BOARDS' REPORT TO, THE MEMBERS Your Directors have pleasure in presenting the Thirty-Ninth Annual Report together with audited financial statement for the financial year ended 31st March, 2015. This report pertains to financial year that commenced from April 01, 2014 and the contents herein are governed by the relevant provisions/ sections/ rules of Companies Act, 2013 and clauses of new amended Listing Agreement effective from 1st October, 2014. This report also includes Management Discussion & Analysis (MD&A) as it has been considered appropriate to do so, in order to avoid duplication & overlap between Directors Report and a separate MD&A. 2. Dividend Directors regret their inability, in view of the losses, to recommend any dividend for the year. 3. Operations The Company's operation has been adversely affected for last few years due to a dramatic shift in consumer preference from 2-stroke geared scooters to 4-stroke motorcycles and 4-stroke gearless scooters. Company's exports have also been affected during the year, inter-alia, due to turmoil in the African market and economic slow down in developed economies. In domestic market, the performance was adversely affected due to general economic slowdown during the year. The Company is registered as a sick industrial Company under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The Company is working on development and industrialization of various new products and technology, including new generation of 4-stroke - geared scooters, gearless scooters, motorcycles and light 3-wheeler cargo vehicle. Export and Domestic sales performance of your Company was as follows 4. Exports Exports were 26184 vehicles during the year as against 34033 units during the previous year. Company's exports are made to many countries including USA, countries in the European Union, Africa, Latin America, Asia etc. 5. Directors' Responsibility Statement Pursuant to Section 134(5) of the Companies Act, 2013, the Directors confirm: (a) that in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same; (b) that they 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 losses of the Company for that period; (c) that they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (d) that they have prepared the annual accounts on a going concern basis; (e) that they have laid down the internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; (f) that they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 6. Corporate Governance As required under Clause 49(X) of the Listing Agreement, a detailed Report on Corporate Governance is enclosed. A certificate from the Auditors of your Company regarding compliance of the conditions of Corporate Governance as stipulated in Clause 49(XI) of the Listing Agreement is attached to Annual Report. The Chairman & Managing Director and Chief Financial Officer of the Company have given necessary Certificate to the Board in terms of Clause 49 (IX) of the Listing Agreement for the financial year ended 31st March. 2015. 7. Audit Committee The Board of Directors has an Audit Committee with a composition as specified in the Section 177 of the Companies Act, 2013 and Clause 49 of the Listing Agreement. The details of Audit Committee are specified in Corporate Governance Report. The Board has accepted recommendations of the Committee on various matters. 8. Management Discussion and Analysis (a) Macro-economic Developments and overall review The world economies are still facing effect of the crisis which started in 2008. Complex forces that effected global activity are still shaping the outlook. The problem of recession, un-employment, industrial slow down and exchange rate swings triggered by actual and expected changes in monetary policies continued with different degrees of intensity in various countries including those in the European Union. The Indian economy continues to suffer from anemic sluggishness in manufacturing adversely affecting industrial activity. The current economic environment represents a mixed scenario with inflation showing some signs of easing,but weak rural demand coupled with high interest rates are putting pressure on economic growth. Untimely rains and difficult weather conditions have affected the rural sector adversely. The GDP growth of Indian economy was approx. 7.4% in FY- 2014-15 compared to 6.9% in FY-2013-14, mostly driven by some improved economic fundamentals and revision of GDP methodology calculation. The growth estimated for current year of about 8% is due to the expectation that monsoon will be favourable which itself is uncertain phenomena, as agriculture remains vulnerable to monsoon shocks. Over the years, the volatility of monsoon outcome has, in fact, increased undermining the accuracy of forecasting. Revival of the economy will inter-alia depend upon increase in infrastructure investment, reduction in interest rates, increase in employment etc. so as to give a fillip to boost domestic demand. Domestic Sales (b) Two wheeler Industry in India The Indian automobile market can be divided into various segments viz. motorized two-wheelers (motorcycles, geared and gearless (CVT) scooters and mopeds), three wheelers, commercial vehicles (light, medium and heavy), passenger cars, utility vehicles (UVs) and tractors. A total of 15.90 million two-wheelers were sold in India in FY- 2014-15, a growth of 7% over the previous year. The slow growth was on account of the overall slowdown in the Indian economy and specially in rural economy and high interest rates. Motorcycles accounted for