(Including Management Discussion and Analysis)
TO THE MEMBERS OF WENDT (INDIA) LIMITED
The Board of Directors have the pleasure in presenting the 38 Annual Report of theCompany together with the Audited Financial Statements for the year ended 31 March 2020.The Management Discussion & Analysis Report which is required to be furnished as perSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 has been includedin the Directors Report to avoid duplication and overlap.
The global economy during the year 2019 was impacted on account of macro-economicuncertainties including the US-China trade war the monetary policies slowdown in theautomotive sector due to which the global growth was at 2.9 per cent as against 3.6 percent during the year 2018.
Global headwinds and challenges in the domestic financial sector moderated growth ofthe Indian economy in year 2019-20.
Corona Virus Disease 2019 (COVID-19) outbreak came at a time when India's economy wasalready undergoing a slowdown owing to declining demand in automotive sector and othercore sectors like construction as well as continuing financial sector weaknesses. Tocontain the outbreak of the pandemic the Government imposed a lockdown shuttingfactories and businesses suspending flights stopping trains and restricting mobility ofgoods and people. The rapid spread of the Corona virus and the associated isolationpolicies implemented to control the outbreak led to significant disruption in economicactivity. Both the manufacturing and services industries bore the brunt of the impact. Asper the data released by the National Statistical Organization India's economy sloweddown to 3.1 per cent in Q4 (January-March quarter) reflecting the partial impact of theCOVID-19 pandemic.
The annual expansion in the GDP stood at 4.2 per cent in fiscal year 2019-20 - thelowest pace of growth in 11 years against 6.1 per cent expansion in 2018-19 (FY 2019).
The resultant domestic supply and demand disruptions (on the back of weak externaldemand) is expected to result in a sharp growth deceleration in FY 2020-21.
The stimulus package of `20 lakh crore which is around 10 per cent of India's GDPannounced by the Government of India to counter the impact of the pandemic reaffirms thecountry's commitment to macro-economic stability prudent fiscal management and upliftingof indigenous manufacturing. The growth tonic to MSMEs easing of labour relatedcontributions tax relaxations are expected to bring in much needed liquidity.
The recent spate of macro-indicators reveals the deep distress in the Indian economywith industrial activity and Indian exports posting record contraction in March and April2020. In this light Atma Nirbhar Bharat package is a welcome moveas it benefits not only industry and working-class population but also focusses on thepoor migrant populace and agriculture sector and is a step towards making the countryself-reliant.
The vision laid by Prime Minister to fulfil the country's dream to become Self-Reliant(Atma Nirbhar Bharat) resonates with the growth strategy of the Company and it's also timeto become "vocal for our local" products and make them global. This is avery bold step to encourage domestic industry however there is a need to do more as AtmaNirbhar will mean moving from 'Made in India' to 'Made by India'.
Self-Reliant India Mission aims towards cutting down import dependence by focusing onsubstitution while improving safety compliance and quality goods to gain global marketshare.
The outbreak of COVID-19 has yielded an unprecedented blow to global financial markets.As per IMF's World Economic Outlook (WEO) January update global economic activityremained weak with growth for 2019 downgraded to 2.9 per cent which is the slowest sincethe global financial crisis.
INDUSTRY STRUCTURE & DEVELOPMENTS
The demand for Super Abrasive products is closely linked to the level of industrialproduction. Super Abrasives are used to manufacture long-lasting expensive items likeauto and aircraft parts demand for which is highly cyclical. Diamond and Cubic BoronNitride (CBN) Super Abrasive products are used extensively in aerospace industry and otherindustrial applications where price considerations are less significant as they incur highinitial costs. They are used in the machining of materials such as nickel cast iron andcobalt-based superalloys where precision in machining operations is of prime importance.
Increasing complexity of Super Abrasive technology in high-performance applications andits high initial cost make it difficult for small-scale and medium-scale companies tocompete with the global market leaders. While industry leaders can afford significantresearch operations a majority of unorganized players do not have access to substantialR&D resources. This disparity can make it difficult for small and medium-scalecompanies to compete in the market in terms of developing products that may requireadvanced technologies.
Additive manufacturing of components in the aerospace and other industries is pursuedby a number of organizations. Since the additive processes produce components in near-netshape there is often very little stock that remains on these components for providingfinal finish. Therefore any post-processing finishing methods that are employed need tobe extremely consistent in achieving part tolerances and surface quality which in turncreate opportunities for Super Abrasives and Machine Tool Business.
The Company being a total Grinding & Honing Solution provider innovation is at thecore of the Company's products and processes. As such majority of our products arecustomized to fulfil the customer's requirements.
Our comprehensive product range backed by state-of-the-art technology valued-addedservices and consistent performance by and large fulfil the needs and expectations of ourcustomers in diverse industrial segments.
The Company is a preferred supplier for many of the automobile auto componentengineering aerospace defence ceramics customers for their Super Abrasive Toolingsolutions Grinding & Honing Machines and Precision components. A major contributionto the Company's revenues in the forthcoming year is expected to come from theseindustries.
Also the Company is working on de-risking its business by introducing new products andexploring new markets for Glass Wheels for Auto/Solar/Construction Application; Textileindustry for Knife grinding; Razor Blade and Needle & Surgical Blade/Cutlery KnivesIndustry.
COMPANY PERFORMANCE OVERVIEW
| ||FY 2019 - 20 ||FY 2018 - 19 |
|Domestic Sales ||8033 ||9733 |
|Export Sales ||4004 ||4253 |
|Total Sales ||12037 ||13986 |
|Other Income ||1057 ||709 |
|Profit Before Tax ||1189 ||1904 |
|Profit After Tax ||934 ||1347 |
|Operating Profit before Finance cost ||425 ||1495 |
|Capital Employed ||11966 ||11461 |
|Earnings per Share - ` ||46.70 ||67.33 |
Due to the vulnerabilities of our domestic economy & the global market dislocationincluding on the back of the COVID-19 pandemic in March 2020 the Company clocked a topline of `12037 lakhs compared to `13986 lakhs (net) lower by 14 per cent over theprevious year.
Considering preventive measures to curtail the spread of COVID-19 and in line with thedirections issued by the Ministry of Home Affairs the Company had to temporarily suspendits manufacturing operations from 23 March 2020 leading to a tepid performance in themonth of March 2020.
Though the demand for Company's products and services in the domestic market saw areasonable traction during the year from the Steel Industry the Company was adverselyimpacted due to lower orders from major contributory industry segments such as Auto &ancillary Engineering & allied sector. Consequently the Company recorded sales 17per cent lower than the last year. The export business was also affected by continuedvolatility and global slowdown resulting in sales being 6 per cent lower than the previousyear. The Company continued its efforts in addressing the challenges thereby recordinggrowth in some of the overseas markets such as Korea United States of America ChinaUnited Kingdom and Taiwan despite uncertainties.
During the year the Company continued its dedicated efforts in pursuing business inits major verticals namely Super Abrasives Machines and Components. The Company wouldcontinue to deploy the required investments and resources in identified growth areasconsidering its long-term growth strategy.
The Super Abrasive Business comprising Diamond/CBN Grinding Wheels invarious Bonding Systems Rotary Dressers Stationary Dressers Hones and Segmentedproducts was majorly impacted by the volatile situation in the domestic market and alsolower orders from some of the key overseas markets like Germany Russia Singapore andSpain. However amidst many challenges business has achieved a growth of over 10 per centin countries like the United States of America China United Kingdom and Taiwan.
The Company continued to drive growth through New Product Developments in areassuch as Wheels for Auto/Solar/Construction applications; Textile industry for Knifegrinding Razor Blade Needle/Surgical Blade/Cutlery Knives industry in addition toadopting new technologies for Dressing Rolls Precision Electroplated products.
During the year the Company with an aim to explore opportunities in new marketscustomers and applications adopted Online Marketing initiatives and a B2BDigital Marketing Platform.
The Machines Business vertical witnessed a growth of 29 per cent over theprevious year on the back of good orders from domestic and overseas market. The Companyhas developed and launched new models/variants in this segment viz. High Precision RingGrinding Machine: Delta 450. These machines have been well received by the customersprojecting a good performance. Machine sales in the export market achieved an impressivegrowth of 93 per cent on the back of good orders from renowned Steel and Cutting Toolindustries.
