resolutionseeking Member’s approval for the remuneration payable to M/s. Rao Murthy &Associates. Cost Auditors is included in the Notice of the Annual General Meeting.


M/s.Brahmayya & Co Chartered Accountant were appointed as Internal Auditors undersection 138 of the

Companies Act 2013 for the financial year 2017-18.


Pursuant to the provisions of Section 204 of the Companies Act 2013 and read withRules made thereunder the Company had appointed Mr. Thirupal Gorige Company Secretariesin Practice to undertake the Secretarial Audit of the Company for the financial year2017-18. The Secretarial Audit Report is enclosed herewith as Annexure-4.


As required by provisions of section 197 of the Companies Act 2013 read with Rule 5(2)and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014. The salary details of designated employees are given in Annexure-1.


Information under Section 134 Companies Act 2013 read with rule 8 (3) of the Companies(Accounts) Rules 2014 is enclosed as Annexure-2.


Your Company has not accepted any deposits within the meaning of Chapter- V of theCompanies Act 2013 and rules made thereunder.

Internal Control System and their Adequacy

The Company has put in place adequate internal financial controls over financialreporting Systems commensurate to the nature of its business and complexity of itsoperations. These are regularly tested for their effectiveness by Statutory as well asInternal Auditors.

The Company periodically conducts physical verification of inventory fixed assets andcash on hand and matches them with the books of account. Explanations are sought for anyvariance noticed from the respective functional heads.

The Company is planning to implement new ERP system during the year 2019-20 to furtherstrengthen the internal control system of the Company.

The Significant observations made by the Auditors and follow up actions there onreported to the Audit Committee. The Audit Committee reviews the adequacy andeffectiveness of the Company’s Internal Control Environment and monitors theimplementation of the Audit recommendations.

Industrial Relation

Industrial relations have been cordial at the Bengaluru Mysore and Hosur plants duringthe year.

Your company has taken appropriate steps to build organizational capability which willenable the long term growth plans. There were 713 No. of permanent employees on roll as on31st March 2018.

Forward-Looking Statements

Statements in this release that are "forward-looking statements" are based oncurrent expectations and assumptions that are subject to risks and uncertainties. Actualresults could differ materially from those either expressed or implied due to factors suchas Raw material prices Government policies Competition tax regime market acceptance ofnew products and services continued acceptance of existing products and services changesin licensing programs product price discounts delays in product development and relatedproduct release schedules sales and vendor channel disruption.

All information in this release is as of May 11 2018 The Company undertakes no dutyto update any forward-looking statement to conform the statement to actual results orchanges in the company’s expectations.

Information Technology

Your Company’s operations are supported by a full-fledged Data Centre. Yourcompany has a well planned Business Continuity Plan and Disaster Recovery Set-up for allcritical applications with near real-time data replication.

The delivery centers meet the Information Security Management System and CIA(Confidentiality Integrity and Availability) Standards. To cater to the ever-changingcustomer needs the IT infrastructure is being constantly upgraded with new / enhancedfeatures to facilitate smooth functioning of operations and deliver customer satisfaction.We are using industry best standard mailing solutions with compliance and availability ofmails which controls various spam mails. The Company is planning to implement new ERPsystem during the year 2019-20 to further strengthen the internal control system of theCompany along with 24*7 availability of critical applications and standard businessanalytical tools.

Board Meeting

Five meetings of the Board of Directors were held during the year. For further detailsplease refer report on Corporate Governance of this Annual Report.

Declaration of Independent directors.

The Company has received declarations from Independent directors as mentioned insub-section (6) of section 149 of the Companies Act 2013.


The Company has constituted Audit Committee CSR Committee Nomination &Remuneration Committee Stakeholders Relationship Committee and Risk Management Committee.The details of the Committees are mentioned in Corporate Governance Report.

Vigil Mechanism

The purpose of this policy is to provide a framework to promote responsible and securewhistle blowing. It is to protect employees wishing to raise a concern about seriousirregularities within the Company. The Company has vigil mechanism to deal with instanceof fraud and mismanagement if any. The details of the vigil mechanism are explained inthe Corporate Governance Report and also posted on the website( of theCompany.

Technology Transfer Agreement with M/s. Kukje Machinery Co. Ltd.

During the year 2017-18 the Company has entered into a Technology Transfer Agreementwith M/s. Kukje Machinery Co. Ltd. Korea to manufacture 47 HP tractors.

Auditors qualification reservation or adverse remark or disclaimer.

