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Wheels India Ltd.

BSE: 590073 Sector: Auto
NSE: WHEELS ISIN Code: INE715A01015
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VOLUME 193
52-Week high 1345.00
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P/E 29.47
Mkt Cap.(Rs cr) 2,153
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OPEN 893.00
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VOLUME 193
52-Week high 1345.00
52-Week low 873.15
P/E 29.47
Mkt Cap.(Rs cr) 2,153
Buy Price 895.40
Buy Qty 1.00
Sell Price 914.95
Sell Qty 10.00

Wheels India Ltd. (WHEELS) - Director Report

Company director report

your Directors present their Fifty Ninth Annual Report and the Audited Accounts of yourCompany for the year ended March 31 2018.

Performance

Sales (net of Indirect taxes) for the year were Rs. 2443.17 crores compared toRs. 2160.38 crores in the previous year showing an increase of 13.08%.

Financial Results

The Ministry of Corporate Affairs vide its notification dated 16.2.2015 has notifiedthe Companies (Indian Accounting Standards) Rules 2015. In pursuance of thisnotification the Company adopted IndAS effect from 01.04.2017. The Company's financialresults for the previous year ended 31.03.2017 had also been recast in accordance withIndAS. The standalone financial results of your Company are as below:

(Rs in Crores)

2017-18 2016-17
Gross Profit before finance cost and depreciation 200.55 188.91
Finance cost 44.54 48.16
Depreciation 67.05 63.92
Add: Exceptional Item 12.49 -
Profit before tax 101.45 76.83
Profit after 71.77 58.37
Total Comprehensive Income 73.91 57.79
Transfer to General Reserves 30.00 25.00

Dividend and transfer to General Reserve

The Board approved and paid an Interim Dividend of Rs 6/- per equity share (60%) inFebruary 2018. your Directors are pleased to recommend a final dividend of Rs.9/- perequity share (90%) for the year ended 31st March 2018. The final dividend recommendedsubject to approval at the 59th Annual

General Meeting will be paid to all the shareholders as on 09.08.2018. The totaldividend payout for the financial year is Rs.18.05 crores on which dividend distributiontax aggregates to Rs. 3.70 crores. The Board has adopted a Dividend Distribution Policywhich is available at the Company's website www.wheelsindia.com The Companyproposes to transfer an amount of Rs. 30 crores to the General Reserves. An amountof Rs. 65.02 crores is proposed to be as Retained Earnings.

Issue of Bonus Shares

On June 22 2018 the Board recommended a proposal for issue of Bonus Equity Shares inthe proportion of 1:1. that is 1 (one) bonus equity share of Rs. 10/- each for every (1)one fully paid-up equity share held as on the record date subject to approval of theshareholders of the Company through postal ballot.

Management Discussion and Analysis

The last year saw an improved growth in global GDP from 3.2% in the previous year to3.8% last year. The growth was across geographies. In India GDP slowed down by 0.5% to6.7% as government reform with the introduction of GST temporarily affected economicactivity. The growth momentum in the global economy is likely to continue in the comingyear and India is expected to see GDP grow at 7.4%. The political rhetoric from leadingtrading countries towards protectionism is introducing some uncertainty. There wascommodity inflation in steel aluminium and oil towards the second half of the year.

It was a tumultuous year for the commercial vehicle industry in India with negativegrowth in the first quarter following the introduction of BS IV engines. This howeverchanged towards the second half with stricter implementation of overloading restrictionresulting in very strong growth in the second half of the year so much so that despite aslow start to the year the growth in the truck market was 9% for the year. The secondhalf of the year also saw the multi-axle market change its preference from the 31T to 37Tincreasing the number of wheels per vehicle. your company saw high capacity utilization ofits truck wheel plants in the second half of the year although we did struggle meetingthe demand in the fourth quarter. The latter part of the year also saw a resurgence ofdemand for light commercial vehicles post-GST implementation with increasingpossibilities for hub and spoke logistics. There was also a strong demand for small trucksafter successive years of declining volumes. It is expected that the growth momentum inthe commercial vehicle industry could continue up to 2020 when BS VI engines areintroduced. The higher cost of these new engines could dampen demand post theirintroduction but could trigger a "pre-buy" in the period building up to 2020.