The Precision Components Business during the year faced fewchallenges in terms of lower volume off take by the customers due to slowdown in the autosector and transition phase of BS IV to BS VI in the internal combustion engine. TheCompany has successfully established and ramped up the capacity of new components to suitthe latest technology.
The Company also focused on de-risking the Precision Components business to reducedependency on Auto industry by exploring new business opportunities in refrigerator &air conditioning parts special inserts Carbide industry deploying its core competencies- Expertise Experience and Knowledge on Grinding Machines & Super Abrasive Tools forproducing related precision components.
FOCUS ON PROCESS EFFICIENCY
The Company continues to focus on improving operational efficiency as well as optimalutilization of various resources in manufacturing and production areas. This is supportedthrough implementation of LEAN not only in manufacturing process but also in supportfunctions. This initiative is beneficial in addressing some of the key areas like planningand scheduling production reliability materials availability and product delivery. TheCompany ensures maintaining minimum inventory levels while safeguarding on-call suppliesand on-time delivery to customers.
Optimum use/sweating of assets based on Value Stream Mapping by using common pool ofresources (Machine) for similar operation across all cells remains the Company's priority.
Supply Chain efficiency is one of the Company's key focus area. The Company outsourcesmost of its 'Non-Precision' processes and the 'Precision' processes are carried in-house.The Company partners with well-equipped and established vendors in and around Hosur TamilNadu for certain noncritical activities.
On the raw material front the Company continuously develops alternative reliable andcompetitive sources/suppliers for critical raw materials including Diamond/CBN machinecastings systems electrical chemicals etc.
With Government of India giving more thrust to localization Indian machine toolindustry is keen to substitute imports and explore new user segments especially inAgriculture machinery Pharmaceutical and Medical equipment Defence and other emergingsectors.
There will be a push for digitalization automation and optimization of processes inthe manufacturing ecosystem in the medium to long-term. Industries need to use manpowerjudiciously for new product and process developments as well as for engineering services.
Super Abrasive products are used in various medical applications such as SurgicalInstruments Hypodermic Needles Dental implants Knee Hip and Shoulder joints.Availability of nano Cubic Boron Nitride particles is expected to open up more untappedmedical applications in the near future. Also growing Consumer Electronic Segment withalso manufacturing facilities in India is expected to provide a wide array ofopportunities for consumption of Super Abrasives in the coming years.
With specialized manufacturing gaining more attention worldwide there is a growingimportance for manufacturing of smaller and accurately shaped parts. Precision grinding isthe only way to produce the tight tolerances that make smaller more intricate parts fitproperly. The Company aims to capitalize on this front in manufacturing technology forcustomers in the field of high precision grinding.
The Company's growth lies in constantly monitoring changes in the external environmentand adapting to the customer needs that are emerging. Accordingly mega trends andunderlying new opportunities that unfolds are being tracked continuously.
To bridge the gap between optimizing existing technologies & investing inadvancements the Company's in-house R&D efforts are aimed at strengthening theexisting technology complemented by new methods of manufacturing.
The Company has embraced the current slowdown as an opportunity to get its employees upskilled in digital marketing and Digital Technology so as to complement thetraditional sourcing and interacting with customers in a much cost-effective mannerultimately enhancing customer experience.
Adoption and deployment of appropriate technologies for indigenous Bond developmentstreamlining processes introducing automation in critical areas and working on industry4.0 would also be the key focus areas for the year to address the Company's growthprospect. Product and process improvement through constant innovation has always been theCompany's driver for growth.
Wendt Grinding Technologies Limited Thailand
The Company's wholly owned subsidiary Wendt Grinding Technologies Limited Thailandachieved sales of Thai Baht 1022 lakhs (`2337 lakhs) which is 4% lower than the lastyear despite continuing industry slowdown declining exports political uncertaintiesrising costs and all odds. The subsidiary continues to demonstrate its strong resolve andbusiness acumen challenging the unfavourable conditions and churning out good results on aconsistent basis.
The Profit Before Tax was Thai Baht 225 lakhs (` 508 lakhs) and the Profit After Taxhas been Thai Baht 179 lakhs (` 404 lakhs) both being 5 per cent higher over previousyear.
Like in earlier years persistent growth initiatives and efforts have been the key toperformance sustainability of the subsidiary. Strict cost control measures despite gainingnew business through proactive measures and strong business network has also beeninstrumental. Focus on providing value-added services enhancing the product basket newcustomer additions and entering new geographies have yielded desirable results.
The subsidiary participates in important Industrial and Trade Exhibitions as a part ofexploring new businesses and strengthening networking with industry leaders for businesspromotion and development.
Wendt Middle East FZE Sharjah
Wendt Middle East FZE Sharjah the other wholly owned subsidiary of the Company hasclocked an annual sale of AED 7.82 lakhs (`151 lakhs) which is 67 per cent lower than thelast year. The lower top line is attributable to the worsening oil crisis politicaldisturbance and slowdown in new projects in the Middle East region. Also due to theworsening credit situation the subsidiary has been cautious and prudent in growing thetop line.
CONSOLIDATED FINANCIAL RESULTS
The Consolidated Financial Statements of the Company (incorporating the operations ofthe Company and its two wholly owned overseas subsidiaries) for the financial year2019-20 are prepared in compliance with the applicable provisions of the Companies ActAccounting Standards as prescribed by Regulation 33 of the Securities and Exchange Boardof India (SEBI) (Listing Obligations and Disclosure Requirements) Regulations 2015. TheConsolidated Financial Statements have been prepared based on the audited financialstatements of the Company its subsidiaries as approved by their respective Board ofDirectors.
Pursuant to provisions of Section 136 of the Act the Financial Statements of theCompany the Consolidated Financial Statements along with the relevant documents and theAuditors' Report thereon form part of this Annual Report. A statement of summarizedfinancials of all subsidiaries of the Company in form AOC-1 forms part of the AnnualReport. The audited annual accounts and related information of the subsidiaries isavailable in our website- www.wendtindia.com.
The key financial information on the consolidated operations are as follows: -
KEY CONSOLIDATED FINANCIAL SUMMARY
| ||FY 2019 - 20 ||FY 2018 - 19 |
|Sales ||14063 ||16178 |
|Other Income ||745 ||520 |
|Profit Before Tax ||1361 ||2193 |
|Profit After Tax ||1003 ||1541 |
|Earnings per share-` ||50.13 ||77.07 |
The Company has voluntarily adopted the Dividend Distribution Policy as approved by theBoard in line with the Listing Regulations and the same is available on the Company'swebsite www.wendtindia.com.
In line with the policy the Board of Directors have recommended a Dividend of Rs 25/-per equity share of face value Rs 10/- each (250 per cent) for the year ended 31 March2020 to be distributed upon approval by the members at the ensuing 38 Annual GeneralMeeting.
TRANSFER TO RESERVES
The Company transferred Rs 93.40 lakhs to the General Reserve. An amount of Rs 5690lakhs is retained in the Statement of Profit & Loss.
|Available for appropriation ||(Rs in lakhs) |
|Profit After Tax ||934 |
|Add: Other Comprehensive Income ||(96) |
|Add: Balance brought forward from previous year ||5278 |
|Total ||6116 |
|Recommended appropriations || |
|Transfer to General Reserve ||(93) |
|Dividend || |
|-Final (Dividend paid for 2018-19 Rs 15/- per share of face value of Rs 10/- each) ||(300) |
|Dividend Tax || |
|-Final (for 2018-19) ||(33) |
|Balance carried forward ||5690 |
|Total ||6116 |
CORPORATE SOCIAL RESPONSIBILITY (CSR)
As a responsible Corporate the Company's Corporate Social Responsibility pursuits havealways been based on the foundation of ethical behaviour in all its business transactionsand contributions for economic development of not only the workforce and their familiesbut also extending to the local communities and society at large. The Company being a partof the Murugappa Group has been upholding this tradition by allocating a part of itsprofits for fulfilling its social responsibilities. The Group's philosophy is to serve thecommunities in which it operates through the services of service-oriented philanthropicinstitutions with education and healthcare being the core focus areas.