Auditors Qualification on Internal financial control:

"The Company has designed and established internal financial controls overaccounting of expenditure and payment processing. However adequate "maker andchecker controls" were not effective with respect to review of expenditure entriesgeneration of EDI (Electronic Data Interchange) file for payments modifications to EDIfile and uploading the EDI file onto the Bank’s website for payments as detailed innote no. 45 to financial statements as at March 31 2018 which resulted in creation offictitious accounting entries in the system and payments to unauthorized parties."

Management Response:

Looking into the unblemished track records management believed that the internalcontrol systems which includes design and financial controls were working effectively andin totality. However it was realized that the operation of the internal controls andprocedures were not effective and needed further improvement. The management has takennecessary steps to go into the depth of the fraud the extent of possible damage donelegal proceeding recovery of the amount embezzled and correcting the lapses in theinternal financial controls. With this in mind the management had already embarked onintroducing a new ERP system (SAP) to overcome the shortfall in the present system.

There was no qualification reservation or adverse remark or disclaimer fromSecretarial Auditors. There was no fraud reported by the auditors under section 143 (12)of the Companies Act 2013 other than those which are reportable to the CentralGovernment.

Loans Guarantee & Investment

The Company has made investment during the year 2017-18. However the investments andLoan formed part of the notes to the financial statements provided in this Annual Report.The company has not given any Loan or Guarantee during the year 2017-18.

Related Party Transactions

All related party transactions that are entered into during the financial year were onan arm’s length basis. There are no materially significant related party transactionsmade by the company with Promoters Directors Key Managerial Personnel or otherdesignated persons which may have a potential conflict with the interest of the Company atlarge.

All Related Party Transactions are placed before the Audit Committee and also beforethe Board for approval. Prior omnibus approval of the Audit Committee was obtained for thetransactions which are of a foreseen and repetitive nature. The transactions entered intopursuant to the omnibus approval so granted are audited and a statement giving details ofall related party transactions is placed before the Audit Committee and the Board ofDirectors for their information and approval. The policy on dealing with Related PartyTransactions as approved by the Board can be accessed at

Material changes and commitments affecting the Financial Position

There are no material changes and commitments affecting the financial position of thecompany which have occurred between the end of the financial year of the company to whichthe financial statements relate and the date of the report;

Risk Management Policy

The Company is having a risk management policy. The risk pertaining to business of theCompany is discussed at the Risk Management Committee Audit Committee and at the BoardMeetings on regular basis. There are no risks which in the opinion of the Board threatenthe existence of the Company. However some of the risks which may pose challenges are setout in the Management Discussion and Analysis which forms a part of this report.

The Committee composition :

Mr. M.K. Bannerjee Chairman

Mr. V. K. Surendra Member

Mr. K.M. Pai Member

Mr. V.P. Mahendra Member

Corporate Social Responsibility (CSR)

The Company has formed CSR policy and Committee details as required by the Act areavailable in Company website i.e. TheCompany has spent Rs.165 lakhs in CSR activities during the financial year 2017-18.

Evaluation of Board Performance.

The Board works with the nomination and remuneration committee to lay down theevaluation criteria for the performance of executive / non-executive / independentdirectors through a peer-evaluation excluding the director being evaluated. The evaluationof all the Directors and the Board as a whole was conducted based on the criteria andframe work adopted by the

Board. None of the Independent Directors are due for reappointment.

There is no change in nature of the business during the year.

Details of subsidiary Associate or joint Venture Company.

During the year 2017-18 there is no change in Subsidiary Associate or Joint VentureCompany.

Significant and material orders

There are no significant material orders passed by the

Regulators / Courts which would impact the going concern status of the Company and itsfuture operations.

The ratio of the remuneration of each Director and KMP to the median remuneration ofthe employees of the company for the financial year as follows:

Sl. No. Name Designation Salary 2017-18 (in Rs) Salary 2016-17 (in Rs) Increase in salary Ratio/Times per Median of employee remuneration
1 Mr.V.P. Mahendra Vice Chairman & Managing Director 7710739 7749081 -38342 (-0.49%) 19.12
2 Mr. R. Thiyagarajan* Chief Financial 5759599 4562423 1197176 14.28
Officer (26.24%)
3 Mr. P M Keshava** Chief Financial 3538136 2633631 904505 18.77
Officer (34.34%)
4 Mr. Chinmaya Khatua Company Secretary 1537589 1389647 147942 3.81

* Mr.R.Thiyagarajan resigned from CFO w.e.f. 1st June 2017 and from Director w.e.f.31st March 2017.

** Mr.P.M.Keshava appointed as CFO w.e.f 1st June 2017.

There is a marginal increase in median remuneration of the employee during the year2017-18.

