DIRECTORS' REPORT Your Directors are pleased to present the 60th Annual Report and Audited Statement of Accounts for the financial year starting 1st January 2014 ending 31st March 2015. The Ministry of Corporate Affairs (MCA) has vide its General Circular No. 08/2014 dated 24th April, 2014, clarified that the financial statements (and documents required to be attached thereto), Auditors' Report and the Directors' Report in respect of financial years that commenced earlier than 1st April, 2014, shall be governed by the relevant provisions/ Schedules/ Rules of the Companies Act, 1956, In view of this, the Directors' Report has been prepared as per the provisions of the Companies Act, 1956. Operations The Board of Directors of the Company in the Board meeting held on October 31, 2014 approved the change in the financial year of the Company from January-December to April-March effective April 1, 2014. In view of this, the current financial year comprises of a period of 15 months i.e. January 1, 2014 to March 31, 2015. The Net income of the Company during the financial year ended 31st March 2015 was Rs.1,60,722.21 lacs as against Rs. 1,18,009.11 lacs for the financial year ended 31st December 2013. During the year under review, the Company made a net profit after tax of Rs. 3,135.54 lacs as against the net profit after tax of Rs. 2,058.56 lacs in the previous financial year. During the period from January 1, 2014 to March 31, 2015, the automobile component industry recovered in terms of business growth as compared to previous year. During first half of 2014, the automotive industry has provided mixed signals, as Light Vehicles and Commercial vehicles had a negative growth, however, strong growth was seen in the two wheeler and three wheeler market segments. Auditors' Comments The Auditors have made certain observations in their annexure to their report, concerning the accounts of the Company. The Management puts forth its explanations as below : With regard to Auditor's observation on the utilization of short term borrowings for long term purposes, the Management is taking necessary remedial actions. DIVIDEND In view of requirement of funds for the operations of the Company, no dividend is recommended for the financial year ended 31st March, 2015. MANAGEMENT DISCUSSION AND ANALYSIS: (a) Industry structures and developments Indian auto component makers faced the heat of a global auto slowdown during first half of 2014. Due to the slipping growth in commercial vehicle and passenger car segments, the supplies of component makers fell too. Two wheeler and three wheeler market segments, however, witnessed strong growth.The auto industry seems to be in recovery mode since July 2014. Indian auto components industry treads a difficult path through an uncertain near term future. Operational excellence, scenario planning and risk management are poised to become the key arsenal for success. The auto component industry, globally has witnessed economic restructuring whose macro and micro-economic implications on nations and regions has been profound. The slowdown of sales in several markets in the auto component industry was a short-term challenge, but loss of market share to increasing competition in the domestic markets was another key challenge for automakers over the long term. A host of domestic factors in the form of decrease in fuel prices, and low interest rates as compared to previous year led to increase in the demand for cars. Though, in the short term, the global economic uncertainties and domestic monetary tightening measures had built up a near term negative sentiment on the Indian auto component industry. However, the long term prospects of the industry are definitely perceived as a huge opportunity area. (b) Opportunities and Threats Federal-Mogul continues to support the Company with its technical expertise. With widely recognized brands, superior technology, strong distribution network and a committed team of employees, the Company is well positioned to take advantage of the opportunities and withstand the market challenges. The Company strives to create sustainable profitable growth by using superior technology and maintaining product quality and offering wide range of products at competitive prices which will give us a competitive edge in the market. A progressive leadership has given direction to the establishment. We believe our proactive steps and consistent implementation of our plans will allow us to prepare the company for growth as consumers regain confidence in the industry and vehicle demand increases. The Company competes with many independent manufacturers and distributors of component parts. Management continues to develop and execute initiatives to meet the challenges of the industry and to achieve its strategy for sustainable global profitable growth. There are limited sets of customers in our business, that is, the automobile manufacturers. Competition is intense, as we compete with suppliers both in the organized and unorganized segments. Technical