DIRECTORS' REPORT Your Directors have pleasure in presenting the Annual Report for the financial year ended 31st March, 2015 Review of Operations The Company registered total revenue of Rs. 1,713.03 crore during the year under review as against Rs. 1,745.72 crore in the previous financial year. The Profit after tax was Rs. 81.53 crore during the year under review as against Rs. 113.09 crore in the previous financial year. The decline in profit after tax has been due to exceptional losses during the current financial year. Profit before tax and exceptional items improved by 1.39% at Rs. 174.66 crore during the year under review as against Rs. 172. 26 crore in the previous financial year. The Company's sustained efforts towards back-end cost control, new product launches and efficiency improvement measures, supported the insulation and limited the impact on the profitability margins. The profit before tax and exceptional items as a percentage of total revenue for the year under review was higher at 10.20% as against 9.86% in the previous financial year. The Company's ability to better utilise capacities and product range will help derive better margins out of the businesses. The outlook of each business has been discussed in detail in the 'Management Discussion & Analysis' which forms a part of this Annual Report. Dividend The Directors have recommended a final dividend of Rs. 1.10 per share which together with the interim dividend of Rs. 1.40 per share of Rs. 2 paid during the year, aggregates to Rs. 2.5 per share of Rs. 2 as against Rs. 1.30 per share in the previous year. The total dividend pay-out for the year under review, excluding tax on dividend, is Rs. 61.05 crore as against Rs. 31.74 crore in the previous year. Dividend as a percentage of profit after tax is 74.88% as compared to 28.07% in the previous year. Public Deposits The Company discontinued its Fixed Deposit Scheme in April, 2005. During the year under review, the Company did not accept any deposits within the meaning of the provisions of Chapter V of the Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014. Investor Education and Protection Fund Pursuant to the provisions of Section 124 of the Companies Act, 2013, the amount of dividend remaining unpaid or unclaimed for a period of seven years from the date of transfer to the unpaid account, is required to be transferred to the Investor Education and Protection Fund (IEPF) of the Central Government. Accordingly, unpaid or unclaimed dividends in respect of the 3rd interim dividend and final dividend for the financial year ended 31st March, 2007, the 1st and 2nd interim dividend for the financial year ended 31st March, 2008 and the unclaimed fixed deposits have been transferred to the IEPF Members, who have not yet en-cashed or claimed the dividend / fixed deposits, that are yet to be transferred to the IEPF, are requested to contact the Company's Registrar and Share Transfer Agent, at the earliest. Report on performance of Subsidiaries During the year, no company became or ceased to be a subsidiary of the Company. The details of the performance of the subsidiary companies are as follows: Greaves Leasing Finance Limited (GLFL) GLFL, a wholly owned subsidiary of the Company, is a non-banking finance company. It reported total revenue of Rs. 2.53 crore and profit after tax of Rs. 1.95 crore for the year under review. Being in excess of its requirements, the Paid-up Share Capital of GLFL, as per the order of the Hon'ble High Court of Bombay, was reduced from Rs. 20,78,10,690 comprising of 2,07,81,069 Equity Shares of Rs. 10 each to Rs. 25,00,000 comprising of 2,50,000 Equity Shares of Rs. 10 each. The excess capital i.e. Rs. 20,53,10,690 comprising of 2,05,31,069 Equity Shares of Rs. 10 each was paid off / returned to the holder of the said Equity Shares. GLFL, post reduction of the Paid-up Share Capital, is in compliance with the requirements pertaining to maintenance of minimum Net Owned Funds as stipulated in Section 45-IA of the Reserve Bank of India Act,1934. Dee Greaves Limited (DGL) DGL, a wholly owned step-down subsidiary through GLFL, did not undertake any business during the financial year under review. A marginal profit, representing interest income, was earned during the year. Greaves Cotton Middle East FZC, United Arab Emirates (GCME) GCME, a wholly owned step-down subsidiary of the Company through GLFL, is engaged in trading and after sales services of the company's products in the Middle East and the North African countries and has a strategic importance. For the year under review, GCME recorded revenue of Rs. 18.08 crore (previous year Rs. 14.51 crore) and incurred a loss of Rs. 1.66 crore (previous year Rs. 1.03 crore). Greaves Auto Limited (GAL) GAL, a wholly owned subsidiary of the Company, being a dormant company, was struck off from the register of the Registrar of Companies with effect from 10th April, 2014, under the Fast Track Scheme of the Ministry of Corporate Affairs. A statement containing salient features of the financial statement in Form AOC-1, as required under Section 129(3) of the Companies Act, 2013, forms a part of this Annual Report. The audited financial statement of each subsidiary company shall be kept open for inspection at the Registered Office of the Company on every working day between 10 a.m. to 12 noon up to the date of the forthcoming Annual General Meeting. Consolidated Financial Statement The consolidated financial statement, prepared by the Company in accordance with the applicable Accounting Standards issued by the Institute of Chartered Accountants of India and the provisions of the Listing Agreement with the Stock Exchanges, forms a part of this Annual Report. The Auditors' Report on the consolidated financial statement is also attached. The same is unqualified. Management Discussion & Analysis Detailed review by the Management of the operations, performance and future outlook of the Company and its