BOARD'S REPORT The Board of Directors has pleasure in presenting the 31st Annual Report and Audited statement of Accounts for the financial year ended March 31, 2016 together with the Independent Auditors' Report. PERFORMANCE OF THE COMPANY The Company's performance for the year has been adversely impacted by the continued slowdown in its major end use industry segment like Automotive & Agriculture. Since its peak level in 2013, Sales & Margin have been hit due to economic slowdown and impact of lower volume. However, the Company is able to maintain its market shares in all major product lines despite the low overall market activity and the slump in capital equipment industry. The Company has been able to bring down the manufacturing cost and head counts through various cost reduction initiates undertaken by the Company. DIVIDEND The results of the Company for the year was adversely impacted by the continued recession and overall slowdown in the economy. However, considering the past records of the Company and future economic outlook, your Board of Directors recommends a Dividend of Rs. 2.50 (i.e 25%).per Equity Shares of Rs. 10/- each. RESERVE The Company has not proposed to transfer any amount to the General Reserve. SHARE CAPITAL The paid up Equity Share capital of the Company as on March 31, 2016 was Rs. 151.02 Lakhs. During the year under review, the Company has not issued shares with differential voting rights nor granted stock options nor sweat equity. As on March 31, 2016 none of the Directors holds Shares or convertible instruments of the Company. MANAGEMENT DISCUSSION AND ANALYSIS REPORT ECONOMIC SCENARIO & OUTLOOK Since 2011, the Indian Economy has been through the longest slowdown in the last few decades. The upswing in industry sentiments was evident with a new majority union government. Though the real growth revival is still not achieved during the year, there are some signs of improvement in business confidence reflected by strong order intake by the Company during Jan-Mar'2016 resulting in an increased order back log of Rs 8,066 lakhs as on March 31,2016 as against Rs 6,783 lakhs as at the end of the previous year. INDUSTRY OUTLOOK & OPPORTUNITIES IIP Growth which is a direct reflection of our industry, has not been strong in the last few years. Such marginal growth puts hindrances for capacity expansions of Capital Equipment Industry like DISA India Limited. The Passenger Vehicles (Cars & Utility Vehicles) market has shown some gradual growth but slow. Commercial Vehicles (Buses & Trucks) market which collapsed from a peak of around 9.2 Lakhs/year in Y2011, to around less than 7.0 Lakhs/Year in Y2013, have now been picking up and approaching 8 lakhs/year volume. The Tractors Market is still about 23% below the peak levels in Y2013 and expected to improve with a good monsoon expectation in the year 2016-17. Your Company's key focus segment of Foundry Industry is heavily dependent on the Automotive & Agricultural Industry growth. The prolonged slowdown in these end segments, has led to high volume/ margin stress on our customers. Company's continuing focus on New Products & New Markets has helped offset the drop in foundry segment to quite a great extent. Almost a third of the Company's turnover in the year under review is from the New Products introduced over the last few years. This broader product portfolio is expected to bring positive growth when the growth cycle starts. MARKET DEVELOPMENT In pursuits of continued efforts to upgrade the foundry sector towards automation, the Company launched the new C3-150 DISAMATIC Machine with 150 moulds/hour speed foundry machine, to cater to the needs of many foundries in India. The launch of the VH Series Wheelabrator Shot Blast Machines also brings the most modern offering to company's customers. In Y2015, your Company executed the prestigious Shot Blasting Project for JCB, Jaipur incorporating the latest technologies available globally with the distinct honor of being the largest Shot Blasting Solution made in India. While the Company continues its marketing push through Exhibitions, Seminars & Symposiums, a Customers' Day has also been planned at Tumkur Plant, to showcase some of the Company's newest products. CORPORATE SOCIAL RESPONSIBILITY Your Company is committed to discharging its Corporate Social Responsibility as a good corporate citizen. The Directors are pleased to report that the Company has further enhanced its efforts to support the communities in which it operates. The Company has lunched two programs "DISA Wheelabrator Scholarship" for less privileged students studying in grade nine through twelve as well as those seeking diplomas in engineering and "DISA Career Excellence" which involves contribution to a NGO, "Foundation for Excellence India Trust" providing scholarships to student in engineering colleges spread over the state of Karnataka and also neighboring states to a less privileged category of students. DISA Wheelabrator