The last financial year saw a normal monsoon and strong demand for agriculturaltractors. At the same time there was distress amongst farmers due to lower realizations.The government introduced a number of schemes to boost the agricultural sector and severalstates announced loan waivers for farmers. There was a strong growth in the rural sectorespecially in the second half of the year boosting demand for utility vehicles. InSeptember last year your Company hived off its passenger car wheel business servicingmultinational car companies into a separate subsidiary. Subsequently Topy Industries aleading Japanese wheel manufacturer and our technical partner invested in a 26% stake inthe subsidiary. your Company holds a 74% stake in the new company WIL Car Wheels Ltd.(WCWL). It is expected that the Japanese partner will leverage its relationship withglobal car companies and its technology to help grow our car wheel business in in Indiaand open export opportunities for WCWL. In the last financial year there was growth inthe passenger car business driven largely by growth of the market leader.

There is a strong growth in the construction and mining equipment industry from thesecond half of the last financial year. This cyclical upturn came 6 years after the lastpeak driven largely by strong global GDP and equipment replacement cycles. In India wesaw a similar trend with road and infrastructure development gaining pace in the secondpart of the last year. The higher level of commodity inflation and replacement demand hasalso resulted in growth of mining equipment. your company supplies wheels to theconstruction and mining equipment industry in India and globally and will benefit fromthis growth trend. your Company's air suspension division saw reasonable growth last yearon the back of demand for lift axle suspension as the market shifted to higher tonnagevehicles. The demand from state transport undertakings was muted. your Company is a majorsupplier of fabricated and machined parts for the windmill industry in India. The windenergy equipment manufacturers in India had a very poor year last year. The introductionof the government mega auction process for wind power resulted in lower prices requiring asudden re-alignment of commercials at the windmill manufacturers. This caused a disruptionat our windmill customers affecting our windmill component business. your company startedworking on export of windmill parts to global companies that should yield results towardsthe latter part of the coming year. your Company started supplying bogie frame and bolsterto the Integral Coach Factory of the Indian Railways in the latter part of the lastfinancial year. The components we supply are towards the manufacture of LBH coaches thatwill enhance railway passenger safety in the country.

In the last financial year we saw large fluctuation volumes in our commercial vehiclewheel business and our windmill component business. The sudden changes in scheduleresulted in underutilization of capacities in one part of the year and shortage ofcapacity in the latter part of the year. The demand fluctuations resulted in sub-optimalrunning of our plants in these segments. This along with increased inflationary trendsrelated to steel aluminium oil and labour in the latter part of the year affected ourprofitability. your company however did benefit by way of a profit on slump sale of itspassenger car wheel business to its subsidiary. The Indian steel industry is going througha consolidation phase with financially being taken over by profitable steelmanufacturers. This is happening at a time when international steel prices have ralliedsignificantly over the last year. The coming year sees a continuation of commodityinflation in line with the global economy. The oil prices have been rising and areexpected to remain high in the coming year potentially affecting our energy and fuelcost but could also result in volatility of the Indian Rupee with inflationaryconsequences. We are also seeing wage inflation in line with government related minimumwage increases. While all these inflationary factors will put a strain on ourprofitability we also see signs of growth in all major segments of our business in theyear ahead.