The Company believes that social responsibility is not just a corporate obligation thathas to be carried out but an opportunity to make a difference. The Company's CorporateSocial Responsibility programmes are aimed at inclusive growth and sustainable developmentof the community.
The Company's Skill Development Program run in collaboration with Carborundum UniversalLimited has been a major initiative over these years. The main objective being to providehigh quality vocational and technical training to less privileged youth from weakersections of the society by uplifting their lives by equipping them with employable skillsets. This training programme is designed based on the coaching methodology defined byGovernment of India Ministry of Skill Development and Entrepreneurship. This programmealso includes providing stipend to the enrolled students ensuring that they earn whilethey learn. Not only does this initiative help in imparting formal education but alsohelps them in honing them to become a valuable citizen while helping them in seekinggainful employment upon successful completion of the course.
During the year the Company also contributed a sum of Rs 2 lakhs to Shri. AMMMurugappa Chettiar Research Centre towards R&D initiatives for rural development.
The Company also gives importance to green environment and tree plantation in thenearby communities by distributing and planting free saplings every year. Employees areencouraged to participate in activities like blood donation camps taking classes oncomputer education in municipality schools creating awareness on road safety nominatingemployees with RTO as traffic wardens 5S campaigns towards cleaner environment impartingspecial education to the school children to name a few.
In accordance with requirements of the Companies Act 2013 the Company has a CSR policyincorporating the requirements therein which is also available on Company's website at thefollowing link http://www.wendtindia.com/pdf/csrpolicy.pdf
The Company during the year 2019-20 has spent Rs 34.50 lakhs towards CSR activities inline with the provisions of the Companies Act 2013.
The Annual Report on CSR activities in the prescribed format is annexed herewith asAnnexure C.
During the year the Company has not accepted deposits from the public falling withinthe ambit of Section 73 of the Companies Act 2013 and the rules framed there under and noamount of principal or interest was outstanding as on the balance sheet date.
LOANS AND INVESTMENTS
Particulars of Loans Guarantees and Investments covered under section 186 of theCompanies Act 2013 are given below. There were no loans or guarantees covered undersection 186 granted during the year.
(Rs in lakhs)
|Description ||As on 31.03.2019 ||Movement (net of deletions) ||As on 31.03.2020 |
|Loans given by the Company ||- ||- ||- |
|Corporate Guarantee given by the Company ||- ||- ||- |
|Investments made by the Company ||430.55 ||- ||430.55 |
Current Investments: Investments in Mutual Funds as on 31.03.2020 was Rs 3093.34 lakhs
TRANSFER TO THE INVESTOR EDUCATION & PROTECTION FUND
In terms of Section 124 (5) of the Companies Act 2013 an amount of Rs 4.04 lakhsbeing unclaimed dividend during the year pertaining to the financial year 2011-12 wastransferred to IEPF after sending due reminders to the shareholders.
|Ratios ||in terms of ||31.03.2020 ||31.03.2019 |
|1 Performance Ratios || || || |
|a. Operating Profit / Net Sales ||(%) ||4 ||11 |
|b. EBIDTA / Net Sales ||(%) ||17 ||21 |
|c. PBIT / Net Sales ||(%) ||10 ||14 |
|d. ROCE ||(%) ||10 ||17 |
|e. ROE ||(%) ||8 ||12 |
|f. Fixed Asset Turnover Ratio ||Times ||2.15 ||2.48 |
|2. Activity Ratios || || || |
|a. Inventory Turnover Ratio ||Days ||74 ||54 |
|b. Receivable Turnover Ratio ||Days ||77 ||80 |
|3. Liquidity Ratio || || || |
|a. Current Ratio ||Times ||2.35 ||2.17 |
The significant change in operating profit and PBIT to net sales is mainly due to lowersales and resultant lower profit for the year. This has also resulted in adverse change inROCE and ROE for the year ended 31 March 2020.
Further the imposition of lockdown at the year-end due to COVID-19 pandemic hasresulted in a higher inventory turnover days.
To maintain the quality of its products the Company follows a quality assurance systemwith stringent tests built into every stage of production. This extreme qualityconsciousness backed by a thorough understanding of customer application needs andone to one customer support has made the Company a synonym for quality andreliability. The Company has certifications of ISO 9001 and TS 16949 reinforcingits commitment to ensure Quality Management Standards are met. TS 16949 pertains tomanufacturing of precision components. In order to comply with the safety norms andrequirements of overseas customers the Company has successfully renewed EN 13236Standards during the year. Quality being the uncompromised differentiator the Companyaims to ensure that product quality is built by deploying and embracing effective qualitycontrol management process robustness quality assurance and discipline at every stage ofmaterial flow.
SAFETY HEALTH AND ENVIRONMENT (SHE)
The Company recognizes the need and is committed to provide Safe Healthy and SociallyAccountable Work Culture in the Organization. The Company has complied with therequirements of internationally recognized Social Accountability Standard SA 8000:2014and periodically reviews its policy to cater to the changing requirements. The
Senior Management takes responsibility for maintaining these standards throughdeployment of relevant processes and guidelines in line with OHSAS 18001 and ISO 14001standards.
All personnel on a periodical basis receive effective health and safety trainingincluding on-site training job specific training etc. During the year the Company hasprovided trainings for creating awareness about the significance of safety amongstemployees and visitors including by way of setting up of safety training kiosk. Quarterlymock drills for fire safety annual health check-up for employees special medicalattention for employees working in special process & sensitive areas use of personalprotection equipment (PPEs) zero discharge of ETP/STP and hazardous waste handling aresome of the initiatives which the Company undertook during this year.
In March 2020 as the COVID-19 pandemic spread to India actions were taken to enhanceemployee awareness health and safety with also ensuring business continuity.
Towards this the Company provided guidance and made a SOP detailing the appropriatesocial distancing measures including restricted movement of manpower use of handsanitizers and face mask at workplace and home and ensuring adequate spread of employeesin 3 shifts to maintain social distancing.
RECOGNITIONS AND AWARDS
The Company encourages its employees to participate in customer audits groupcompetitions various national and international events & competitions. During theyear Company received many awards and accolades from well recognized organizationsestablishments and certifying bodies for various distinctive achievements. Needless tomention that these recognitions and accolades enhance the passion and optimism among theemployees and acts as key motivator for the Company as a whole. Some of the keyrecognitions received during the year are as follows:
Best New Development Award
Awarded with Best New Development Award at Schaeffler Supplier Meet.
ASSOCHAM Excellence Award
Won the prestigious ASSOCHAM Excellence Award for Corporate Social Responsibility. Theaward was presented by Shri Nitin Jairam Gadkari.
CII Award for CUMI Centre for Skill Development (CCSD) for Community engagement.
Quality Circle Awards
Bagged National Level - Excellence Award organized by NCQC 2019 Varanasi.
Cufest 2019 Awards
Employees participated in Group-level Quality competitions 'CUFEST 2019 (Qualityfestival of CUMI) and won awards for Quiz Best Practice: Commercials 5S SGA and IdeaKing.
OPPORTUNITIES & THREATS OPPORTUNITIES
Electric Automobiles is the recent emerging trend in the automotive industry which isexpected to boost the market demand for Super Abrasives for high thermal and wearresistance applications.
Nano Cubic Boron Nitride abrasives are likely to augment applicability of SuperAbrasives in many medical and electronic industry applications.
The industries in the Auto aerospace and electronics manufacturing space demandhigh-performance applications. Improvements in the design of diamond wheels used to finishceramics can be key to cost-effective manufacturing. Metal-bond specially design wheelsfor longer wheel life can lead to shorter process cycle times while also ensuring longerlife thereby reducing the overall grinding cost.
Growing construction industry is anticipated to drive the demand for Super Abrasivesover the coming years. Initiatives taken by the Indian Government for boostinginfrastructure viz. highways construction of flyovers metros and the Housing for allinitiatives is expected to drive the demand for our products.
The Company would continue to leverage upon its vast experience and technicalexpertise deep understanding of customer requirements comprehensive product rangesuperior technology and the resultant competitive edge emerging out of its complementarybusiness verticals namely Super Abrasives Machine Tools and Precision Component.
