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Directors Report
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Yuken India Ltd.
BSE CODE: 522108   |   NSE CODE: YUKEN   |   ISIN CODE : INE384C01016   |   28-Mar-2024 Hrs IST
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March 2015

DIRECTORS' REPORT

TO

THE MEMBERS,

Your Directors have pleasure in presenting their 39th Annual Report of the Company together with the Audited Statements of Accounts for the year ended 31st March, 2015.

THE EXTRACT OF ANNUAL RETURN (FORM MGT-9)

The extract of Annual Return pursuant to the provisions of Section 92(3) and Section 134(3)(a) of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 is furnished in Annexure-1 and is attached to this report.

NUMBER OF BOARD MEETINGS CONDUCTED DURING THE YEAR

Five Board Meetings had been held during the financial year, 2014-15 viz., on 29th May 2014, 26th July 2014, 9th September 2014, 29th October 2014 and 7th February 2015.

DIRECTORS RESPONSIBILITYSTATEMENT

In accordance with the provisions of Section 134(5) of the Companies Act, 2013 the Board hereby submits its Responsibility Statement

(a) In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) 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 at the end of the financial year and of the profit and loss of the Company for that period;

(c) The Directors had 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 had prepared the annual accounts on a going concern basis.

(e) The Directors had laid down internal financial controls to be followed by the Company as applicable to listed companies and such internal financial controls are adequate and were operating effectively.

(f) The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively.

5. COMPANY'S POLICY RELATING TO DIRECTORS APPOINTMENT, PAYMENT OF REMUNERATION AND DISCHARGE OF THEIR DUTIES

The Nomination and Remuneration Policy of the Company pertaining to appointment of Directors, payment of mana­gerial remuneration, Directors' qualifications, positive attributes, independence of Directors and other related matters as provided under section 178(3) of the Companies Act, 2013 is attached to this report in Annexure-2.

6. EVALUATION OF DIRECTORS

Nomination and Remuneration Committee of the Company has formulated a criteria for evaluation of the Board Members. Accordingly performance evaluation of the Board and its members has been carried out.

7. EXPLANATION OR COMMENTS ON QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLOSURES MADE BY THE AUDITORS AND THE PRACTICING COMPANY SECRETARY IN THEIR RESPECTIVE REPORTS

There were no qualifications, reservations or adverse remarks made by the Auditors or by the Practicing Company Secretary in their respective reports.

9. CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions.

The details of related party transactions as required under Accounting Standard-18 are set out in Note-31 to the standalone financial statements of the Company.

The Form AOC-2 pursuant to section 134(3)(h) of the Companies Act, 2013 read with rule 8(2) of the Companies (Accounts) Rules, 2014 is set out as Annexure-3 to this report.

The Policy on Related Party Transactions as approved by the Board may be accessed on the Company's website, web link of which is as under:

<http://www.yukenindia.com/wp-content/uploads/2014/11/Related-Party-Transactions-Policy.pdf>

10. DETAILS OF AMOUNTS TRANSFERRED TO RESERVES

Your Company proposes to transfer Rs. 4 lakhs to General Reserves.

11. DIVIDEND

The Board of Directors is pleased to recommend a dividend of 15% on equity shares of the Company for the year ended 31st March, 2015, subject to the approval of the members at the ensuing Annual General Meeting.

12. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

In terms of section 125 of the Companies Act, 2013 any unclaimed or unpaid dividend relating to the financial year 2007-08 is due for remittance on 10th September, 2015 to the Investor Education and Protection Fund established by the Central Government.

13. MATERIAL CHANGES AND COMMITMENTS IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY OC CURRED BETWEEN 31ST MARCH, 2015 AND 09TH MAY, 2015

There were no material changes and commitments affecting the financial position of the Company occurred between the end of the financial year (31st March, 2015) and the date of the Report (09th May, 2015).

14. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO UNDERSECTION 134(3)(m) OF THE COMPANIES ACT, 2013 READ WITH RULE 8(3) OF THE COMPANIES (ACCOUNTS) RULES, 2014

1. Conservation of Energy:

The Company has taken various steps for conservation of energy in the process of implementing several projects. Energy conservation is a consistent focus area for the Company both from cost control as well as social responsi­bility perspective. The power factor is regularly monitored and maintained between 0.99 and 1.00. Solar power is being used at Malur Plant.

3. Research and Development (R&D)

The Company continues to invest in R&D activities towards development of new products and applications, improve­ment in operating efficiencies and reduction in manufacturing costs.

(a) Specific areas in which R&D carried out by the Company

Development of larger valves for process and steel industries, rugged vane pumps for special applications and development of high efficiency gear pumps are some of the areas where R&D was carried out by the Company.

(b) Benefits derived as a result of above R&D efforts

Special products developed to meet specific requirements of customers which enable your Company to develop niche markets for growth.

(c) Future plan of action

Development of additional range of products

Focus on process improvements to enable the Company to penetrate the export market

• Strong focus on employee involvement to eliminate waste in operations through focused initiatives.

(d) Expenditure on R&D

There is a continuous increase in R&D expenditure as the scope of activities carried out keeps on increasing.

4. Technology Absorption, Adaptation and Innovation

(a) Efforts in brief, made towards technology absorption, adaptation and innovation:

• Special models of energy saving pumps and valves have been designed to meet specific needs of customers and these have enabled us to extend our customer base to include a wider range of industries.

Indigenization is a continuous ongoing effort.

(b) Benefits derived as a result of the above efforts:

Reduction of material cost

• Quality improvement and improvement in product performance characteristics

• Ability to innovate and produce new products

(c) Information regarding technology imported during the last five years reckoned from the beginning of the financial year:

i. Technology imported: For manufacture of Chip compacting machine

ii. Year of import: 2011

iii. Has technology been fully absorbed? Yes

iv. If not fully absorbed, areas where this has not taken place, reasons thereof and future plans of action: NA

15. DETAILS OF CHANGE IN NATURE OF BUSINESS, IF ANY

There was no change in the nature of business of the Company, during the year 2014-15.

16. DIRECTORS

Mr. Shiro Hattori, nominated by Yuken Kogyo Company Limited, Japan has been appointed as a Director in the 38th Annual General Meeting held on 09th September, 2014.

The status of Mr. Osamu Tanaka has been changed from "Director not liable to retire by rotation" to "Director liable to retire by rotation" in the 38th Annual General Meeting held on 09th September, 2014.

Mr. Srinivasan Rangarajan, Capt. N S Mohanram and Dr. Premchander had been appointed as Independent Directors of the Company in compliance with the provisions of section 149 of the Companies Act, 2013 and Clause 49(H) of the Listing Agreement.

Mr. Y Mukaide has resigned from the office of Director, on 01st April, 2014.

Mrs. Vidya Rangachar has been appointed as an Additional Director on 30th March, 2015.

The Independent Directors have submitted their declarations to the Board stating that they meet the criteria of indepen­dence as stipulated in Section 149(6) of the Companies Act, 2013.

17. KEY MANAGERIAL PERSONNEL

In compliance with the provisions of section 203 of the Companies Act, 2013, Mr. H M Narasinga Rao, Chief Financial Officer and Mr. Subramanya Ullal, Chief Executive Officer have been designated as Key Managerial Personnel and Ms. Sridevi Ch has been appointed as the Company Secretary during the year.

18. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, the Statement of Profit & Loss and other documents of the Subsidiary Companies are not being attached to the Balance Sheet of the Company.

The Company will make available the Annual Accounts of the Subsidiary Companies and the related detailed informa­tion to any member of the Company who may be interested in obtaining the same. The Annual Accounts of the Subsidiary Companies will also be kept open for inspection by any investor at the Registered Office of the Company and that of the respective Subsidiary Companies. The consolidated financial statements presented by the Company include financial results of its Subsidiary Companies.