Scholarship" program makes scholarship available to students in eight educational institutions in the plant neighborhood of Tumkur and Hosakote in Bangalore. During the year 289 scholarships were provided to students. In addition, the Company also invested in infrastructure development for the schools in order to provide drinking water, teaching aids and school sanitation. Under "DISA Career Excellence" program 59 students were provided with scholarships during the year. The Company has also conducted three sessions of career guidance program for tenth & twelve grade students through an NGO, Banjara Academy. The Composition of CSR Committee, details of the amounts spent during the current financial year and the manner in which it was spent are given in Annexure "A". RISK MANAGEMENT The Company has formulated a Risk Management Policy and a mechanism to inform the Board about risk assessment and mitigation procedure and also undertakes periodical review to ensure that Executive Management Controls risks by means of properly designed framework. The Risk Management Committee is constituted with all the Directors on the Board as Members. Mr. Robert E Joyce is the Chairman of the Committee. As an established practice, at each meeting of the Board, the Directors are updated on risks identification and steps taken to mitigate the same. Risk Management Policy is hosted on the Company's website on: <http://www.disagroup.com/PDF/DIL_Risk_Management_Policy.pdf> 'OPEN OFFER' BY PROMOTERS During the year under review, Naciron A/S ("Acquirer") through persons acting in concert, DISA Holding AG ("PAC 1") and DISA Holding A/S ("PAC 2") acquired 425 shares (0.03% of total shares) in 'Open Offer' from public in the name of PAC 2 resulting in increase in the promoters holding to 75.03%.These 425 shares were sold by DISA Holding A/S on December 14, 2015 on the floor of Bombay Stock Exchange as per SEBI's approval bringing down the Promoters' Shareholding to 75% during the year. LISTING AGREEMENT The Company has entered into new Listing Agreements with BSE Limited, in compliance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. VIGIL MECHANISM / WHISTLE BLOWER POLICY The Company has a Whistle Blower Policy for vigil mechanism which is available on website of the Company and there were no cases reported during last year. <http://www.disagroup.com/pdf/> DIL_Whistle_Blower_Policy.pdf DIRECTORS AND KMP In terms of the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Andrew Thomas Carmichael, Director, retires by rotation at the forthcoming Annual General Meeting and being eligible offers for reappointment. During the year, Mr. Mohan Subramanian, Chief Financial Officer of the Company retired from services w.e.f. September 05, 2015 and Mr. Amar Nath Mohanty was appointed as Chief Financial Officer of the Company w.e.f. November 05, 2015. Policy on appointment and remuneration of Directors and KMP is available on website of the Company. <http://www.disagroup.com/> PDF/DIL_Remuneration_Policy_of_DISA_India_Ltd.pdf INDEPENDENT DIRECTORS Declarations from all Independent Directors of the Company have been received under Section 149 (7) of the Act, 2013 confirming that they meet the criteria of independence as provided in Sub-Section 6 of Section 149 of the said Act and also under the Listing Regulations. Details of terms of appointment of Independent Directors and the familiarization program have been displayed on the website of the Company at <http://www.disagroup.com/pdf/> Terms_of_appt_of_Indp_Directors_March.%202015.pdf <http://Terms_of_appt_of_Indp_Directors_March.%202015.pdf> <http://www.disagroup.com/pdf/Familiarisation_program_> for_Independent_Directors.pdf MEETINGS OF THE BOARD OF DIRECTORS During the year, four meetings of the Board of Directors were held, as required under the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the Listing Regulations). The details of the meetings are furnished in the Corporate Governance Report which forms part of this report. The Meetings of the Board are held at regular intervals with a time gap of not more than 120 days between two consecutive Meetings. The Agenda of the Meetings were circulated to Directors in advance. Minutes of Meetings of the Board of Directors were circulated amongst the Members of the Board for their perusal. BOARD EVALUATION Pursuant to the requirements of the Companies Act, 2013 and regulation of the Listing Regulations, evaluation was carried by the Board of Directors of its own performance, performance of its Committees and individual Directors. Further, the Independent Directors, at their exclusive meeting held during the year reviewed the performance of the Board, its Chairman and Non-Executive Directors and other items as stipulated under the Listing Regulations. DIRECTORS' RESPONSIBILITY STATEMENT In accordance with the provisions of Section 134(5) of the Companies Act, 2013 the Board hereby submit its responsibility