While we ramp up our capacities to meet the increased customer call for our product wewill also need to ensure tighter cost control measures to counter the high inflation. yourcompany continues to strive to promote safety practices across its plants while promotingrobust quality reviews across its business'. your Company has received awards for itsperformance from customers such as Caterpillar General Motors Komatsu Mahindra &Mahindra Tata Motors and Volvo Eicher Commercial Vehicles. In the coming year we see thetrend of cyclical upswing continuing in the commercial vehicle construction and miningequipment segments of our business. There is a national election in 2019 and building upto this there are likely to be pro-agriculture policies followed by the government. Inlight of this and the expected normal monsoons we expect a reasonable growth in thecoming year for agricultural tractors. In light of rural prosperity we expect the marketfor utility vehicles to continue to do well.

We expect the lift axle suspension business to continue to grow in the coming year inline with the trend of higher tonnage multi-axle vehicles in the truck industry. There isreasonable demand for air suspension for buses expected as fleet takes place ahead of the2019 elections.

In the coming year the government has increased the amount of wind power to beauctioned significantly and we expect more active participation of our windmillmanufacturer customers. In addition we propose to grow exports to windmill equipmentmanufacturers in the coming year. We will see a full year of railway component business inthe year ahead and will increase the range of components we supply to the Indian Railways.There is strong demand for our products across segments in both the domestic and exportmarkets. The challenge for us is to ramp up in a timely manner to meet these challengesand to control costs effectively at a period of high industrial inflation.

Subsidiary Company

WIL Car Wheels Limited (WCWL) was incorporated on June 7 2017. your Company holds 74%stake in WCWL with Topy Industries Limited Japan holding 26% stake.

WIL Car Wheels Limited reported a gross revenue of Rs. 179.42 crores and profit beforetax of Rs. 2.34 crores. There are no comparable figures for the previous year as thisCompany was incorporated during the year under review.

Associate Company

Axles India Limited an Associate Company has achieved a turnover of Rs. 486.09 croresand profit before tax of Rs 35.25 crores for the financial year 2017-18 as against theturnover of Rs 455.28 crores and profit before tax of Rs 22.80 crores for the financialyear 2016-17. your Company's share of profit is Rs.3.35 crores (unaudited) for thefinancial year 2017-18 as against Rs. 2.17 crores for the financial year 2016-17.

Consolidated Financial Statements

In accordance with the provisions of Section 129(3) of the Companies Act 2013("2013 Act") the consolidated financial statements drawn up with the applicableIndian Accounting Standards forms part of the Annual Report. In accordance with theprovisions of Section 136 of the 2013 Act the audited financial statements including theconsolidated financial statements and related information of the Company will be availableon our website www.wheelsindia.com. These documents will also be available for inspectionduring business hours at the registered office of the Company. A statement containing thesalient features of the financial statements of the Subsidiary Company / Associate Companyis provided in Form AOC1. Refer Annexure I of this report.

The consolidated profit after tax for the year is Rs. 75.49 crores and the consolidatednetworth is Rs. 586.62 crores as on 31.03.2018.

Fixed Deposits deposits accepted by the Asat31stMarch2018 fixed

Company from public and shareholders aggregated to Rs. 142.79 crores which are withinthe limits prescribed under the 2013 Act and the rules framed thereunder. The provisionsof the 2013 Act also mandate that any Company inviting/ accepting/ renewing deposits isrequired to obtain Credit Rating from a recognised credit rating agency. your Company hasobtained a credit rating of "MA+ Stable" for its fixed deposits from ICRA. Thedetails relating to deposits covered under Chapter V of the 2013 Act are given in AnnexureII forming part of this Report.

Board Evaluation

Pursuant to the provisions of Section 134 (3) (p) Section 149(8) and Schedule IV of2013 Act SEBI (Listing Obligations & Disclosure Requirements Regulations) 2015 (SEBILODR) Annual Performance Evaluation of the Board the Directors as well as Committees ofthe Board have been carried out.

The Performance Evaluation of the Independent Directors was carried out by the entireBoard and that of the Chairman and Non Independent Directors by the Independent Directors.The criteria and manner in which the evaluation has been carried out are provided in AnnexureII forming part of this Report.

particulars of Loans Guarantees or Investments

The Company has not given any loans or guarantees covered under the provisions ofSection 186 of the 2013 Act. The details of the investments made by Company are given inthe notes to the financial statements.