Further the Government's focus on Projects like 'Make In India' or 'AtmaNirbhar Bharat' are expected to give a boost to the Company's products beingimport substitute thus helping in conservation of precious foreign exchange during thesedifficult times.
Industry leaders across globe with high brand value afford significant Researchoperations. Investment in R&D activities by these major players to innovate theexisting products and to develop new technologies to sustain competition in the market isvery high. On the other hand we have many unorganized regional proprietary-run entitiesthat are smaller in size with limited offering which address customers' requirements in aspecific region.
In order to counter both the extremes the Company strives to evolve a unique approachto improve its market presence market share and address both the segments. To address theprice competitive market the Company has launched fast moving and Standard SuperAbrasives and other tooling products in STAR brand and has been aggressivelyconducting promotional activities at the vicinity of high potential customer. Foraddressing the high performance quality conscious segment the Company is working withforeign Research Institutes and is on lookout for product specific niche manufacturersfor acquiring state of the art technology.
Consolidation amongst customers in the auto and aircraft parts industries is openingopportunities for large abrasive manufacturers to develop nationwide sales relationshipswith big customers. Although there are few economies of scale in manufacturing operationsthere are large distribution efficiencies for companies that can provide a wide range ofSuper Abrasive products to large customers.
Unique properties of Super Abrasives such as extraordinary hardness & high thermalconductivity in the entire abrasive range ensures unparalleled consistency in performancehigh grinding ratio higher wheel life consistent high surface finish making it a uniqueproposition for grinding hard & tough to grind materials. By virtue of it providing alonger wheel life reduced grinding time & downtime the high initial cost isjustified by being cost effective during the course of its life cycle.
Government initiatives in countries such as India United States of America and Chinato promote construction activities are further likely to propel the market growth.
Asia - Pacific region is expected to be a major consumer of the Company's products inthe coming years. Increasing demand for the products is majorly driven by developingcountries like India. Precision tooling is one of the rapidly growing markets in India asmajority of machine shops in the country are shifting towards manufacturing precisiontools to cater to the rapidly advancing automotive bearing aerospace and electronicmarkets. The growing precision tooling market is expected to trigger the market growth inthe incoming years.
In Super Abrasives business the Company's focus will be on extrapolatingsuccess in domestic and in the overseas market while increasing the share of business ofestablished products focusing on new product & application developments withidentified domestic customers. In addition to this the Company is aggressively focusingon the mega trend and aligned strategies by directing energies towards Non-Traditionalbusiness such as wheels for Nuclear Wind Energy Glass Wheels forAuto/Solar/Construction Application; Textile industry for Knife grinding Razor BladeNeedle and Surgical Blade/Cutlery Knives Industry.
On the Machine front the Company will continue to provide Grinding Solutions toSteel Industry for WRM and BRM in India as well as for identified countries like SouthKorea China United Kingdom Spain Brazil & certain parts of Middle East and CuttingTool industry for Dressing machines. Simultaneously the Company is identifyingopportunities to develop machines for automotive industry for Grinding and Honingapplication where there is a high dependency on imports such as Double Disc/Fine Grindingmachine and Single Pass Honing machine.
The Precision Components business is being strengthened and enhanced by rampingup of capacity for existing products and new projects like Fuel pump industry in line withEuro 6 Norms. The initial test and approval for new projects have been encouraging and weexpect to benefit from this during the years to come.
The Company's wholly owned subsidiary Wendt Grinding Technologies LimitedThailand continues to show creditable performance year on year albeit Thailand beingaffected by slowdown specially in export dependent countries political uncertaintiesdeclining demand shifting of base by many Japanese companies. It demonstrates enoughconfidence for even better performance in the coming years. Certainly this has beenpossible due to continuous efforts in exploring newer opportunities scanning new industrysegments enhancing product basket as well as delivering superior value propositions tothe customers in Thailand and adjoining countries.
Due to the ongoing slowdown and worsening liquidity situation in the Middle East theCompany's subsidiary Wendt Middle East FZE is showing a stagnated performance. Howeverdespite these difficulties and hardships the subsidiary continues to dedicate all itsefforts on markets and industries that have given good results during these tough times.The subsidiary would continue to operate as the Product Availability Point (PAP) for theentire GCC region with focus on General Engineering Aerospace Steel Ceramics Autocomponent & associated industry segments and holds enough promise for betterperformance.
COVID-19 Impact and Risk Assessment
The outbreak of the COVID-19 pandemic developed into a global crisis in the lastquarter of the FY 2019-20 forcing countries globally to impose lockdown conditions on allactivities impacting the economy at large. At the onset of the pandemic spread in Indiathe priority for the Company was the safety and health of all its employees and otherstakeholders with minimal disruption to operations. In adherence to the Governmentadvisories and considering the well- being of our stakeholders the Company's plantsituated at Hosur Tamil Nadu was shut down in a safe manner following due protocols.However considering that the Company's operations involve continuous processes as asafeguard measure minimal essential staff required for safety and maintenance weredeployed after undertaking due health and hygiene precautions.
Once the lockdown was imposed a swift transition to remote working was made by puttingin place a framework for operating from home with well-established protocols. The robustIT platform of the Company enabled significant personnel to continue to perform theirservices remotely in a safe and secured manner. Since the Company's facility was locatedin a green zone operations resumed on 30 April 2020 with permitted workforce afterensuring receipt of requisite permissions from the local authority and in adherence to thestandard operating procedures laid down by the Ministry of Home Affairs from time to time.This adherence was ensured not only from a regulatory compliance perspective but bykeeping in mind the well-being of our employees customers and other stakeholders.
The COVID-19 pandemic has caused unprecedented disruption in business and operationmodels globally. This has cascading uncertainties making market and business conditionsvolatile. Even prior to the COVID-19 the slowdown in the automotive sector and other coresectors started to reverse the growth momentum of the Company. However with a soundfinancial position with dedicated passionate employees the Company believes it will beable to navigate these challenges for a sustainable future.
The Company has identified the various risks owing to COVID-19 that could impact futureperformance and is taking initiatives to mitigate the same. The initiatives undertakeninclude rigorous review of the business plan as well as contingency plan based on scenarioplanning closely monitored by the Management duly supported by the operating teams withtimely and relevant information and new opportunities. The Company is in constantengagement with its customers and updates them on the status of operations and assuringthem of delivery and performance. Prudent cash management and efficient working capitalmanagement with sharp focus on collections and payments cost reduction and inventorymanagement is the key. The Company is in regular coordination with its key suppliers aswell as identifying alternate suppliers for expediting the services/materials critical foroperations.
On the people front dedicated and clear communication and awareness programs are beingconducted at regular intervals to sensitize the employees on the cause and effect of thisdisease. Periodic calls are made to enquire about the health status of the employee andhis/her family including neighbourhood. Dedicated Task forces for taking concerted andquick decision on matters relating to COVID-19 have been set up under the supervision ofUnit Head. Preliminary health check-ups are being undertaken before a worker resumes duty.Continuous guidance on social distancing norms and hygiene given. Separate helplines 24X7to counsel employees who require customized guidance or information set up. Onlinelearning and development programs rolled out to keep employees engaged and up skilledduring the lock down.
The Company has made detailed assessment of its liquidity position for FY 2020-21 andthe recoverability and carrying value of its assets comprising property plant andequipment intangible assets investments inventory and trade receivables. Based oncurrent indicators of future economic conditions the Company expects to recover thecarrying amount of these assets.
The Company will continue to closely monitor any material changes arising of futureeconomic conditions and impact on its business.
With respect to material changes or commitments impacting the financial position of theCompany in respect of events occurring after end of the year but before the date of thisreport the Board is of the opinion that no material adjustments in the accounting entriesor estimates accounting policies are relevant to the financial statements for the yearended 31 March 2020.