Statement:- (a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; (b) the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that year; (c) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (d) the directors have prepared the annual accounts on a going concern basis; and (e) the directors, have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively. (f) the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. INTERNAL FINANCIAL CONTROL The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. Internal Controls in the Company have been designed to further the interest of all its stakeholders by providing an environment which is facilitative to conduct its operations and to take care of, inter alia, financial and operational risks with emphasis on integrity and ethics as a part of work culture. The scope and authority of the Internal Audit (IA) is defined every year by the Audit Committee. To maintain its objectivity and independence, the Internal Auditors reports its function to Chairman of the Audit Committee and the Board. The Internal Auditors monitor and evaluate the efficacy and adequacy of internal control system in the Company and its compliance with accounting procedures, financial reporting and policies at all locations of the Company. Based on the report of internal audit, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Any significant audit observations and corrective actions thereon are presented to the Audit Committee and the Board. The Company, during the year, had engaged a reputed external consultant for reviewing the Internal Financial Control Framework of the Company, evaluating the design of internal control systems, testing of key controls and operating effective ness of the Company's internal control systems and the timely preparation of reliable financial disclosures. No major weakness were identified. As a matter of familiarization, a brief sessions was also conducted for all the Directors of the Company. The Company also has a well-functioning Whistle Blower Policy in place. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES During the year, the Company formed a Wholly Owned Subsidiary (WOS) in the name of Bhadra Castalloys Private Limited. During the year, the subsidiary company through an Assets Purchase Agreement, acquired Sri Rajarajeswari Foundry, located in Bhadravathi, Karnataka, engaged in the business of manufacturing of high alloy steel castings, at an agreed consideration of Rs 700 lakhs, payable in four tranches over a period of two years. The Company expects this acqusition to improve its domestic and export aftermarket business. The audited financial results of the wholly owned subsidiary for the year ended March 31, 2016 (for the first period from the date of incorporation on December 30, 2015 till March 31, 2016) were consolidated with those of DISA India Limited for the year. Since there were no operations by the subsidiary company until close of March 31, 2016, no Profit & Loss Statement was prepared by the subsidiary company. The operations of the foundry as Bhadra Castalloys Private Limited was formally commenced from April 01, 2016. The Company did not have any Joint Venture or Associate Company as on the end of the year. DEPOSITS The Company has neither accepted nor renewed any deposits during the year under review. RELATED PARTY TRANSACTIONS All related party transactions that were entered into during the year were in the ordinary course of business and on an arm's length basis. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. All Related Party Transactions were placed before the Audit Committee as well as the Board for approval. Prior omnibus approval of the Audit Committee was obtained on a yearly basis for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their approvals on quarterly basis. The details of all related party transactions are disclosed in the SI. No. 24.2 of the Notes, forming part of the Financial Statements. None of the Directors has any pecuniary relationships or transactions vis-à-vis the Company. The Policy on Related Party Transactions, approved by the Board, is available on the Company's website. <http://www.disagroup.com/pdf/> DIL_RPT_Policy.pdf. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY, BETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT There are no material changes and commitments between the end of the financial year and the date of the report, which affects the financial position of the Company. PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN OR SECURITY PROVIDED BY THE COMPANY The Company, during the year, has made an investment of Rs. 440 Lakhs in the Equity Share Capital of its Wholly Owned Subsidiary Company, Bhadra Castalloys Private Limited and also has given Corporate Guarantees of Rs. 350 Lakhs to Kotak Mahindra Bank on behalf of its subsidiary within the limits prescribed under the provisions of Section 186 of the Companies Act, 2013. The Company has not given any loans under Section 186 of the Companies Act, 