edge, Specialization, innovation and networking will determine the success of the Company in this competitive environment. Looking ahead, revenue is expected to improve, if Company is able to pursue its strategies. The Company is employing the best practices to proactively map the impact of its activities on its performance and profitability from economic environment and social perspectives. (c) Segment wise or product wise performance We operate mainly in two segments i.e. OEM's and the Aftermarket (Motorparts). The Company has a balanced approach to the OEM's and Motorparts, which helps us in capitalizing on our strengths in both segments and to respond to market fluctuations and customer strategies. (d) Outlook It has always been wafer thin margin rates and it could not get any thicker until the first half, with increased competition, weak sales and heavy discounts doled out by manufacturers to attract buyers. The second half of the financial year 2015-16 may hold the key to success for many auto component manufacturers in India, with new launches coming up. It would be a mixed year for the auto component industry ahead. The auto component companies need to achieve significant productivity improvements in order to position themselves in the industry. The Company will endeavor to revitalize in near future as consumers regain confidence and vehicle demand increases. To remain competitive in the challenging and demanding environment, the benchmark has to be high in anticipation of the stated and unstated need of the customers and markets. (e) Risks and concern The Company operates in an environment which is affected by various risks some of which are controllable while some are outside the control of the Company. However, the Company has been taking appropriate measures to mitigate these risks on a continuous basis. Some of the risks that are potentially significant in nature and need careful monitoring are listed hereunder: Raw material prices: Our profitability and cost effectiveness may be affected due to change in the prices of raw materials and other inputs. Foreign Currency Risks: Exchange rate fluctuations may have an adverse impact on the Company Technical Intensive Industry: The automobile industry is a technical intensive industry and thus faced with a constant demand for new designs, knowledge of nascent technology to meet market requirements. Cyclical nature of the Industry: The Company's growth is linked to those of the automobile Industry, which is cyclical in nature. The demand for automobiles has a significant impact on the demand and prices of the products manufactured by the Company. A fall in the demand and / or prices would adversely impact the financial performance of the Company. Increasing competition : Increasing competition across both OEM's and after market segment, may put some pressure on market share. Excess/ short capacity: Estimation of optimal manufacturing capacities for our products is critical to our operations. Should we for any reason, not invest in capacity expansion in near future could result in stagnation in our sales. Conversely, in the event we over-estimate the future demand or due to general lowering of the customer demand due to recession, we may have excessive capacity, resulting in under utilization of assets and/or sale of surplus products at lower margin, which could have material adverse effect on the financial results of the company. (f) Adequacy of Internal Control Systems The Company has an audit committee headed by a non-executive independent director, inter-alia, to oversee the Company's financial reporting process, disclosure of financial information, performance of statutory and internal auditors, functions, internal control systems, related party transactions, investigation relating to suspected fraud or failure of internal audit control, to name a few, as well as other areas requiring mandatory review per Clause 49 of the Listing Agreement with the stock exchanges. The powers of the Audit Committee, inter-alia, include seeking information from any employee, directing the Company's internal Audit function, obtaining outside legal or other professional advice and investigating any activity of the Company within the Committee's terms of reference. The Company has a well-defined internal control system, which aims at protection of Company's resources, efficiency of operations, compliances with the legal obligations and Company's policies and procedures. Subsidiary Companies Annual accounts of the Federal-Mogul TPR (India) Limited, subsidiary company and the related detailed information can be obtained on request by the shareholders of the company. These are also available for inspection at the corporate office of the company and at the registered office of the subsidiary between 11 A.M. to 1 P.M. on all working days. Abridged Financial Statements In terms of the provisions of clause 32 of Listing Agreement, the Board of directors has decided to circulate the abridged annual report containing salient features of the balance sheet