Directors

Under Regulation 17(1A) of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) (Amendment) Regulations 2018 a specialresolution is to be passed for the continuation of the directorship of Mr. S Ram Chairmanas Non-executive Director with effect from 1st April 2019 till the date he retires byrotation. Necessary resolution to this effect is included in the Notice convening the59th Annual General Meeting. The Board of Directors based on the recommendation of theNomination and Remuneration Committee reappointed Mr. Srivats Ram as Managing director fora period of five years commencing from 01.05.2018. Under Article 94(3) of the Company Mr.Paul G Reitz (DIN 07159137) retires by rotation and being eligible offers himself forre-election. Brief resume of the Director proposed to be appointed along with additionalinformation pursuant to SEBI LODR is given in the Corporate Governance Report.

All the Independent Directors have given declaration that they meet the criteria ofindependence as laid down under Section 149(6) of the 2013 Act.

key Managerial personnel

The Board appointed / designated Mr. R. Raghunathan as Chief Financial Officer and Mr.S. Balasundharam as Company Secretary / Compliance Officer on April 11 2017 pursuant tothe superannuation of Mr. S. Srivathsan CFO & Company Secretary on April 102017.

Ms. K. V. Lakshmi was appointed as Company Secretary/ Compliance Officer with effectfrom November 6 2017 consequent to the resignation of Mr. S. Balasundharam on November 42017.

Remuneration policy

The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Managementandtofixtheirremuneration. The Company's policy on appointment and remuneration including criteria fordetermining qualifications positive attributes and independence are provided in theCorporate Governance Report forming part of this Report. The policy is given as AnnexureIII forming part of this Report.

Corporate Social Responsibility

As an initiative under Corporate Social Responsibility (CSR) and in accordance withSchedule VII of the 2013 Act your Company has constituted the CSR Committee under theBoard to frame monitor and execute the CSR activities. The Board has approved the CSRPolicy and guidelines for implementation. The Committee effectively supervises theprogramme. your Company has fulfilled its obligation towards CSR by spending a sum ofRs.117.59 lakhs during the year. The constitution of the CSR Committee and the report asrequired under the 2013 Act are provided in Annexure IV forming part of thisReport.

Risk Management Internal Financial Control Systems and Audit your Company hasimplemented a mechanism for risk management and has formulated a Risk Management Policy.The Policy provides for identification of risks and mitigation measures. The Auditcommittee is informed on the risk assessment and minimization mechanism adopted by theCompany. The implementation of IT based Governance Risk and Compliance (GRC) softwareacross the multiple locations of the Company has further strengthened the businessprocesses and has significantly supported the internal audit requirement towards achievinga controlled environment. your Company maintains an adequate and effective InternalControl System commensurate with its size. These reasonably assure that the transactionsare duly authorized and recorded to facilitate preparation of financial statements in linewith the established practices and that the assets are secured against any misuse or loss.The internal control system is supplemented through an extensive internal audit programmebesides periodic review by the Management and Audit Committee. The Company has in placeadequate internal financial controls.

Vigil Mechanism / Whistle Blower policy

In accordance with the requirements of the 2013 Act your Company has established aVigil Mechanism/ Whistle Blower Policy for Directors and Employees to report genuineconcerns. The said Policy meets the requirement of the Vigil Mechanism framework under the2013 Act and the members can view the details of the policy on www.wheelsindia.com