The Company’s PAT has increased from Rs.8105 lakhs to Rs.11195 lakhs. The increasein KMP remuneration is line with the current market scenario and with Company policy.However salary of Vice Chairman & Managing Director was approved by the shareholders.The Company has given about 10.4% average increase in salaries to the employees keeping inview the overall industry standard and interest of the employees. The unionized employeesof the Company are getting salary increment as per the terms and conditions of their wagesettlement. There is no exceptional circumstances of increase in the managerialremuneration.

The Company has 713 Nos permanent employees on roll as on 31st March 2018. The Companyfixes salary of the employees on the basis of Remuneration Policy of the Company.

Payment of Commission to Managing Director.

The Managing Director is being paid commission on net profit of the Company as approvedby the shareholders.

The commission criteria is given below :

Name Designation Commission
V.P. Mahendra Vice Chairman & Managing Director One percent on the net profit of the Company subject to a maximum of one and half times of annual basic salary drawn

Mr K.U.Subbaiah CEO receives remuneration in excess of the highest paid directorduring the year the details are given in Page No.13


Date Paid up Capital (in Rs) Closing Market Price per shares EPS PE Ratio Market Capitalisation (Rs. in crore)
31.03.2017 86395280 1800 95.73 21.67 1555.12
31.03.2018 86395280 2511.75 129.61 19.38 2170
Increase/Decrease NIL
% Increase/Decrease NIL
No issue of shares during the year - - - - -

Notes: Data based on share prices quoted on BSE.

Internal Complaint Committee under Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.

The Company has formed Internal Complaint Committee under Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013 and no complaint was receivedduring the year 2017-18.

Form No. AOC-2

(Pursuant to clause (h) of sub-section (3) of section 134 of the Companies Act 2013and Rule 8(2) of the Companies (Accounts) Rules 2014)

Form for disclosure of particulars of contracts / arrangements entered into by thecompany with related parties referred to in sub-section (1) of section 188 of theCompanies Act 2013 including certain arm’s length transactions under third provisothereto:

1. Details of contracts or arrangements or transactions not at arm’s lengthbasis: V.S.T. Tillers Tractors Ltd (the Company) has not entered into anycontract/arrangement/transaction with its related parties which is not at arm’slength during FY 2017-18.

(a) Name(s) of the related party and nature of relationship: Not Applicable (b) Natureof contracts/arrangements/transactions: Not Applicable (c) Duration of the contracts /arrangements/ transactions: Not Applicable (d) Salient terms of the contracts orarrangements or transactions including the value if any: Not Applicable

(e) Justification for entering into such contracts or arrangements or transactions: NotApplicable

(f) Date(s) of approval by the Board: Not Applicable (g) Amount paid as advances ifany: Not Applicable (h) Date on which the special resolution was passed in general meetingas required under first proviso to section 188: Not Applicable

2. Details of material contracts or arrangement or transactions at arm’s lengthbasis: a. Name(s) of the related party and nature of relationship: Not Applicable b.Nature of contracts / arrangements / transactions: Not Applicable c. Duration of thecontracts / arrangements / transactions: Not Applicable d. Salient terms of the contractsor arrangements or transactions including the value if any: Not Applicable e. Date(s) ofapproval by the Board if any: Not Applicable f. Amount paid as advances if any: None

on behalf of Board of Directors
V. K. Surendra
Place: Bengaluru Chairman
Date: 11th May 2018

Extract of Annual Return

Annual Return of the Company is available in Company website i.e. www.vsttillers.comextract of Annual Return is annexed herewith as Annexure 5 to this report.

Secretarial Standards:

The Company Complies with all applicable secretarial standards.

Investor Education And Protection Fund

In accordance with the applicable provisions of the Companies Act 2013 read with theIEPF Authority (Accounting Audit Transfer and Refund) Rules 2016 (The Rules) anydividends unpaid or unclaimed for seven years from the date of transfer to Unpaid DividendAccount shall be transferred to the Investor Education and Protection Fund established bythe Central Government. Further according to that Rule the shares in respect of whichdividend has remained unclaimed or unpaid for 7 (seven) consecutive years or more arerequired to be transferred to the Demat Account of the IEPF Authority. Accordingly theCompany has transferred Rs.466259/- unpaid and unclaimed dividend to Investor Educationand Protection Fund and corresponding shares of 24314 Nos to IEPF Authority as per IEPFRules. The details of such Dividend and shares are available in Company website Mr. Chinmaya Khatua has been appointed as nodal officer for IEPF



The Directors wish to convey their gratitude for the faith reposed in your Company byemployees dealers vendors Bankers and the customers at large.

Place: Bengaluru V. K. Surendra
Date : May 11 2018 Chairman