Enterprise Value Addition (EVA)
|Particulars ||2019-20 ||2018-19 ||2017-18 ||2016-17 ||2015-16 |
|Generation of Gross Value added ||5251 ||5800 ||5272 ||4902 ||4417 |
|Breakup on Application of Value added || || || || || |
|Payment to Employees ||3136 ||2892 ||2588 ||2363 ||2077 |
|Payment to Shareholders (on payment basis) ||300 ||600 ||500 ||500 ||500 |
|Payment to Government ||404 ||740 ||692 ||490 ||539 |
|Payment to Directors ||22 ||21 ||16 ||5 ||5 |
|Towards replacement and expansion ||1389 ||1547 ||1476 ||1544 ||1296 |
|Total ||5251 ||5800 ||5272 ||4902 ||4417 |
Gross Value Added is Revenue less Expenditure (excluding depreciationexpenditure on employee & directors service).
Payment to Government is current tax + dividend distribution tax.
Replacement and expansion is retained earnings +depreciation + deferred tax.
The Company has been constantly investing towards replacement and expansionexpenditure to ensure fulfillment of market demand.
RISK & CONCERN
The Company determines the categories of risk from strategic operationalenvironmental legal social and financial points of view which the organization may beexposed to and could impact its ability to conduct its business operations withoutdisruption to provide customer satisfaction and achieve sustained success. As per itsevaluation and periodic monitoring there is no risk envisaged at this point in time thatmay threaten the existence of the Company.
The risk management controls established by the Company includes:
Taking risk where risks have desirable potential consequences.
Altering risk to optimize potential opportunities and minimize threats.
Transferring risk by measures including insurance contractual arrangementstrade unions partnerships and joint ventures.
Retain risk where no worthwhile controls actions are feasible and the risk iswithin the organization's risk tolerance.
Some of the risks associated with the business and the related mitigation plans aregiven below. However the risks given below are not exhaustive and assessment of risk isbased on management perception.
User Industry Concentration Risk
Why is it considered as a Risk?
Adverse demand shock for automobile manufacturers due to COVID-19.
Disruption in the overall automotive market landscape due to transition of theautomobile industry towards hybrids and electric vehicles.
Effect on Customer Relationship with change in ownership.
Disruptive innovation & process changes.
Newer technology like Integrated Starter Generator and Belt-Driven StarterGenerator that are likely to replace alternator and generator in the automobile.
Mitigation Plan/Counter Measure to address
Identifying alternate Industry base Segments based on Mega Trends-Aerospace Bearings Razor Blade Glass Power (Solar Nuclear Wind and Gas).
Widening the customer base/new industry segment & new geographiesthereby de-risking the business.
Pursuing product innovation and new application development as pergovernment norms.
Building relationship and engagement with the customer by adopting newinitiatives conducting Technical Seminar - both online and onsite participation ininternational exhibitions CRM & Knowledge Management application.
Working with renowned research universities and technical consultants todevelop new products.
Focus on Digital Marketing to acquire new customers and pursue newapplications.
Why is it considered as a Risk?
Loss in share of business for standard and low precision products due topresence of many unorganized regional players often adopting measures like pricingstrategy free samples longer credit period etc.
Disruption in global competition by Chinese low-cost products.
Major companies acquiring local dealers/manufacturers and entering intopartnerships with major end users to continuously supply products.
Organized player spending on Research and Development and coming up withnew products.
Mitigation Plan/Counter Measure to address
Launching High Performance standard products in STAR Brand withcompetitive price and branding products by conducting seminar at Tier 1 & Tier 2cities Mela at dealer locations and participating in various exhibitions.
Identify products under Threat. Segregate products and identify which canbe produced in large volume machining with low cost raw material automated processes.
Association with external agency for developing new products fordifferent applications.
Offering products against import substitute by focusing on costdelivery quality and technical support.
Automation and Robotization to address lower manufacturing cost andenhance competitiveness.
Why is it considered as a Risk?
Elimination of Machining Process (Turning Milling Grinding Honing).
High investment on Technology by key global players.
Access to new advanced technologies.
Mitigation Plan/Counter Measure to address
Indigenous development of Bonds with external consultant support and working withResearch Institutes.
Enhance in-house R&D efforts (DSIR approved R&D) to strengthenexisting technology complemented by new methods of manufacturing.
Association with external Research laboratories/Technical institutes fortechnology upgradation.
Collaboration with external consultants for product and processInnovations.
HR & Legal Risk
Why is it considered as a Risk?
Employee disengagement risk owing COVID-19 Pandemic.
Non-availability of employees owing to them residing in containment zonesor being quarantined.
Attrition of skilled/trained manpower leading to disruption of operationsor knowledge gap.
Millennial work force - no long-term interest.
Mitigation Plan/Counter Measure to address
Facilitate to enhance technical and behavioural capabilities throughe-learning modes and Webinars.
Continuous counselling on health safety and mental well being besidesextending necessary support to employees and their family members on matters relating toCOVID-19.
Improve leadership readiness to manage the growth initiatives byidentifying internal and external incumbent for next set of leadership positions.
Focus on acquiring high skilled talents from best in classdomains/organizations.
Design & implement career road map through structured developmentplan for career enhancement based on roles and job descriptions.
Mentoring and Coaching programme for employees for enhancing engagementlevel.
Online Data & Information Security Risk
Why is it considered as a Risk?
Disruption of technology service providers (in Work from Home conditions)
Data breach loss or exposure increase due to a remote/mobile workforce.
Mitigation Plan/Counter Measure to address
The Company has a backup process available for data restoration. TheCompany has identified alternate service providers in case of switch over.
Implemented SIEM (Security Information and Event Management) foridentifying monitoring recording and analysing security events or incidents in areal-time IT environment.
Continuous review of the Disaster Recovery Strategy & BusinessContinuity Policy in place for Technical Controls..
Data Center access limited to authorized personnel.
Crisis Management Group in Place.
Strengthening network security.
Enhancing Information Security policies & procedures.
'IT Way Forward' initiative to rationalize processes & eliminatenon-value add processes.
INFORMATION TECHNOLOGY (IT)
Use of technology and harnessing the benefits for smooth functioning has been one ofthe key success factors for the Company.
The Company configured C4C Cloud for Customer (SAP CRM) which empowerssales and service team on the field to have real time data along with respective visitcalendar customer 360 Degree reports service tickets etc. All future leads/opportunityare being tracked for faster closure.
The Company also launched a Wendt - dynamic website"wendtindia.com" which includes Wendt designs layout catalogues productbifurcations customer enquiries & feedbacks and ensure maximum reach of websitethrough Search Engine Optimization. The Company has an updated Knowledge Based Portalwith latest proven Application Products and shares the same with Overseas Dealer for easyaccess of Product Application technical details for required application.
Lucky Customer Scheme (promotional activity) is well supported by IT bydeveloping software and making changes in SAP for ensuring better service to the selectedcustomers in terms of planning OB production sales technical & commercialclarifications (if any) inspection and material planning.
During the year the Company has started the 'IT Way Forward' Initiative withfocus on how IT function can become an enabler to the business by reducing cost andimproving efficiency of business operations. This objective required formulation of a CoreIT Team comprising of the best talents across all SAP modules mapping the existing SAPERP 'AS IS' process of each module and identifying the 'TO BE' process. Thiswork is currently under progress and is expected to yield significant benefits in terms ofrationalizing processes eliminating duplication and non-value-added activities focus onhow to use the ERP for better analytics and decision support.
INDIAN ACCOUNTING STANDARDS (IND AS) - IFRS CONVERGED STANDARDS
The Company had adopted Ind AS with effect from 1 April 2016 pursuant to the Companies(Indian Accounting Standard) Rules 2015 notified by the Ministry of Corporate Affairs on16 February 2015.
INTERNAL CONTROL SYSTEM & ADEQUACY
The Company has an Internal Control system commensurate with the size scale andcomplexity of its operations. The controls have been designed and categorized based on thenature type and the risk rating so as to effectively ensure the reliability of operationswith adequate checks and balances.
The Company's internal control system covers the following aspects:
Safeguarding the assets of the Company.
Financial proprietary of business transactions.
Compliance with prevalent statues regulations policies and procedures.
Control over capital and revenue expenditure with reference to approved budgets.
The Internal Audit function is delegated to an external Chartered Accountants' firmwhich evaluates the effectiveness and adequacy of internal controls compliance withoperating systems policies and procedures of the Company and recommends improvements ifany. The scope of the Internal Audit is annually determined by the Audit Committeeconsidering inputs from the Statutory Auditors and the Management Team. Significant auditobservations and the corrective/ preventive actions taken by the process owners ispresented to the Audit Committee. Periodic review of the adherence to the agreed actionplan is carried out. The Audit Committee of the Board periodically reviews audit plansobservations and recommendations of the internal and external auditors with reference tothe significant risk areas and adequacy of internal controls and keeps the Board ofDirectors informed of its observations if any from time to time.