and profit and loss account to the shareholders for the financial year ending on March 31, 2015. Full version of the annual report will be available on Company's website www.federalmogulgoetzeindia.net and will also be made available to investors upon request. In support of the green initiative of the Ministry of Corporate Affairs, the Company has also decided to send all future communications including the annual report through email to those shareholders, who have registered their e-mail id with their depository participant/ Company's registrar and share transfer agent. In case a shareholder wishes to receive a printed copy of such communications, he/she may please send a request to the Company, which will send a printed copy of the communication to the shareholder. Directors' Responsibility Statement Pursuant to the requirements of Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement, it is hereby confirmed that: • In the preparation of annual accounts, the applicable accounting standards have been followed and that there have been no material departures; • The Directors have selected such accounting policies and applied them consistently, except to the extent of deviations required for the better presentation of the accounts 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 31stMarch, 2015 and of the profit of the Company for the year ended on that date; • The Directors have taken proper and sufficient care for the maintenance of adequate accounting records, in accordance with the provisions of the Companies Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; • The Directors have prepared the annual accounts of the company on a going concern basis. Directors Presently your Board consists of Nine (9) directors comprising of Mr. K.N. Subramaniam, Chairman and Non-executive Independent Director; Mr. Andreas Wilhelm Kolf, Whole Time Managing Director; Mr. Sachin Selot, Whole Tme Finance Director and CFO, Dr. Khalid Iqbal Khan, Whole Time Director-Legal & Company Secretary; Mr. Mukul Gupta, Non-executive Independent Director; Mr. Sunit Kapur, NonExecutive Director; Mr. Bernhard Motel, NonExecutive Director; Mr. Mahendra Kumar Goyal, Non-executive Independent Director; and Ms. Janice Ruskey Maiden, Non-Executive Director. In the Board Meeting held on 13th August, 2014, Mr. Mahendra Kumar Goyal, and Ms. Janice Ruskey Maiden were appointed as Additional Directors. Pursuant to the provisions of the Companies Act 2013 read with clause 49 of the listing Agreement, Mr. Mahendra Goyal was appointed as an Independent Director in the same Board Meeting. In the Board meeting held on May 22, 2015, the Board accepted resignation of Mr. Sachin Selot as Whole Time Finance Director and CFO of the company w.e.f. close of business hours on May 26, 2015. In the same Board Meeting, Dr. Khalid Iqbal Khan was appointed as Wholetime Director-Legal and Company Secretary. In accordance with Article 109 of the Articles of Association of the Company, Mr. Sunit Kapur and Mr. Bernhard Georg Motel, Directors are retiring by rotation in the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment. Pursuant to the provisions of the Companies Act 2013 read with clause 49 of the listing Agreement, Mr. K N Subramaniam and Mr. Mukul Gupta (existing Independent Directors) were appointed as Independent Directors in the Board meeting held on 13th February, 2015. Public Deposits As at 31st March, 2015, your company had no unclaimed fixed deposits. No fresh/ renewed deposits were invited or accepted during the financial year. Auditors The shareholders in the 59th annual general meeting of the company held on 23rd May 2014 had appointed M/s. Walker, Chandiok & Co., Chartered Accountants, New Delhi (Firm Registration No. 001076N),as statutory auditors to hold office from the conclusion of 59th annual general meeting till the conclusion of forthcoming annual general meeting. Pursuant to the provisions of Section 139 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, your directors propose before the shareholders the appointment of M/s Walker, Chandiok & Co., Chartered Accountants as the statutory auditors of the Company from the conclusion of the forthcoming annual general meeting upto the conclusion of 62nd annual general meeting, subject to ratification of such appointment by the shareholders in every annual general meeting held during the period. The written consent to such appointment and a certificate from M/s Walker, Chandiok & Co., Chartered Accountants has been received to the effect that the appointment is in accordance with the conditions prescribed under Rule 4 of the Companies (Audit and Auditors) Rules, 2014 and they satisfy the criteria specified under Section 141 of the Companies Act, 2013 read with Rule 4 of Companies (Audit & Auditors) Rules 2014. The Board of Directors appointed Ms. Deepika Gera, Company Secretaries as Secretarial Auditor of the Company for the financial year ended 31st March 2015. The Board has reappointed them as Secretarial Auditor for the financial year 2015-16. Shifting of Registered Office The registered office of the Company was shifted from 7870-7877, F-1, Roshanara Plaza Building, Roshanara Road, Delhi - 110007 to G-4, J.R Complex, Gate No.