business, pursuant to Clause 49 of the Listing Agreement is presented in a separate section - Management Discussion and Analysis, which forms a part of this Annual Report. Corporate Governance Report The Company has followed the principles of Corporate Governance in letter and spirit. Requirements relating to Board of Directors, its Committees, Related Party transactions, Disclosures etc. as prescribed under Clause 49 of the Listing Agreement have been duly complied with. A detailed Report on Corporate Governance and a Certificate from the Statutory Auditors confirming compliance of conditions of the Corporate Governance, forms a part of this Directors' Report. Compliance with the Code of Conduct A declaration signed by the Managing Director & CEO affirming compliance with the Company's Code of Conduct by the Directors and Senior Management, for the financial year 2014-15, as required under Clause 49 of the Listing Agreement form a part of this Annual Report. Environment, Health and Safety The Company is committed to conduct business in a sustainable manner with adequate safety procedures in place at each unit level. Measures have been implemented across the Company for stringent compliance with Environment, Health and Safety (EHS) regulations. EHS is a key Management focus area. Our plants are governed by our "Environment, Occupational Health and Safety Policy" and are certified in accordance with ISO 14001 and OHSAS 18001 Standards. Waste generation is continually reduced through 3Rs (Reduce, Reuse & Recycling). Apart from annual health check up for employees, all units have a first aid facility including a room for recuperation, with doctors on call round the clock. Various low cost automations at workplace area have been introduced to reduce fatigue. Regular training is provided to employees on EHS. Mock Drills and emergency evacuation exercises are carried out at specified intervals. New systems like SMAT (Safety Management Auditing Training) & SAR (Safety Activity Rate) have been initiated in our plants. In order to sustain focus on EHS, various competitions on safety and environment through posters, slogans, essays and poems have been conducted in our plants. Results of safety initiatives are visible through reduced number of reportable accidents. Human Resources The Directors place on record their appreciation for the employees' valuable contribution at all levels. Our industrial relations continue to be cordial. The total number of permanent employees of the Company as on 31st March, 2015 was 2,005 (2,307 as on 31st Ma rch, 2014). During the year under review, the Company continued to focus on talent conservation and talent development. Pursuant to the requirements under the Prevention of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company has enacted a Policy on Prevention, Prohibition and Redressal of Sexual Harassment at Work Place. There were no cases filed during the year under review. Awards We are pleased to share that the Light Engine Unit - V of the Company, located at Shendra MIDC, Aurangabad has been awarded the prestigious Silver Medal in the national Green Manufacturing Challenge conducted by the International Research Institute for Manufacturing (IRIM). Directors and Key Managerial Personnel Mr. Karan Thapar, retires by rotation at the forthcoming Annual General Meeting, and being eligible, offers himself for re-appointment. The Board recommends the re-appointment. Ms. Monica Chopra was appointed as an Additional Director with effect from 1st August, 2014. She holds office up to the date of the forthcoming Annual General Meeting. The Company has received from her the requisite notice in writing along with the necessary deposit signifying her candidature for the office of Director. The Board recommends the appointment. Profiles of these Directors, as required by Clause 49 of the Listing Agreement, are given in the Notice of the forthcoming Annual General Meeting. During the year, the following Directors were appointed as Independent Directors by the Shareholders at the 95th Annual General Meeting held on 31st July, 2014 in compliance with the provisions of Sections 149, 152, Schedule IV of the Companies Act, 2013 read with Companies (Appointment and Qualification of Directors) Rules, 2014: Mr. Sunil Pahilajani, Managing Director & CEO, Ms. Monica Chopra, Executive Director - Legal & Company Secretary, and Mr. Narayan Barasia, Chief Financial Officer, are the Key Managerial Personnel of the Company as per the provisions of Sections 2 (51) and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Statement on declaration given by the Independent Directors As required under Section 149 (7) of the Companies Act, 2013, all the Independent Directors have given their respective declarations that they meet the criteria of independence as specified in Section 149 (6) of the Companies Act, 2013. Directors' Responsibility Statement In terms of Section 134(5) of the Companies Act, 2013 the Directors state that to the best of their knowledge and belief and according to the information and explanations obtained by them: 1. In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; 2. The Directors had 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 as at 31st March, 2015 and of the Profit of the Company for that period; 3. The Directors had 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; 4. The Directors had prepared the annual accounts on a going concern basis; 5. The Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; 6. The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Policy on appointment and remuneration of Directors The Company has constituted a Nomination and Remuneration Committee and formulated the criteria for determining the qualification, positive attributes and independence of a Director (the Criteria). The Nomination and Remuneration Committee has recommended to the Board a policy relating to the remuneration for Directors, Key Managerial