During the year there were no changes in internal control over financial reportingthat have materially affected or are likely to have any financial reporting lapse.
INTERNAL FINANCIAL CONTROLS (IFC)
As per Section 134 of the Companies Act 2013 the term Internal Financial Control (IFC)means the policies and the procedures adopted by the Company for ensuring:
a) orderly and efficient conduct of its business including adherence to accountingpolicies
b) safeguarding of its assets
c) prevention and detection of frauds and errors
d) accuracy and completeness of accounting records and
e) timely preparation of reliable financial information.
The key components of IFC followed by the Company are:
1. Entity Level Controls (ELC) that the management relies on to establishappropriate Code of Conduct
Enforcement and Delegation of Authority Hiring and Retention practices Whistle Blowermechanism and other policies and procedures.
2. Process Level Controls (PLC) to ensure processes are stable predictable andconsistently operating at targeted level of performance classified into Manual orAutomated Controls. They are also classified as Preventive or Detective.
3. General IT Controls to ensure appropriate functioning of IT applications andsystems built by Company to enable accurate and timely processing of financial data are -User Access rights Management and Logical Access Change Management controls; passwordpolicies and practices Patch management and License management; backup and recovery ofdata.
The adequacy of IFC is ensured by:
Documentation of risks and controls associated with major processes.
Validation classification of existing Controls to mitigate risks.
Identification of improvements and upgradation of the controls.
Improving the effectiveness of controls through data analytics.
Performing testing of controls by Independent Internal Audit firm.
Implementation of sustainable solutions to Audit observations.
The IFC Audit is conducted annually by an Independent firm of Accountants by testing ofcontrols to ensure that all controls are operational effective adequate and identifyingimprovements to controls wherever necessary which is reviewed by the Audit Committee.
Liquidity and Cash Equivalents
The Company continues to be debt free maintaining sufficient cash and cash equivalentsto meet its futuristic strategic initiatives. This is achieved by being prudent in itsinvestment policy over the years maintaining a reasonably high level of cash and cashequivalents which enable the Company to eliminate short and medium-term liquidity risks.
The Company continued to have a healthy cash generation during the year due to prudentcapital expenditure and
efficient working capital management.
The Company follows a robust Cash Management Policy whereby it:
a. Uses cash to provide sufficient working capital to address business objectives ofthe Company & to add value to all stakeholders by continued enhancement.
b. Conserves sufficient cash as reserves that will aid the Company in venturing intomeaningful business opportunities that unfold in future.
c. Prudently invests surplus funds that the business generates in liquid investmentsincluding rated debt schemes of mutual funds as per the Board approved policy. Thisensures availability safety and liquidity of Company's funds while allowing reasonableyield as per the prevailing market rates. The surplus funds are generated throughstringent control on working capital.
As at 31 March 2020 the Company's investment in debt mutual funds was `3093 lakhs insecurities holding papers with high credit rating.
During the year the Company has formulated Cost Optimization Projects wherein theCross Functional Teams are identified across various projects and the potential costsavings in all the three business segments Super Abrasives Machines and PrecisionComponents is determined. These projects are reviewed on a monthly basis in terms ofsavings in both variable cost and fixed cost.
The paid-up equity share capital as on 31 March 2020 was `200 lakhs. During the yearunder review the Company has not issued shares with differential voting rights norgranted stock options nor sweat equity.
The shareholders fund as on 31 March 2020 was `11966 lakhs against `11461 lakhs ofprevious year. Accordingly the book value of the share stands at `598/- as compared to`573/- during the previous year.
The Company is debt free as it does not have any long-term borrowing. It continues toutilize its cash credit limit with State Bank of India to bridge the short-term fundrequirement and for meeting the temporary mismatches in its cash flow. The Company doesnot have any interest- bearing term loan.
During the current year as well the working capital limits of the Company continued tobe rated by ICRA as AA- (pronounced ICRA double A minus) rating assigned to the Rs 2 CroreLong-term Fund facilities of the Company which signifies low credit risk and stable. Theshort-term rating assigned to Rs 9 crore Non-Fund Based working capital limit alsocontinued to be reaffirmed as A1+ (pronounced ICRA A one plus).
The Company follows the policy of being prudent in its capex spend. During the currentyear the capital expenditure was Rs 756 lakhs. The major capex spent was on addition ofnew plant & machinery towards capability building in fast growing products and newproducts capacity enhancements which are critical for the future growth of the Company.As in the past the Company follows the policy of funding all the capex through internalaccruals.
INVENTORIES AND SUNDRY DEBTORS
The Company follows rigorous Working Capital Management based on a well-organizedprocess of continuous monitoring and control on Receivables Inventories and otherparameters. The overall inventory levels as on 31 March 2020 is Rs 2612 lakhswhich is higher than previous year by `340 lakhs.
Receivables (Gross) as on 31 March 2020 were at Rs 2368 lakhs against `2781 lakhsduring the previous year. Despite the tough liquidity position in the market the Companyhas been able to maintain the receivable average credit days at 88 days through aggressivereceivable management system including close follow ups and credit lock through the SAPsystem to ensure that receivables are kept under control and payments received in time.
FOREIGN EXCHANGE HEDGING
Being a net exporter & based on its export & import position the Companycontinues to follow the practice of natural hedging of foreign exchange earnings andoutflow and does not take forward covers. The net forex gain during the year has been Rs85 lakhs (Previous Year Rs 42 lakhs).
Human capital is the most precious asset in any organization. The Company has a strongand diverse workforce where every employee is involved as partners in theprogress. The intangible asset comprises all the competencies of the people within theorganization in terms of education experience potential and capacity. The Companyencourages & motivates employees to take active part in activities such as CrossFunctional Teams (CFTs) Kaizens Small Group Activities (SGAs) and Suggestions. TheCompany believes in Building leadership by talent management and developing competenciesand plan structured individual development programmes for high potential individuals andenhance existing multi-skilled workforce to next level to support business.
Safety at the workplace remains the top priority with focused and highest attentionfrom the Board. Periodic training and awareness sessions continue to be conducted foridentification and elimination of unsafe working conditions.
In order to meet the growth plans set by the Company and to fulfil the ever changingneeds and expectations of the customers the Company continues to focus on identifying anddrawing a structured training plan based on the competency levels future needs andfocusses on recruiting high skilled talents from best in class domains/organizations. TheCompany gives equal importance to physical wellness of not only its employees but alsotheir family members by conducting annual heath check up every year. For High PotentialIndividuals the Company encourages them to undergo Mentoring and Personality DevelopmentPrograms to prepare them for leadership roles and bigger business challenges in future.
Employee relations continue to be smooth and cordial and the work atmosphere remainedcongenial throughout the year. The manpower strength of confirmed employees of the Companyas on 31 March 2020 was 421.
The Company has a policy on prevention of sexual harassment at workplace in line withthe requirement of the Sexual Harassment of Women at the Workplace (PreventionProhibition & Redressal) Act 2013. An Internal Complaints Committee (ICC) to redresscomplaints received regarding sexual harassment has been constituted. No complaints werereceived and disposed off during the year under review.
RELATED PARTY TRANSACTIONS
The Company as per the requirements of the Companies Act 2013 and Regulation 23 of theListing Regulations has a Policy for dealing with Related Parties.
In line with its stated policy all Related Party transactions are placed before theAudit Committee for review and approval. Prior approval of the Committee is taken on aquarterly basis for the estimated value of transactions which are foreseen and repetitivein nature. Omnibus approval in respect of transactions which are not routine or whichcannot be foreseen or envisaged are also obtained as permitted under the applicable laws.The list of related parties is reviewed and periodically updated as per the prevailingregulatory conditions.