around 67% of the total two wheelers sold and reported nominal growth of around 2%. The gearless scooters (CVT) segment did well logging growth rate of around 25% in the earlier part of the year and aggregate share of 28% of the two wheeler market. The revival of the 2-wheeler industry is highly dependent upon the revival of Indian economy and more so the rural economy. c) Company Performance Company's performance during the year was adversely affected inter alia due to global recessionary conditions and specially political and economic condition prevailing in African and developed economies as well as week domestic demand. (d) Opportunities and Threats LML stands for the highest standards of technical expertise, product innovation and has one of the finest R & D capabilities, particularly relating to designing, rapid proto-typing, CAD - CAM, tooling and industrialization. It is harnessing these strengths and its vast experience in the two-wheeler business coupled with a aggressive business strategy for its revival and turnaround. The Company is perhaps the first in the world to obtain Euro III certification for its 2-stroke vehicles and subsequent to restart, it has also received the upgraded ISO 9001-2008 certification from DNV. (e) Outlook As stated elsewhere in this report the Company has been working for its revival including development of new products including those having state of the art technology. (f) Performance Review Due to various reasons and problems the Company could not leverage its rich technological strengths during the year under review and the sales volume was 38086 units in financial year 2014-15 as compared to 51835 units in financial year 2013-14.. (g) Financial Review Revenues - Gross Sales and Other Income during the year was Rs. 212.58 crores as compared to Rs. 273.73 crores in the previous financial year 2013-14. Operating Profit/Loss - The Company reported a net Operating Loss during the year of Rs 25.46 crores as compared to net operating loss of Rs. 17.76 crore in the previous financial year 2013-14. Interest - Interest was Rs 43.02 crores during the year as compared to Rs. 40.13 crores in the previous financial year 2013-14. Depreciation, Amortization & Impairment of Fixed Assets - Depreciation, Amortization & Impairment of Fixed Assets during the year was at Rs 12.61 crores as compared to Rs. 14.94 crores in the previous financial year 2013-14. Loss before tax - The Company reported a loss before tax and exceptional items during the year of Rs 81 .09 crores as compared to Rs. 72.83 crores in the previous financial year 2013-14. Share Capital - Company's Paid-up Equity Share Capital is Rs. 81.98 crores as on 31.03.2015. (h) Human Resources Your Company treats human resource a very important asset. Your Company continuously invest in attraction, retention and development of talent on an ongoing basis. 9. Directorate Mr. Ram Kumar Srivastava (DIN: 00763948), Director of the Company whose office is liable to retire by rotation and being eligible, offers himself for re-appointment as a Director of the Company. Pursuant to the provisions of Section 161(1) of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Santoshkumar Shivshanker Shukla (DIN: 06770309) and Mrs. Ritu Schimar Dhingra (DIN: 01186286) were appointed as Additional Directors (Independent) in the Board meeting held on 23.09.2014 who will hold the office until the conclusion of the ensuing Annual General Meeting. The Company has received requisite notices in writing from members proposing Mr. Santoshkumar Shivshanker Shukla and Mrs. Ritu Schimar Dhingra for appointment as Independent Directors. The Board has recommended to re-appoint Mr. Lalit Kumar Singhania (DIN: 00014318) and Mr. Anurag Kumar Singhania (DIN: 00080925) as Whole-time Directors of the Company as per details given in annual general meeting notice. During the year under review, no Director has resigned from the Board of Directors All the Independent Directors have submitted their declaration of independence, as required under section 149(7) of the Companies Act, 2013, stating that they meet the criteria of independence as provided in section 149(6) of the Companies Act, 2013 and under Clause 49 of the Listing Agreement. 10. Whole Time Key Managerial Personnel (KMP) In pursuance of the compliance of Section 203 of the Companies Act, 2013 the following persons have been designated as Whole Time Key Managerial Personnel of the Company:- 1. Mr. Deepak Kumar Singhania - Chairman & Managing Director 2. Mr. K. C. Agarwal - Sr. President (Commercial) & Company Secretary 3. Mr. Mahesh Kumar Kanodia - Chief Financial Officer During the year under review, no KMP has resigned from the Company. 11. Extract of Annual Return Pursuant to section 92(3) of the Companies Act, 2013 ('the Act') and rule 12(1) of the Companies (Management and Administration) Rules, 2014, the required extract of Annual Return in prescribed form MGT-9 is attached as Annexure 'A' with this Board Report. 12. Nominations Remuneration Policy The Company has, on the recommendations and approval of Nomination & Remuneration Committee, formulated a Nomination & Remuneration Policy which governs Directors' appointment including criteria for determining their qualifications, positive attributes, their independence and remuneration for the Directors, KMPs and other employees which was passed by the Board in its meeting held on 8th November, 2014. The Nomination and Remuneration Policy is attached as Annexure 'B' with this Board Report. 