Directors' Responsibility Statement

The Directors acknowledge their responsibility of ensuring compliance with theprovisions of Section 134(3)(c) of the 2013 Act. To the best of their knowledge and beliefand according to the information and explanations obtained by them your Directors makethe following statements in terms of Section 134(3)(c) of the 2013 Act: a. that in thepreparation of the annual financial statements the applicable IndAS have been followedalong with proper explanation relating to material departures if any; b. that suchaccounting policies as mentioned in the financial statements have been selected andapplied consistently and judgement and estimates have been made that are reasonable andprudent so as to give a true and fair view of the state of affairs of the Company as atMarch 31 2018 and of the profit of the Company for the year ended on that date; c. thatproper and sufficientcare has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the 2013 Act for safeguarding the assets ofthe Company and for preventing and detecting fraud and other irregularities; d. that theannual financial statements have been prepared on a going concern basis; e. that properinternal financial controls are in place and that the financial controls are adequate andwere operating effectively. f. that proper systems have been devised to ensure compliancewith the provisions of all applicable laws and that such systems were adequate andoperating effectively.

Related party Transactions

The Company has formulated a policy on related party transactions and the same isuploaded on the Company's website www.wheelsindia.com. All Related Party transactions thatwere entered into by the Company during the financial year 2017-18 were in compliance ofSection 188 of the 2013 Act and the Rules framed thereunder. There are no"Material" contracts or arrangement or transactions at arm's length basis andhence disclosure in form AOC-2 is not required.

All Related Party transactions were placed before the Audit Committee for their priorapproval in accordance with the requirements of the SEBI (LODR) 2015. The transactionsentered into pursuant to such approval are placed periodically before the Audit Committeefor its review. There are no materially significant transactions made by the Company withPromoters Directors and Key Managerial Personnel which may have a potential conflict withthe interest of the Company at large.

Meetings of the Board/ Committees

The Board meets at regular intervals to discuss and decide on Company / business policyand strategy apart from other businesses. The Board / Committee Meetings are pre-scheduledand a tentative annual calendar of the Board and Committee Meetings are circulated to theDirectors in advance to facilitate them to plan their schedule and to ensure meaningfulparticipation in the meetings. The details of the meetings of the Board as well as theCommittees are disclosed in the Corporate Governance Report forming part of this Report.

Significant and Material Orders Passed by the

Regulators or Courts

There are no significant by the Regulators / Courts which would impact the goingconcern status of the Company and its future operations. There are no material changes andcommitments if any affecting the financial position of the Company which have occurredbetween the end of the financial year of the Company to which the financial statementsrelate and the date of this report.

Employees and details of Remuneration

None of the employees of the Company was in receipt of remuneration in excess of thelimits prescribed under the 2013 Act and the rules framed thereunder. The statement ofDisclosure of Remuneration under Section 197 of 2013 Act and Rule 5(1) of the

Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014("Rules") is provided in Annexure V forming part of this Report. Theinformation as per Rule 5(2) and Rule 5(3) of the Rules forms part of this Report.However as per first proviso to Section 136(1) of 2013 Act and Second Proviso to Rule 5of the Rules the report and financial statements are being sent to the members of theCompany excluding the statement of particulars of employees under Rule 5(2) and Rule 5(3)of the Rules. Any Member interested in obtaining a copy of the said statement may write tothe Company Secretary at the Registered office of the Company. The said statement is alsoavailable for inspection by the members at registered office of the Company during officehours till the date of Annual General meeting.

Disclosure under the Sexual Harassment of Women at Workplace (prevention prohibitionand Redressal) Act 2013

The Company has in place an Anti-Sexual Harassment Policy in line with the requirementsof the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013. During the year under review there were no cases filed the above Act.

Corporate Governance

In pursuance to SEBI LODR Corporate Governance Report is given in Annexure VI andforms part of this Report.

Statutory Audit

The Company had appointed M/s Brahmayya & Co Chartered Accountants as theStatutory Auditors of the Company for a term of five consecutive years i.e. from theconclusion of the 58th Annual General Meeting till the conclusion of 63rd Annual GeneralMeeting of the Company. The Company has received the eligibility certificate from theauditors confirming that they are not disqualified to act as Auditors and are eligible tohold office as Auditors of the Company.