-4, Mandoli, Delhi - 110093 with effect from 28th February, 2014. Human Resources The employee relations have remained cordial throughout the year and industrial harmony was maintained. Measures for the safety, training and development of the employees, continued to receive top priority. The total number of salaried and hourly paid employees, as at March 31, 2015, stood at 4227. Safety, Health and Environment Protection The Company sustained its initiatives to maintain a pollution free environment by reduction/ elimination of waste, optimum utilization of power and preventive maintenance of equipment's and machineries to keep them in good condition. Safety and health of the people working in and around the manufacturing facilities is the top priority of the Company and we are committed to improve this performance year after year. Corporate Social Responsibility Pursuant to Section 135 of the Companies Act, 2013, which came into force with effect from 1st April 2014, the Company has constituted Corporate social Responsibility (CSR) Committee. Presently, the commitee comprises of the following members :- 1) Mr. Andreas Wilhelm Kolf : Chairman 2) Dr. Khalid Iqbal Khan : Member 3) Mr. KN Subramaniam : Member 4) Mr. Mukul Gupta : Member The corporate social responsibility committee shall institute a transparent monitoring mechanism for implementation of CSR projects or programs or activities undertaken by Company. Pursuant to the provisions of Companies Act, 2013, the Company is required to spend 2% of the average profits of the company during the previous 3 financial years. Therefore, the Company has incurred the total allocated budget of Rs. 61.39 lacs on the CSR activities approved by CSR Committee and Board of Directors viz. Donation for education at SOS children's village at Rajpura and Bangulur, Supply of potable water, providing uniform in deaf and dumb school in Patiala, Repairing and Renovation in a Government school and renovation of garden in Bhiwadi Corporate Governance Report The company is committed to good corporate governance practices. The Board endeavors to adhere to the standards set out by the Securities and Exchange Board of India (SEBI) corporate governance practices and accordingly has implemented all the major stipulations prescribed. A detailed corporate governance report in line with the requirements of Clause 49 of the listing agreement regarding the corporate governance practices followed by the Company and a certificate of compliance from Mr. Surendra Vashishtha, practicing company secretary form part of this Directors' Report annual report 2015 The company has following committees of the Board members, details of which are provided under corporate governance report: 1. Audit Committee; 2. Nomination and Remuneration Committee; 3. Stakeholders' Relationship Committee; 4. Corporate Social Responsibility Committee; Cautionary Statement Certain statements in the Management Discussion and Analysis describing the Company's views about the Industry, expectations/predictions, objectives etc may be forward looking within the meaning of applicable laws and regulations. Actual results may differ from those expressed or implied in these statements. The Company's operations may, inter-alia, be affected by the supply and demand situations, input prices and availability, changes in Government regulations, tax laws and other factors such as industry relations and economic developments etc. Investors should bear the above in mind. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo Information pursuant to Section 217(1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is annexed and forms a part of this report. Particulars of Employees Your Directors place on record their deep appreciation for the contribution made by the employees of the Company at all levels. Our industrial relations continue to be cordial. Information in accordance with the provisions of Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this report. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, this report and accounts are being sent to all the members of the company, excluding the Statement of Particulars of Employees. Any member interested in obtaining a copy of the said statement may write to the company secretary of the Company. Acknowledgement Your Directors acknowledge with sincere gratitude the co-operation and assistance extended by the Bank(s), Customers, Dealers, Vendors, promoters, shareholders, Government Authorities and all the other business associates during the year under review. The Directors also wish to place on record their deep sense of gratitude for the committed services of the Executives, staff and workers of the Company For and on behalf of the Board Andreas Wilhelm Kolf Whole Time Managing Director Sachin Selot Whole Time Finance Director & CFO Place: Gurgaon Date: 22nd May 2015 |