13. Particulars of Loan, Guarantees or Investments No loan, guarantee or investments were made during the year by the Company under Section 186 of the Companies Act, 2013. 14. Related Party Disclosure Particulars of contracts or arrangements with Related Party referred in Section 188 (1) of the Companies Act, 2013 in prescribed form AOC-2 is attached as Annexure 'C' with this Board Report. As required under Clause 49, the Company has formulated a policy for dealing with Related Party Transactions. The Policy is available on the website of the Company (Weblink: <http://www.lmlworld.com/Pdf/RPT-Policy.pdf>). 15. Material changes and commitments No material Changes or commitments affecting the financial position of the Company occurred between the end of the financial year to which the financial statements relates and the date of the report. 16. Risk Management Policy The Company has Risk Management Policy and a Risk Management Committee for identification of elements of risk, if any, which meets quarterly and submits its report, on quarter basis, to the Board. 17. Annual Evaluation The Board has carried out the Annual Performance Evaluation of its own, its Committees based on Performance Evaluation Report submitted by each Committee and individual Directors based on the Performance Evaluation Report submitted by the Nomination & Remuneration Committee, as per Performance Evaluation Policy of the Company. 18. Number of Board Meetings The details of the number of meetings of the Board held during the Financial Year 2014-15 forms part of the Corporate Governance Report. 19. Corporate Social Responsibility The provision related to Corporate social responsibility under the Companies Act, 2013 is not applicable to the Company in view of losses. 20. Details of Committees The details of Committees of the Board forms part of Corporate Governance Report. 21. Whistle Blower Policy The Company has a Whistle Blower Policy, including vigil mechanism to report genuine concerns of grievances, providing direct access to the Chairperson of the Audit Committee in appropriate and exceptional cases. The Whistle Blower Policy has been posted on the website of the Company (www.lmlworld com) with a weblink: <http://www.lmlworld.com/Pdf/LML-Whistle->Blower-Policy.pdf 22. Internal Financial Control The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no material weakness was observed by the internal auditor of the Company. 23. Subsidiary/ Associate Companies As there is no Subsidiary of the Company, no policy of determining "material" subsidiaries is formulated by the Company. The Company is a promoter of one Associate Company namely -M/s VCCL Limited. The Company is not required to prepare consolidated financial statement as per Notification dated 14.10.2014 issued by Ministry of Corporate Affairs. 24. Deposits Your Company has not accepted any deposits from public in terms of provisions of Companies Act, 2013 25. Personnel The Company had 2789 employees as on 31.03.2015. As per Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, none of the employee was in receipt of remuneration of Rs. 60.00 Lacs or more per annum throughout the year or Rs. 5.00 Lacs per month for the part of the year. Further, none of the employees is in receipt of remuneration which is in excess of the remuneration drawn by Managing Director or Whole-time Director or any manager of the Company and holds by himself or along with his/ her spouse and dependent children, not less than 2% of equity shares of the Company. (a) Pursuant to the Rule 5(1 ) Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the information required to be disclosed by every Listed Companies in its Board Report are as follows:- (b) The Median remuneration of employees of the Company during the financial year was Rs. 49,743/- (c) The percentage increase in the median remuneration of employees in the financial year was 10.67% (d) Variations in the market capitalization of the company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer in case of listed companies, and in case of unlisted companies, the variations in the net worth of the company as at the close of the current financial year and previous financial year; Company's market capitalization increased by 26.39% to Rs. 53,78,17,139.20 as of March 31, 2015 from Rs. 42,54,98,620.80 as of March 31 , 2014. The price earning ratio was (0.66) as of March 31, 2015 in comparison to (0.58) as compared to March 31, 2014. The closing price of the Company equity shares on the NSE and BSE as of March 31, 2015 was Rs. 6.50 and Rs. 6.56 respectively. (e) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration: Since Company is a sick industrial company and in view of losses, no increase was made in the managerial remuneration. (f) The key parameters for any variable component of remuneration availed by the directors: No variable component of remuneration was availed by the Directors of the Company. (g) The ratio of the remuneration of the highest paid Director to that of the employees who are not Directors but receive remuneration in excess of the highest paid Director during the year: The highest paid Director in the Company is Mr. R. K. Srivastava with annual remuneration of Rs. 18 Lakhs as per Central Govt. approval. The ratio of remuneration of employees receiving in excess to that is as follows:- (h) It is hereby affirmed that the remuneration paid is as per the Remuneration Policy of the Company. 