Personnel and other employees, as required under Section 178 (1) of the Companies Act, 2013. The Remuneration Policy is given as Annexure 1 to this Directors' Report. The Criteria, inter alia, includes: a person to be appointed on the Board of the Company should possess in addition to the fundamental attributes of character and integrity, appropriate qualifications, skills, experience and knowledge in one or more fields of engineering, banking, management, finance, marketing and legal, a proven track record, etc. As required under the provisions of Section 197 (14) of the Companies Act, 2013, the Executive Directors of the Company confirm that they do not receive any remuneration or commission from any subsidiary of the Company. Ratio of remuneration of each Director to the median remuneration of the employees of the Company for the Financial Year The information required pursuant toSection 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company is available. In terms of Section 136 (1) read with its relevant provisio of the Companies Act, 2013, the Annual Report excluding the aforesaid information is being sent to the Members of the Company and others entitled thereto. The said information is available for inspection by the Members at the Registered Office of the Company during working hours up to the date of the forthcoming Annual General Meeting. Familiarisation Programme for Directors The Company has formulated a structured orientation programme including presentations by key personnel, information about the various codes, policies, etc. to familiarize the new Directors with the Company's operations. In addition, plant visits are organised to familiarise the Directors with the Company's products, production process, etc. Periodically, the Company sponsors interested Directors for seminars / training programmes. Presentations made at the Board / Committee Meetings, inter alia, cover the business strategies, human resource matters, budgets, initiatives, risks, operations of subsidiaries, etc. where the Directors get an opportunity to interact with the Senior Management. The Directors' Familiarisation Programme is available on the website of the Company on www.greavescotton.com Evaluation of performance of Board, its Committees and The Board has established a comprehensive and participative annual process to evaluate its own performance, its Committees and the individual Directors. The performance evaluation matrix defining the criteria of evaluation for each of the above was prepared by the Nomination and Remuneration Committee. The criteria for perfomance evaluation includes, inter alia, relevant experience and skills of the Directors, ability and willingness to speak up, ability to carry others, ability to disagree, stand his / her ground, Integrity, focus on shareholder value creation and high governance standards. The performance evaluation of the Independent Directors was carried out by the entire Board (excluding the Director being evaluated). The outcome of the evaluation process conducted was, inter alia, recognition of strengths, identification of areas of improvements, focus areas for the future, etc. During the year, a meeting of the Independent Directors was held to review the performance of the non-independent Directors and the Board as a whole and the Chairman on the parameters of effectiveness and to assess the quality, quantity and timeliness ofthe flow ofinformation between the Management and the Board. Mr. Vikram Tandon was appointed as the Lead Director to oversee the evaluation process at the meeting of the Independent Directors. Loans, Guarantees and Investments Particulars of loans, guarantees and investments as on 31st March, 2015 are given in the Notes to the financial statement. Contracts and arrangements with Related Parties All transactions of the Company with Related Parties are in the ordinary course of business and at arm's length. Information about the transactions with Related Parties are given in the Corporate Governance Report which forms a part of this Annual Report. Form AOC - 2 pursuant to the provisions of Section 134 (3) (h) of the Companies Act, 2013, read with Rule 8 (2) of the Companies (Accounts) Rules, 2014 is given as Annexure 2 to this Directors' Report. Number of Meetings of the Board The details of the number of meetings of the Board and other Committees are given in the Corporate Governance Report which forms a part of this Annual Report. Extract of Annual Return As required pursuant to Section 134 (3) (a) of the Companies Act, 2013, an extract of Annual Return in the prescribed Form MGT 9 is given as Annexure 3 to this Directors' Report. Conservation of energy, technology absorption, foreign exchange earnings and outgo Particulars of conservation of energy, technology absorption foreign exchange earnings and outgo, as prescribed in Rule 8 (3) of the Companies (Accounts) Rules, 2014 are given as Annexure 4 to this Directors' Report. Risk Management Policy The Company has constituted a Risk, CSR and Strategy Committee of Directors to oversee the risk management efforts. The Company has put in place a robust Enterprise Risk Management (ERM) Policy which covers strategic risks, operational risks, regulatory risks and catastrophic risks and provides a clear identification of "Risks That Matter (RTM)". These RTMs are monitored on a quarterly basis by the Management and on a half-yearly basis by the Risk, CSR and Strategy Committee. Implementation of this ERM Policy effectively supports the Board and the Management in ensuring that risks, if any, which may significantly impact the Company are adequately highlighted and mitigation actions are implemented in a time-bound manner to reduce the risk impact. There are no risks, which in the opinion of the Board threaten the existence of the Company. However, the risks that may pose a concern are set out in the Management Discussion and Analysis, which forms a part of this Annual