The details of transactions proposed to be entered with Related Parties are placedbefore the Audit Committee for approval on an annual basis before the commencement of thefinancial year. Thereafter a statement containing the nature and value of thetransactions entered by the Company with Related Parties is presented for quarterly reviewby the Committee. Further revised estimates or changes if any to the proposedtransactions for the remaining period are also placed for approval of the Committee on aquarterly basis. Besides the Related Party transactions entered during the year are alsoreviewed by the Board on an annual basis.
All transactions with Related Parties entered during the financial year were in theordinary course of business and on an arm's length basis requiring no particulars to beentered in the Form AOC-2. Further all transactions entered into with Related Partiesduring the year even at arms' length basis in the ordinary course did not exceed thethresholds prescribed under the Companies (Meetings of Board and its Powers) Rules 2014or Listing Regulations or the Company's Policy in this regard and hence no disclosure wasrequired to be made in Form AOC-2. Accordingly there are no contracts or arrangementsentered with Related Parties during the year to be disclosed under Sections 188(1) and134(h) of the Companies Act 2013 in Form AOC- 2.
There are no materially significant Related Party transactions made by the Company withits Promoters Directors Key Managerial Personnel (KMP) their relatives and otherrelated parties may have a potential conflict with the interest of the Company at large.
The Policy on Related Party Transactions as approved by the Board is uploaded on theCompany's website www.wendtindia.com. During the year in line with the regulatory changesin the Listing Regulations and the Companies Act 2013 & the rules referred thereinthe policy on dealing with Related Parties was amended and approved by the Board. None ofthe Directors and KMPs had any pecuniary relationship or transaction with the Companyother than those relating to remuneration in their capacity as Directors/Executives andcorporate action entitlements in their capacity as shareholders of the Company.
BUSINESS RESPONSIBILITY REPORTING (BRR)
During the year consequent to the requirements of reporting of its businessresponsibility initiatives becoming mandatory under the Listing Regulations the Companyformulated a consolidated Policy on Business Responsibility which lays down the broadprinciples guiding the Company in delivering its various responsibilities to itsstakeholders. The Policy is intended to ensure that the Company adopts responsiblebusiness practices in the interest of the social set up and the environment so that itcontributes beyond financial and operational performance.
A copy of the Policy is available at https://www.wendtindia.com/ and the BusinessResponsibility Report for the year ended 31 March 2020 in terms of Regulation 34 of theListing Regulations is annexed to this Report as Annexure E.
BOARD OF DIRECTORS
As on 31 March 2020 the Board of Directors comprises six Directors of which majority(four) are independent. During the year Mr. Rajesh Khanna's appointment as a Directorunder Section 152 of the Companies Act 2013 and as an Executive Director for a termcommencing from 24 July 2018 to 31 October 2020 was approved by the shareholders at the 37Annual General Meeting of the Company held on 22 July 2019.
Mr. Shrinivas G. Shirgurkar and Mr. K S Shetty Independent Directors were appointedat the Annual General Meeting (AGM) held on 24 July 2014 for a period of five years andtheir tenure of office ended on 23 July 2019. Being eligible for re-appointment Mr.Shrinivas G Shirgurkar and Mr. K S Shetty were re-appointed as Independent Directors ofthe Company for a second term of five years with effect from 24 July 2019 and theirappointment was approved by the shareholders vide special resolution at the 37 AnnualGeneral Meeting.
Mr. K Srinivasan ceased to be a Director of the Company with effect from closing hoursof 22 November 2019 in view of his retirement as the Managing Director of CarborundumUniversal Limited on that date. Based on the recommendation of the Nomination andRemuneration Committee the Board has appointed Mr. N Ananthaseshan (DIN: 02402921) as anAdditional Director to the Board with effect from 23 November 2019. The Board places onrecord its appreciation for the services rendered by Mr. K Srinivasan during his term as aDirector of the Company.
Consequent to the changes in the Board composition the constitution of variousCommittees were reviewed and revised more fully detailed in the Corporate Governancesection of the Report.
In accordance with the provisions of the Companies Act 2013 Mr. Rajesh KhannaExecutive Director and CEO retires by rotation at the forthcoming Annual General Meetingand being eligible offers himself for re-appointment. The necessary resolution is beingplaced before the shareholders for approval. The Board of Directors of the Company believethat his continued association with the Company will be beneficial to the Company andrecommends his reappointment.
Mr. Rajesh Khanna has confirmed that he is not disqualified from being appointed asDirector in terms of Section 164 of the Companies Act 2013.
The Company has received declarations from all its Independent Directors confirmingthat they meet the criteria of independence prescribed both under the Companies Act 2013and the Listing Regulations. In the opinion of the Board all the Directorsappointed/re-appointed during the year are persons with integrity expertise and possessrelevant experience in their respective fields.
All Directors of the Company other than Mr. K S Shetty have registered their names inthe Independent Directors Databank as required under the Companies Act 2013 and the Rulesreferred therein. MCA has extended the timeline for this requirement until 30 June 2020.The Independent Directors are also required to take up an online proficiencyself-assessment test within one year from the date of inclusion of their name in theIndependent Directors databank with an exemption provided to Directors fulfilling thecriteria prescribed under the Act and the Rules referred therein. While the requirement ofcompletion of the online proficiency self-assessment test is exempt for few of theCompany's Independent Directors considering the one year time available from the date ofinclusion of the name in the databank the Independent Directors would complete theassessment within the prescribed time. Hence considering the time available for theIndependent Directors to complete the online proficiency test the requirement for theBoard to provide its opinion on the experience of the Independent Directors with specificreference to proficiency ascertained from passing of the online proficiencyself-assessment test does not arise.
KEY MANAGERIAL PERSONNEL (KMP)
Mr. Rajesh Khanna Executive Director & CEO Mr. Mukesh Kumar Hamirwasia CFO andMs. Janani T A Company Secretary are the Key Managerial Personnel of the Company as perSection 203 of the Companies Act 2013.
A calendar of Board Meetings is prepared and circulated in advance to the Directors.
During the year five (5) Board Meetings were convened and held in accordance with theprovisions of the Act. The date(s) of the Board Meeting attendance by the directors aregiven in the Corporate Governance Report forming an integral part of this report.
Pursuant to the provisions of the Companies Act 2013 and the Listing Regulations theBoard carried out an annual performance evaluation of its own performance the Directorsindividually as well as the evaluation of the working of its various Committees as per theevaluation framework adopted by the Board on the recommendation of the Nomination andRemuneration Committee. Structured assessment forms were used in the overall Boardevaluation comprising various aspects of the Board's functioning in terms of structureits meetings strategy governance and other dynamics of its functioning besides thefinancial reporting process internal controls and risk management. The evaluation of theCommittees was based on their terms of reference fixed by the Board besides the dynamicsof their functioning in terms of meeting frequency effectiveness of contribution etc.
Separate questionnaires were used to evaluate the performance of individual Directorson parameters such as their level of engagement and contribution objective judgement etc.The Executive Director's evaluation was based on leadership qualities strategic planningcommunication engagement with the Board etc.
The Chairman was also evaluated based on the key aspects of his role. The performanceevaluation of the Independent Directors was carried out by the entire Board. Theperformance evaluation of the Chairman the Board as whole and the Non-IndependentDirectors was carried out by the Independent Directors at their separate meeting heldduring the year.
POLICY ON APPOINTMENT AND REMUNERATION OF DIRECTORS
Pursuant to Section 178(3) of the Companies Act 2013 the Nomination and RemunerationCommittee of the Board has formulated the criteria for Board nominations as well as thepolicy on remuneration for Directors and employees of the Company.
The criteria for Board nominations lays down the qualification norms in terms ofpersonal traits experience background and standards for independence besides thepositive attributes required for a person to be inducted into the Board of the Company.Criteria for induction into Senior Management positions have also been laid down.
The Remuneration policy provides the framework for remunerating the members of theBoard Key Managerial Personnel and other employees of the Company. This Policy is guidedby the principles and objectives enumerated in Section 178(4) of the Companies Act 2013and reflects the remuneration philosophy and principles of the Murugappa Group to ensurereasonableness and sufficiency of remuneration to attract retain and motivate competentresources a clear relationship of remuneration to performance and a balance betweenrewarding short and long-term performance of the Company. The policy lays down broadguidelines for payment of remuneration to Executive and Non-Executive Directors within thelimits approved by the shareholders. Further details are available in the CorporateGovernance Report.