26. Auditors and their reports a) Statutory Auditors M/s. Khandelwal Jain & Co. (FRN 105049W), Chartered Accountants, were appointed as Statutory Auditors of the Company for a period of three years and M/s. Parikh & Jain (FRN 001105C), Chartered Accountants, were appointed as Statutory Auditors of the Company for a period of two years in previous Annual General Meeting held on 23.09.2014. The Board proposes to members of the Company to ratify their appointment for the financial year 2015 - 16, pursuant to the provisions of Section 139 of the Companies Act, 2013, at the ensuing Annual General Meeting of the Company. In respect of observations made by the Statutory Auditors in their Report, your Directors wish to state that the respective notes to the accounts are self-explanatory and do not call for any further comments. b) Secretarial Auditors M/s. Adesh Tandon & Co., Practicing Company Secretary (FCS. 2253, CP No. 1121) of Kanpur, appointed as Secretarial Auditors of the Company submitted their Secretarial Audit Report, for the Financial Year 2014-15, pursuant to the Section 204 of the Companies Act, 2013 which is being attached herewith as Annexure - 'D' No adverse observations are made by the Secretarial Auditors in their Report. c) Internal Auditors Pursuant to Section 138 of the Companies Act, 2013, Board has appointed M/s Onkar Tandon & Co., Chartered Accountants (FRN 000953C) of Kanpur as an Internal Auditor of the Company for the financial year 2015-16 as recommended by the Audit Committee of the Company. 27. Conservation of Energy Company continued to envisage and implement energy conservation measures in various manufacturing operations leading to savings of quantitative consumption of power, fuel & oil etc. Energy conservation during the year under various heads resulted into an estimated saving of Rs. 2.70 lacs (in previous financial year 2013-14: Rs. 2.66 lacs). 28. Pollution Control Relevant and necessary effluent treatment plants and other measures for control of water, air and environmental pollution are in place and steps have been taken to further strengthen and consolidate pollution control measures. 'No Objection Certificates' from the U.P. Pollution Control Board are obtained from time to time. 29. Technology Absorption Requisite information in prescribed form is given in Annexure 'E' to this report. 30. Foreign Exchange Earnings and Outgo Your Company earned during the year Foreign Exchange of Rs. 144.57 crores (previous financial year - Rs. 174.76 crores) while Foreign Exchange outgo during the year amounted to Rs. 13.09 crores (previous financial year - Rs. 22.73 crores). 31. Stock Exchange Listing The Equity Shares of the Company are listed on the following Stock Exchanges (with respective stock codes/ symbol):- i) BSE Limited (BSE), Mumbai (500255); ii) National Stock Exchange of India Limited (NSE), Mumbai (LML). The Equity and Preference Shares of the Company were also listed on the U.P. Stock Exchange Limited, Kanpur. However, as per SEBI circular dated May 30th 2012 read with circular dated May 22nd 2014 related to Companies exclusively listed on De-recognized/ Non-operational Stock Exchanges, U.P. Stock Exchange Limited, Kanpur got de-recognized on account of non fulfillment of the prescribed conditions. The Company confirms that it has paid the annual listing fee to BSE and NSE. 32. Depository System SEBI vide its Circular No. SMDRP/Policy/CIR-01/2000 dated 6th January, 2000 notified that trading in Equity Shares of the Company is permitted only in dematerialized form w.e.f. 17th January, 2000. Requests received for dematerialization of shares are processed and confirmation is given to the respective depositories i.e. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) within the stipulated time. As on 31st March, 2015, 95.82% equity shares of the Company have been dematerialized. 33. General The Company became a Sick Industrial Company within the meaning of Section 3(1)(o) of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) due to erosion of its net worth and the Company was declared a sick industrial company by BIFR on 8th May, 2007. As directed by BIFR, the Company has since submitted the updated revival scheme. In view of this, no impact is foreseen on the going concern status of the Company and the Company's operations in future. The matter is pending before the Hon'ble BIFR. The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 is not applicable to the Company, as there is no woman employee in the Company. 34. Cautionary Statement The statement in the Director's report and MD&A, detailing the Company's objectives and expectations, may contain 'forward looking statements' within the meaning of applicable securities laws and regulations. The actual results inter-alia may differ materially from those expressed or implied, depending upon changes in global and Indian demand-supply conditions as well as changes in government regulations, tax regimes, economic and market developments, movements. 35. Acknowledgement Your Directors take this opportunity to appreciate deeply the valuable co-operation extended by the Central and State Government authorities and are extremely grateful to the Financial Institutions and Banks for their continued assistance, guidance and support. Your Directors are also grateful to all stakeholders, including Customers, Shareholders, Employees, Vendors, Distributors, Dealers / Sub-dealers, and the general public for their support and confidence reposed in the Management. For and on behalf of Board of Directors LML Limited Deepak Kumar Singhania Chairman & Managing Director DIN:00012037 Place : Gurgaon Dated : 29.05.2015 |