Report. Corporate Social Responsibility The Company believes that being a good corporate citizen begins with being a great community leader. Economic and social development of people from the under-privileged section of the society is thus firmly embedded across the business fabric. Committed to creating opportunities for the local people to enable their empowerment, initiatives are aligned to areas of skill development. An important intervention undertaken by the Company to promote job growth is its ongoing programme to develop Authorised Trained Mechanics (ATM). The programme, now running for around two decades at the Company's facilities, focuses on training people and building capabilities for repair and maintenance of engines. Promoting self-sufficiency and improving the quality of life through technical and financial support, the ATM programme has been very well-received by the local community. By contributing to community welfare and fulfilling unmet needs, the Company will continue to work towards bringing about a transformation in the communities in and around its areas of operations. Pursuant to the provisions of Section 135 of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company has adopted a CSR Policy, as recommended by the Risk, CSR and Strategy Committee covering the objectives, initiatives, outlay, implementation, monitoring, etc. The CSR Policy is uploaded in the Company's website www.gravescotton.com A report on the CSR activities in the prescribed format as set out in Annexure to the Companies (Social Responsibility Policy) Rules, 2014, duly signed by the Managing Director & CEO and the Chairman of the Risk, CSR and Strategy Committee, is given as Annexure 5 to this Directors' Report. Vigil Mechanism and Whistle Blower Policy The Company has established a vigil mechanism, through a Whistle Blower Policy, where Directors and employees can voice their genuine concerns or grievances about any unethical or unacceptable business practice. A whistle-blowing mechanism not only helps the Company in detection of fraud, but is also used as a corporate governance tool leading to prevention and deterrence of misconduct. It provides direct access to the employees of the Company to approach the Compliance Officer or the Chairman of the Audit Committee, where necessary. The Company ensures that genuine Whistle Blowers are accorded complete protection from any kind of unfair treatment or victimisation. Internal Financial Controls related to financial statement The Company has in place adequate internal financial controls related to financial statement. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed. Some of the controls are outlined below: • The Company has adopted accounting policies, which are in line with the Accounting Standards and other applicable provisions of the Companies Act, 2013; • Changes in policies, if any, are approved by the Audit Committee in consultation with the Auditors; • In preparing the financial statement, judgements and estimates have been made based on sound policies. The basis of such judgements and estimates are approved by the Auditors and the Audit Committee; • The stand alone accounts are audited every quarter by the Auditors. Internal Control Systems and their adequacy Details of the Internal Control Systems and their adequacy are provided in the Management Discussion and Analysis which forms a part of this Annual Report. Statutory Auditors The Company's Auditors, Walker, Chandiok & Co LLP, Chartered Accountants, Mumbai and the Branch Auditors, Wrigley Partington, U.K., in respect of Company's Branch in Cheshire, London (U.K.), retire at the forthcoming Annual General Meeting. The appointment of the Statutory Auditors and re-appointment of the Branch Auditors forms a part of the Notice convening the forthcoming Annual General Meeting and the Resolutions are recommended for your approval. Secretarial Auditors Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, your Company engaged the services of M/s Pradeep Purwar and Associates, Company Secretary in Practice, Mumbai to conduct the secretarial audit of the Company for the financial year ended 31st March, 2015. The Secretarial Audit Report (Form MR - 3) is given as Annexure 6 to this Directors' Report. Auditors' Report Reports issued by the Statutory Auditors on the financial statement for the financial year ended 31st March, 2015 and by the Secretarial Auditors on the verification of secretarial and compliance records of the Company for the financial year ended 31st March, 2015 do not contain any qualification, reservation or adverse remark or disclaimer. Cost Auditors Pursuant to the provisions of Section 148 (3) of the Companies Act, 2013, the Board has appointed M/s Dhananjay V. Joshi & Associates, Cost Accountants, as the Cost Auditors of the Company to conduct an audit of the cost records maintained by the Company for the financial year ending 31st March, 2016. The Board has approved the remuneration payable to the Cost Auditors subject to approval of the Members at the forthcoming Annual General Meeting. Other Disclosures The Directors confirm that during the financial year under review- • no significant and material order has been passed against the Company by any Regulator or Court or Tribunal which will impact the going concern status of the Company's operations; • there was no issue of Equity Shares with differential rights as to dividend, voting or otherwise; there was no issue of shares (including Sweat Equity Shares) to the employees of the Company under any scheme. Acknowledgement The Board places on record its appreciation for the support and co-operation the Company has been receiving from its all stakeholders. The Company looks upon them as partners in its progress. It will always be the Company's endeavour to build and nurture strong relationship for mutual benefits. For and on behalf of the Board Karan Thapar Chairman Place : Mumbai Date : 6th May, 2015 |