2013. AUDITORS Pursuant to provisions of Section 139 of the Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, Messrs Deloitte Haskins & Sells, Chartered Accountants were appointed as Statutory Auditors of the Company for a term of 3 years, to hold office from the conclusion of 30th Annual General Meeting held on August 06, 2015 until the conclusion of 33rd Annual General Meeting, subject to ratification of their appointment at every subsequent Annual General Meeting. The Company has received a Certificate under section 141 of the Companies Act, 2013 from them stating that the ratification for the 2nd year would be as per the term provided in the Companies Act, 2013. COST AUDITORS Pursuant to Section 148 of the Companies Act, 2013, read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company in respect of its activity are required to be audited. On recommendations of the Audit Committee, Messers Rao, Murthy & Associates, Bangalore have been appointed as the Cost Auditors of the Company for the year ended March 31, 2016. SECRETARIAL AUDIT Pursuant to the provisions of Section 204 of the Companies Act, 2013, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. Vijayakrishna KT, Bangalore, a Company Secretary in Practice to undertake the Secretarial Audit of the Company for the year March 31, 2016. The Report of the Secretarial Auditor is annexed in Annexure-'B'. EXPLANATION BY BOARD ON ADVERSE COMMENTS BY AUDITORS There were no adverse comments by the Auditors of the Company and hence no explanation is provided. CORPORATE GOVERNANCE As required under Regulation 34 (3) read with Schedule V(C) of the Listing Regulations, a report on Corporate Governance and the certificate as required under Schedule V (E) of the Listing Regulations from Mr. Vijayakrishna KT, Practising Company Secretary, regarding compliance of conditions of Corporate Governance are annexed as Annexure - C. Further, in compliance with the Listing Regulations, your Board has adhered to the Corporate Governance Code. All the requisite Committees are functioning in line with the guidelines. As reported earlier, a reputed firm of independent Chartered Accountants has been carrying out the Internal Audits of the Company and reporting periodically their findings of systems, procedures and management practices. INDUSTRIAL RELATIONS Industrial relations for the year have been cordial and constructive, which have helped your Company to achieve production targets. CONSERVATION OF ENERGY Your Company gives high priority for conservation of energy through better supervision and training of employees to economize the usage of electricity. RESEARCH AND DEVELOPMENT, TECHNOLOGY, ABSORPTION, ADAPTATION AND INNOVATION Your Company has been continuously seeking and adapting new technology from Principals in order to develop skills locally and meet specific needs of Indian and global customers. Personnel at all levels are routinely sent to Principals' factories and design offices abroad for training and updating their skills. FOREIGN EXCHANGE EARNINGS AND OUTFLOW The Company earned Rs.2,336 Lakhs of foreign exchange and expended Rs. 2,951 Lakhs of foreign exchange during the year under review as stated in SI. No. 23.8 , 23.4 & 23.5 of the Notes forming part of the Financial Statements. EXTRACTS OF ANNUAL RETURN Extracts of Annual Return in FORM NO. MGT-9 is annexed as Annexure 'E' MATERIAL ORDER PASSED BY ANY COURT OR REGULATOR OR TRIBUNALS IMPACTING GOING CONCERN STATUS OF COMPANY There were no orders passed by any Court or Regulator or Tribunals during the year under review which impacts going concern status of the Company. PERSONNEL The information required pursuant to Section 197 read with Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company are given in the Annexure 'F' forming part of the Report. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013: The Company has put in place a Gender Neutral Policy on Zero Tolerance towards Sexual Harassment at Workplace in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this Policy. The Company conducts regular training & awareness program in this regard to sensitize employees at all levels. A summary of sexual harassment complaints received and disposed off during the year 2015-16 are as under. No of complaints received: NIL No of complaints disposed off: NIL ACKNOWLEDGEMENT The Directors place on record their appreciation for valuable contribution made by employees at all levels, active support and encouragement received from Government of India, Government of Karnataka, Company's Bankers, Customers, Principals, Business Associates and other Acquaintances. Your Directors recognize the continued support extended by all the Shareholders and gratefully acknowledge with a firm belief that the support and trust will continue in the future also. For and on behalf of the Board of Directors Deepa Hingorani Director DIN:00206310 Viraj Naidu Managing Director DIN:01284452 Place: Bangalore Date: May 26, 2016 |