The Board Nomination criteria and the Remuneration policy are available on the websiteof the Company at www.wendtindia.com.
Pursuant to Section 148 of the Companies Act 2013 read with Companies (Cost Recordsand Audit) Rules 2014 and amendments thereof the Company does not fall under thecategory of companies required to mandatorily undertake Cost Audit. However the Companymaintains cost accounting records in respect of products of the Company.
PARTICULARS OF REMUNERATION
The information on employees and other details required to be disclosed under Rule 5 ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 isannexed to and forms part of this Report (refer Annexure D).
COMPOSITION OF AUDIT COMMITTEE
The Audit Committee of the Board comprises five members out of which four areindependent. Mr. Shrinivas G. Shirgurkar is the Chairman and other members are Mr. K SShetty Mr. M Lakshminarayan Mrs. Hima Srinivas and Mr. N Ananthaseshan. Consequent tothe resignation of Mr. K Srinivasan with effect from 22 November 2019 Mr. N Ananthaseshanwas inducted to the Committee with effect from 23 November 2019. During the year fiveAudit Committee meetings were held the details of which are provided in the CorporateGovernance Report.
STATUTORY AUDITORS AND AUDITORS' REPORT
Pursuant to the provisions of Section 139 of the Companies Act 2013 and the rulesframed thereunder M/s Price Waterhouse Chartered Accountants LLP (Reg. No. FRN012754N/N500016) were appointed as Statutory Auditors for a term of 5 consecutive yearsat the 35 Annual General Meeting of the Company held on 24 July 2017 subject to annualratification by the shareholders at every AGM. However as the Companies (Amendment) Act2017 has dispensed with the requirement of annual ratification of the Statutory Auditor'sappointment there is no requirement to seek an annual ratification of their appointmentthis year.
As required under Regulation 33 of the Listing Regulations the Auditors have confirmedthat they hold a valid certificate issued by the Peer Review Board of the Institute ofChartered Accountants of India.
The Report given by M/s Price Waterhouse Chartered Accountants LLP on the FinancialStatements of the Company for the year ended 31 March 2020 is provided in the financialsection of the Annual Report. There are no qualifications reservations adverse remarksor disclaimers given by the Auditors in their report.
During the year under review the Auditors have not reported any matter under Section143(12) of the Companies Act 2013 and hence there are no details to be disclosed underSection 134(3)(ca) of the Act.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Rulesframed thereunder the Company has appointed M/s. R Sridharan and Associates PracticingCompany Secretaries Chennai to undertake the secretarial audit for the financial year2019-20. The Report of the Secretarial Auditor confirming compliance with the applicableprovisions of the Companies Act 2013 and other rules and regulations issued by SEBI/otherregulatory authorities forms part of the Annual Report. There were no qualifications oradverse remarks in the audit report except an observation in respect of compliance withthe minimum public shareholding of 25 per cent of the paid-up capital of the Company.
M/s. Carborundum Universal Limited promoter had in 2011 filed a petition against theCompany and 8 other respondents (Wendt GmbH 3M and others) for oppression andmismanagement of the affairs under Sections 397/398 of the erstwhile Companies Act 1956.The Company Law Board had passed an interim order on 18 January 2011 restricting the otherRespondents from altering the composition of the Board and the shareholding pattern of theCompany. Pursuant to the interim order the Company has been unable to maintain minimumpublic shareholding.
The Hon'ble National Company Law Tribunal (NCLT) on 7 March 2019 dismissed thepetitions filed by Carborundum Universal Limited and directed SEBI to take appropriatejudicious decision as expeditiously as possible on the issue of the purchase of 20 percent of the public shareholding of Wendt (India) Limited in view of the open offer made byM/s. 3M (Schweiz) AG after providing proper opportunity to Carborundum Universal Limitedto put forward their views on the issue.
M/s. 3M (Schweiz) AG had made an open offer on 4 June 2011 to acquire up to 20 per centof the equity capital of the Company under the extant Securities and Exchange Board ofIndia (Substantial Acquisition of Shares and Takeover) Regulations 1997 as amended. Owingto the interim stay granted by the Company Law Board on 18 January 2011 the open offerprocess could not be completed. During the year the Company received a letter from M/s.JM Financials Limited representing M/s. 3M (Schweiz) AG intimating the public announcementmade on 26 September 2019 for withdrawal of the open offer made by 3M in 2011.
The Company's public shareholding currently stands at 20.26 per cent which is less thanthreshold of 25 per cent mandated under the Securities Contract Regulation Rules 1957.The Company is in discussions with its promoters in the matter of meeting the minimumpublic shareholding requirement including seeking relaxation on the timelines if sorequired particularly given the prevailing circumstances arising out of the ongoingCOVID19 pandemic.
In terms of Regulation 24A of the Listing Regulations there is no material unlistedsubsidiary incorporated in India. Material unlisted subsidiary for the purpose of thisRegulation is a subsidiary whose income/net worth exceeds 10 per cent of the consolidatedincome/net worth respectively of the Company and its subsidiaries in the immediatelypreceding accounting year. Hence the requirement prescribed under Regulation 24A of theListing Regulations is not applicable to the Company.
The Company is in compliance with the Secretarial Standard on Meetings of the Board ofDirectors (SS-1) and Secretarial Standard on General Meetings (SS-2).
In terms of Regulation 34(3) read with Schedule V of the Listing Regulations aseparate section on Corporate Governance including the certificate from a PractisingCompany Secretary confirming compliance is annexed to and forms an integral part of thisReport.
Mr. Rajesh Khanna Executive Director & CEO and Mr. Mukesh Kumar Hamirwasia ChiefFinancial Officer have submitted a certificate to the Board on the integrity of thefinancial statements and other matters as required under Regulation 17(8) of the ListingRegulations.
VIGIL MECHANISM UNDER WHISTLE BLOWER POLICY
The Company has a well-established whistle blower policy as part of vigil mechanism forDirectors and employees to report concerns about unethical behaviour actual or suspectedfraud or violation of the Company's Code of conduct or ethics policy. This mechanism alsoprovides for adequate safeguards against victimization of Director(s)/employee(s) whoavail of the mechanism and also provides for direct access to the Chairman of the AuditCommittee in exceptional cases. The Whistle blower policy is available on the Company'swebsite at the following link www.wendtindia.com. It is affirmed that during the year noemployee was denied access to the Audit Committee.
EXTRACT OF ANNUAL RETURN
The extract of the Annual Return in form MGT 9 as required under Section 92(3) of theAct and the Rules framed thereafter is annexed to and forms part of this report. (AnnexureB). The Annual Return in Form MGT 7 is available at www.wendtindia.com.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the provisions of Section 134(3)(c) of the Companies Act 2013 the Boardto the best of its knowledge and belief and according to the information and explanationsobtained by it confirm that:
in the preparation of the annual accounts for the year ended 31 March 2020 theapplicable accounting standards have been followed and there have been no materialdepartures therefrom.
they have selected appropriate accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at the end of the financial year andof the profits of the Company for that period.
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.
the annual accounts have been prepared on a going concern basis.
proper internal financial controls have been laid down to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively.
proper systems have been devised to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO
The information on energy conservation technology absorption expenditure incurred onResearch & Development and forex earnings/outgo as required under Section 134(3)(m) ofthe Companies Act 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 isannexed to and forms part of this Report (refer Annexure A).
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status of the Company and its future operations.
The Board would like to record its sincere appreciation for the cooperation receivedfrom various stakeholders of the Company viz. customers suppliers bankers investorschannel partners government and other statutory authorities auditors businessassociates and shareholders. The Directors extend their gratitude to all the regulatoryagencies like SEBI Registrar of Companies stock exchanges and other Central and StateGovernment authorities/agencies vendors and sub-contracting partners for their support.The Board also acknowledges the unstinted co-operation commitment and dedication made byall the employees of the Company.
The Directors also wish to place on record their gratitude to the members of theCompany for their unrelenting Support & Confidence.
| ||On behalf of the Board |
| ||For Wendt (India) Limited |
|Place: Bangalore ||Shrinivas G Shirgurkar |
|Date: May 28 2020 ||Chairman |