DIRECTORS' REPORT To, The Members of EMCO Limited, Your Directors take immense pleasure in presenting their 50th Annual Report on the business and operations of the Company and statement of accounts for the year ended 31st March 2015. Overview of Company's Financial Performance During the year under review, Income from Sales and Services was Rs. 91,243 Lakhs against Rs. 83,826 Lakhs in the previous year. The Company has earned a net profit of Rs. 325 Lakhs in the current financial year against the net profit of Rs. 707 Lakhs in the previous financial year. Transfer to reserves During the financial year, the Company did not transfer any amount to reserve. Dividend Considering the past performance of the Company and to maintain the consistent track record of dividend, your Directors are pleased to recommend for your approval a dividend of 10 paisa per equity share of Rs. 2/- each for the financial year 2014-2015 out of the current year's profit. Change in the nature of business There was no change in the nature of business of the Company during the financial year. Public Deposits During the financial year 2014-15, your Company has not accepted any deposit within the meaning of Sections 73 and 74 of the Companies Act, 2013 read together with the Companies (Acceptance of Deposits) Rules, 2014. Subsidiaries and Joint venture Companies Pursuant to Section 136 of the Companies Act, 2013, the audited accounts of each of the Company's subsidiaries are placed on the website of the Company. If any Member of the Company so desires, the Company will be happy to make available the Annual Accounts of the subsidiaries to him/her, on request. The physical copies of the aforesaid documents will also be available at the Company's Registered Office for inspection during normal business hours on all working days, excluding Saturdays. Consolidation of Accounts The performance and financial position of each of the subsidiaries, associates and joint venture companies are detailed in 'Statement containing salient features of the financial statement of subsidiaries/associate companies/ joint ventures' in form AOC I pursuant to Section 129 of the Companies Act, 2013 and given in 'Annexure A' to this report. Directors and Key Managerial Personnel During the financial year, Mr. Rajesh S. Jain (DIN: 00005829), Whole Time Director (WTD) designated as Chairman of the Company was going to be ceased his term as WTD on October 19, 2014. The Nomination and Remuneration Committee of the Board of Directors had recommended to the Board for re-appointment of Mr. Rajesh S. Jain as WTD for the period of 3 years. The Board on recommendation of said committee had approved the same and recommended to the Members for their approval. Accordingly, the Members at their Annual General Meeting held on August 08, 2014 accorded their approval for such appointment. Pursuant to the provisions of Section 152 of the Companies Act, 2013 and in accordance with the Articles of Association of the Company, Mr. Rajesh S. Jain, WTD of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible, offer himself for re-appointment. During the year under review, on account of health issues Mr. K. N. Shenoy (DIN:00021373), Independent Director, resigned on May 14, 2014 from the Board of the Company. Further, the Board at their meeting held on October 17, 2014 appointed Mr. Amit Sudhakar as the Chief Financial Officer (CFO) of the Company in place of Mr. Ram Mundra who resigned as CFO on September 29, 2014. Mr. Ganesh Tawari was appointed as the Company Secretary of the Company on February 26, 2015 in place of Mr. Pravin Kumar who resigned as Company Secretary on August 30, 2014. Mr. K. N. Shenoy, Independent Director of the Company expired on August 18, 2014. The Board has placed on record it appreciation for the valuable contribution made and support extended by Mr. K. N. Shenoy during his tenure. The Board has placed on record its appreciation for the valuable contribution made and support extended by Mr. Ram Mundra and Mr. Pravin Kumar during their respective tenure. Pursuant to the provisions of Sections 149, 152 and 161 of the Companies Act, 2013, Mrs. Priyamvada Bhumkar (DIN: 00726138) was appointed as an Additional Director (Woman - Independent Director) of the Company. The Company has received a notice in writing from a member along with requisite deposit under Section 160 of the Companies Act, 2013, proposing her candidature for the office of Director. Your Directors recommend her appointment for a term of 5 (five) years. Re-appointment of Independent Directors Pursuant to Section 149 and other applicable provisions, if any, of the Companies Act, 2013 and rules framed there under, Mr. S. V. Deo (DIN:00210554), Mr. Bherulal Choudhary (DIN:00011905) and Mr. Sanjay Bhatnagar (DIN:00867848), Independent Directors of the Company will be completing their first term of appointment on the Board at the ensuing Annual General Meeting of the Company. The Company has received notices in writing from a member along with requisite deposit under Section 160 of the Act, proposing their candidatures for the office of Director. Your Directors recommend their re-appointment for a next term of 5 (five) years by passing a special resolution separately for each one of them. The brief profiles of the Directors as required under Clause 49 of the Listing Agreement entered with the Stock Exchange(s) are disclosed in the notice convening 50th Annual General Meeting. Declaration by independent directors The Company has received necessary declaration from each independent director under Section 149(7) of the Companies Act, 2013, that