Cost Auditor

Pursuant to Section 148 of the 2013 Act read with the Companies (Cost Audit and Record)Rules 2014 the cost records and the accounts maintained by the Company are required to beaudited. The Board on recommendation of the Audit Committee had appointed M/s. Geeyes andCo Cost and Management Accountants to audit the cost records and the accounts maintainedby the Company for the financial year ended 31.3.2018. The report of the said Cost Auditorwill be filed with the Central Government in accordance with the rules framed thereunder.The said firm were appointed by the Board to conduct the Cost Audit for the year 2018-19at the remuneration of Rs. 700000/- (excluding applicable taxes and out of pocketexpenses) The Companies Act 2013 mandates that the remuneration payable to the CostAuditor is ratified by the members. Accordingly a resolution seeking members ratificationof the remuneration payable to the Cost Auditor for the year 2018-19 is included in theNotice convening the 59th Annual General Meeting.

Secretarial Audit

Pursuant to the provisions of Section 204 of the 2013 Act and the rules framedthereunder the Company appointed M/s. S Dhanapal & Associates a firm of CompanySecretaries in Practice to undertake the Secretarial Audit of the Company. The Report ofthe Secretarial Audit is given in Annexure VII and forms part of this Report.

The Company has complied with the Secretarial Standards for the Board Meetings (SS-1)and the General Meetings (SS-2) during the year 2017-18.

Comments on Auditors' report

There are no qualifications reservations or adverse remarks or disclaimers made by theStatutory Auditors and Company Secretary in Practice in their reports respectively. TheStatutory Auditors have not reported any incident of fraud to the Audit Committee of theCompany for the year under review.

Safety

In regard to safety your Company has been working towards inculcating a cultureinstalling a system and reviewing its results at its facilities. Starting with the Padiplant the company is horizontally deploying safety work systems and review mechanismsacross its plants. The last year saw decent progress towards this endeavor to build safetyinto the manufacturing work culture.

Employees have been encouraged to adhere to safety in all their activities in and outof the company premises. Safety training is conducted at all levels on a continuous basisand additional emphasis is given in implementation of safety work standards. The Companyrewards best safety performers from different groups of employees regularly. This hashelped to inculcate a significant change in the minds of the employees towards better safework environment is cultivated.

CEO/CFO Certificate

The Managing Director and Chief Financial Officer have submitted a certificateintegrity of the financial statements and other matters required under regulation 17(8) ofthe SEBI LODR Regulations.

Extract of Annual Return

The details forming part of the extract of the Annual Return in Annexure VIII formspart of this Report.

Energy Conservation Technology Absorption and Foreign Exchange Earnings & Outgo

Conservation of Energy Technology Absorption and Foreign Exchange Earnings and outgoas required under Section 134(3)(m) of the 2013 Act read with rule 8(3) of the Companies(Accounts) rules 2014 are enclosed as Annexure IX and forms part of this report.

Business Responsibility Reporting

During the year consequent to the requirements of reporting of its businessresponsibility initiatives becoming mandatory under the SEBI LODR the Company hasformulated a policy on Business Responsibility which lays down the broad principlesguiding the Company in delivering various responsibilities to its stakeholders. A copy ofthis policy is available at www.wheelsindia.com and the Business Responsibility Report forthe year ended 31.03.2018 in terms of Regulation 34 of the SEBI LODR is given in AnnexureX and forms part of this report.

Acknowledgement

The Directors wish to thank United Bank of India State Bank of India StandardChartered Bank HDFC Bank other Banks and financial institutions for their continuedsupport. your Company wishes to thank its customers suppliers and the communities aroundits plants for their continued support. your Company continues to have the fullco-operation of all its employees. The Directors would like to place on record theirappreciation of the efforts of the employees in controlling costs and improving theprofitability of the Company.

On behalf of the Board of Directors
S Ram
Chennai Chairman
June 22 2018 DIN 00018309