he/she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future During the financial year, there were no such orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future. Adequacy of Internal Financial Control The Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company's policies, the safeguarding the assets, the prevention and detention of frauds and errors, the accuracy and completeness of the accounting records, and timely preparation of reliable financial disclosure. Composition of Audit Committee The Audit Committee comprises of three Non-Executive Directors, all of whom are Independent Directors. The Chairman and other Members of the Committee are having ability to read and understand financial statement. Besides, all members have knowledge of finance, accounting and law. There were no matters during the financial year 2014-2015, wherein the Board did not accept recommendations given by the Audit Committee. Establishment of Vigil Mechanism The Company has established and adopted Vigil Mechanism and the policy thereof for directors and employees of the Company in accordance with the provisions of the Companies Act, 2013 as well as listing agreement. During the year under review, no personnel of the Company approached the Audit Committee on any issue falling under the said policy. The vigil mechanism policy is available on the website of the company at link: <http://www.emco.co.in/pdf/policy/Vigil%20> Mechanism%20Policy.pdf Particulars of remuneration to employees The particulars of remuneration to directors and employees and other related information required to be disclosed under Section 197 (12) read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules are given in 'Annexure B' to this Report. Management Discussion and Analysis The Management Discussion and Analysis forms part of the Directors' Report is annexed herewith as 'Annexure C'. Auditors a) Statutory Auditors The Company's Auditors, M/s. P. Raj & Co.(FRN:108310W), and M/s. Chaturvedi & Shah (FRN:101720W), Chartered Accountants, Statutory Auditors hold office up to the conclusion of the forthcoming 50th Annual General Meeting and being eligible, offer themselves for re-appointment. The Company has received letter from them giving their consent to act as Auditors of the Company and stating that their re-appointment, if made, would be within the prescribed limits under Section 139 of the Companies Act, 2013. Your Directors recommend their re-appointment for the second term of 2 years and 5 years respectively. b) Secretarial Auditors Makarand M. Joshi & Co., Practicing Company Secretaries, was appointed to conduct the Secretarial Audit of the Company for the financial year 2014-2015, as required under Section 204 of the Companies Act, 2013 and Rules thereunder. The secretarial audit report for financial year 2014-2015 forms part of the Directors Report as 'Annexure D' to the Board's report. c) Cost Auditors The Company has appointed M/s. Kishore Bhatia & Associates (FRN:00294), Cost Accountants, as Cost Auditors of the Company for the financial year 31st March, 2015 at a remuneration of Rs. 1 Lac. The Company maintains cost accounting records as required under Section 148 (1) of the Act. The Compliance certificate in this regard to be obtained from the Cost Accountants for the year ended 31st March 2015. Your Directors recommend to ratify remuneration payable to him for the year ended 31st March 2015 and 31st March 2016. d) Internal Auditors M/s. Rahul Birla & Company (FRN:122589W), Chartered Accountants, were appointed the Internal Auditors of the Company for the financial year 2014-15. Based on the recommendation of the Audit Committee of the Company, the Board of Directors has appointed M/s. Rahul Birla & Company, Chartered Accountants as the Internal Auditors of the Company for the financial year 2015-16. Explanations by the Board on qualification, reservation or adverse remark or disclaimer made by the • Auditors in their report There were no qualification, reservation, disclaimer and adverse remarks made by the Auditors of the Company in their audit report. • Company Secretary in practice in his secretarial audit report The qualification given by the Company Secretary in practice in his secretarial audit report: Extract of Annual Return In accordance with Section 134(3)(a) of the Companies Act, 2013, an extract of the Annual return in the prescribed format is annexed herewith as 'Annexure E ' to the Board's report. Number of Meetings of the Board During the financial year, 9 (Nine) Board Meetings and 5 (Five) Audit Committee Meetings were held. The details of which are given in the Corporate Governance Report forming part of the Annual Report. Directors' Responsibility Statement Pursuant to the requirement of Section 134(3)(c) of the Companies Act 2013, with respect to the Directors' Responsibility Statement, it is hereby confirmed: a) that in the preparation of the accounts for the financial year ended on 31st March, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures; b) that the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2015 and of the profit/ loss of the Company for the year ended on that date; c) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) that the Directors had prepared the accounts for the financial year ended on 31st March, 2015 on a 'going concern' basis. e) that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively. f) that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively. Policy on directors' appointment and remuneration Policy for Selection and Appointment of Directors and their Remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters under Sub-section (3) of Section 178 of the Companies Act, 2013, adopted by the Board, is given in the Corporate Governance Report forming part of this report. Particulars of loans, guarantees or investments under Section 186 Your Company being engaged in providing infrastructural facilities, the provisions of Section 186 of the Companies Act, 2013 with regards to loan made, guarantee given or security provided is not applicable. Whereas investment made during the year has been disclosed in notes to accounts of the Financial Statement. Particulars of contracts or arrangements made with related parties There were no new contract or arrangements entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Companies Act 2013 during the financial year 2014-2015. Hence, particulars of related party contracts or arrangements in form AOC - 2 is not applicable Corporate Governance Report As required by clause 49 of the Listing Agreement with the Stock Exchange(s), a report on Corporate Governance and a certificate confirming compliance with requirement of Corporate Governance forms part of this Annual Report. Training to Independent Directors The Company had arranged a presentation on rights, duties and responsibilities of Independent Directors brought by the Companies Act, 2013 and listing agreement. The Independent directors of the Company attended the said presentation given by a practicing company secretary. The details of presentation is available at web link <http://www.emco.co.in/other-information.html> Preferential allotment The Members at their Extraordinary General Meeting held on 22nd January, 2015 passed a special resolution according their consent to the Board for issue and allotment of 24,39,025 equity shares of Rs. 2/- each at a premium of Rs. 39/- per share to EMCO Investments Private Limited, a promoter group company, on preferential allotment basis. Accordingly, the Board allotted EMCO Investments Private Limited 11,00,000 equity shares on 26th February, 2015 and 13,39,025 equity shares on 4th March, 2015. The Company has complied with all applicable provisions of the Companies Act, 2013, listing agreement and SEBI regulation. Material changes and commitments affecting financial position between the end of the financial year and date of report There are no material changes and commitments affecting financial position between the end of the financial year and date of report. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings & Outgo The particulars as prescribed under Sub-section (3)(m) of Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014, are enclosed as 'Annexure F' to the Board's report. Risk Management Policy and Compliance Framework The Board at their Meeting held on 17th October, 2014 constituted the Risk Management Committee and adopted the Risk Management Policy with a majority of Board Members, the details of which are as follows: The Company is mainly engaged in the Engineering Procurement and Construction (EPC) projects and Transformer business. The Company continuously identifies and mitigates the arising risks through a robust risk identification and management system. Details of some of the risks involved in the business are discuss below: 1) Commodity Risk The Company deals with various commodities, such as steel, zinc, copper and aluminium. Fixed price contracts can have a negative impact if input costs rise, if it is not appropriately hedged in time. By adding price escalation clause in most of the contracts, the Company passes off such negative impacts to its client, partially or completely. 2) Currency Risk The Company is exposed to the risk of currency fluctuations, if any exposure remains open. The Company believes in keeping its currency exposures hedged. It measures and manages these risks centrally and carries out periodic reviews of these risks; whenever required external experts are also consulted. 3) Execution Risk Execution delay may results in cost overruns and may also negatively impact company's reputation. EPC projects could face delays due to external factors like Right of Way issues, manpower shortages, etc. The Company deploys a well-defined standard operating procedure (SOP) - from project planning to completion. It keeps a close watch and review these risks periodically and take timely course corrections. Corporate Social Responsibility (CSR) Detailed Information as required pursuant to the provisions of Section 134 of the Companies Act 2013, and Rule 9 of the Companies (Corporate Social Responsibility) Rules, 2014 is annexed herewith as 'Annexure G ' forming part of this report. Board Evaluation Clause 49 of the Listing Agreement mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated The evaluation of all the directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board. The evaluation process has been explained in the corporate governance report section in this Annual Report. Insurance All the assets of the Company are adequately insured. Acknowledgment Your Directors would like to express their grateful appreciation for the assistance, support and co-operation received from the Financial Institutions, Banks, Government Authorities and Shareholders during the year under review. Your Directors would also like to take this opportunity to express their appreciation to the dedicated and committed EMCOites for the contribution in trying to achieve the Company's vision to "To Build A World Class Company Through Reliability and Be A Great Place To Work". On behalf of the Board of Directors For EMCO LIMITED Sd/- Rajesh S. Jain Chairman (DIN:00005829) Place: Mumbai Date: 29th May, 2015 |