19. DEPOSITS

The Company has neither accepted nor renewed any deposits during the year.

20. MATERIAL ORDERS PASSED BY REGULATORY AUTHORITIES

There are no significant and material orders passed by the regulators or courts or tribunals during the year, impacting the going concern status and Company's operations in future.

21. INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS

Details of the same are provided in the Management Discussion and Analysis Report attached as Annexure-6 to this report.

22. RISK MANAGEMENT POLICY

In compliance with the provisions of Clause 49(VI) of the Listing Agreement, a Risk Management Committee has been constituted by the Board, which has formulated a Policy on Risk Management for the purpose of identification, assess­ment, handling, monitoring and dealing with various risks across the organization.

Risks are identified by the respective departmental heads. Each SBU & Corporate will carry out the Risk Assessment for each identified risk, as applicable to them and will document the results for each risk in the Risk Register. Action will be taken based on the possible impact of the identified risk.

The Company has adopted the following measures concerning the development and implementation of a Risk Man­agement Policy during the year:

a. Measures taken by IT department of the Company to mitigate risk relating to security of data and systems of the Company;

b. Security measures in the manufacturing units of the Company to prevent accidents; and

c. Installation of CC TV cameras and siren at factory for safety of the employees.

23. DETAILS OF POLICY DEVELOPED, IMPLEMENTED BY THE COMPANY ON ITS CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The Company has constituted a Corporate Social Responsibility Committee and developed a CSR Policy, in compli­ance with the provisions of section 135 of the Companies Act, 2013, with the following objectives:

* To ensure an increased commitment at all levels in the Organization to operate its business in an economically, socially and environmentally sustainable manner, while recognizing the interests of the stakeholders.

* To directly or indirectly take up programs that benefit the communities over a period of time, in enhancing the quality of life and economic well being of the people around.

In accordance with the Company's CSR Policy, following are the areas on which the Company would like to focus for the purpose of CSR:

1. Education and

2. Environmental sustainability

In compliance with the CSR Policy, your Company has undertaken the following activities:

1. Appointed a Teacher in a school run by State Government at Malur, on its own expenses,

2. Donations made to ISKCON's Akshaya Patra and

3. Rain water harvesting at Malur foundry and Whitefield Factory.

However, the Company could not allocate and spend enough funds as required under the provisions of section 135 of the Companies Act, 2013, on CSR activities due to insufficiency of funds.

24. COMPOSITION OF AUDIT COMMITTEE AND PROVIDING VIGIL MECHANISM

In compliance with the provisions of Section 177 of the Companies Act, 2013 read with Rules 6 and 7 of the Companies (Meetings of Board and its Powers) Rules, 2014, the Company has constituted an Audit Committee with the following members:

1. Capt. N. S. Mohanram - Chairman

2. Mr. R. Srinivasan - Member

3. Mr. CP Rangachar - Member

The above composition of the Audit Committee consists of two Independent Directors, who form the majority.

The Company has established a Vigil Mechanism to deal with the genuine concerns of the employees and Directors pertaining to the Company's interests and also provided direct access to the Chairman of the Audit Committee and the Vigilance Officer of the Company on reporting issues concerning the interests of the Company. The Company also has provided adequate safeguards against victimization of employees and Directors who are the whistle blowers.

The Company has published the Whistle Blower Policy in its website, a web link of which is as under: <http://www.yukenindia.com/wp-content/uploads/2014/11AA/histle-Blower-Policy.pdf>

25. DETAILS OF REVISION OF FINANCIAL STATEMENTS

There was no revision of the financial statements of the Company, during the year 2014-15.

26. FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS

As part of the Familiarisation Programme, Independent Directors of the Company have been made aware of the following information:

a. Rules and regulations pertaining to their appointment as Independent Directors

b. Duties and responsibilities of the Independent Directors towards the Company and stakeholders

c. Code of conduct to be followed by them and

d. Company's policies and procedures

27. DETAILS OF REMUNERATION AS REQUIRED UNDERSECTION 197(12) OF THE COMPANIES ACT, 2013 READ WITH RULE 5(1) OFTHE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

a. Ratio of remuneration of each Director/KMP to the median employee's remuneration and the Percentage increase in the median remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year 2014-15.

Notes:

1. The sales for the year has increased by 12% and the remuneration of the Managing Director has been decreased by 1%. *2. Mrs. Vidya Rangachar has been appointed as an Additional Director on 30/03/2015.

**3. The CEO has been appointed on 01/01/2014 and the Company Secretary has been appointed on 01/08/2014.

b. The median remuneration of employees of the Company during the year: Rs. 527,856/- and percentage increase in the median remuneration of employees compared to the previous financial year: 6.17%.

c. The number of permanent employees on the rolls of the Company as on 31st March, 2015 was 392.

d. Relationship between average increase in remuneration and company performance: The sales for the year has Increased by 12% and the average increase in median employee remuneration was 6.17%. Remunerations of the employees are as per the industry standards.

e. Comparison of the remuneration of the Key Managerial Personnel against the performance of the Company

Overall remuneration of Key Managerial Personnel for the year 2014-15 has been increased by 49% whereas the revenue from the operations has increased by 12% when compared to the previous year. The variation in increase in the remuneration of KMP is due to new appointments of the CEO and Company Secretary. Remunerations of the KMP are as per the industry benchmarks.

f. (i) Variations in the market capitalization of the Company: The market capitalization as on 31st March, 2015 was  Rs. 68.22 crores whereas as on 31st March, 2014 was Rs. 48.66 crores.

(ii) Price earnings ratio of the Company as on 31st March, 2015: 100.18:1 (Previous year - 19.17:1).

(iii) Percentage increase over/decrease in the market quotations of the shares of the Company as compared to the rate at which the company came out with the last public offer in the year:

The Company had come out with initial public offer in 1991. An amount of Rs. 10 invested in the said IPO would be worth Rs. 227.40 as on 31st March, 2015 indicating a Compounded Annual Growth Rate of 13.90%. This is excluding the dividend accrued thereon.

g. Average percentage increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentage increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration

• Average percentage increase of salaries of employees other than the managerial personnel in the financial year: 9.96%

Percentage increase/decrease in the managerial remuneration: 7.30%* * CEO and CS have been newly appointed and hence there is no increase in remuneration.

h. The key parameters for any variable component of remuneration availed by the directors

Directors are paid commission calculated on the basis of net profits of the Company under the provisions of section 197 of the Companies Act, 2013 and as approved by the shareholders and based on the Nomination and Remunera­tion Policy of the Company.

28. REVIEW OF BUSINESS OPERATIONS AND FUTURE PROSPECTS

During the year under review, the Company has registered a turnover of Rs. 18,412 lakhs compared to Rs. 16,449 lakhs in the previous year. Operations of the Company for the year under review have resulted in a net profit of Rs. 72.80 lakhs.

The economy is slowly improving during the year. Once the interest rate comes down, the demand for our products is likely to increase and the Company hopes to improve its performance in the near future.

29. SHARES

a. BUY-BACK OF SHARES

The Company has not bought back any of its securities during the year.

b. SWEAT EQUITY

The Company has not issued any Sweat Equity Shares during the year.

c. BONUS SHARES

No Bonus Shares were issued during the year.

d. EMPLOYEES STOCK OPTION PLAN

The Company has not provided any Stock Option Scheme to its employees, during the year.

30. COST AUDITORS

Pursuant to the provisions of section 134 of the Companies Act, 2013, the Board had appointed M/s. Kamalakara & Co., Cost Accountants, Bangalore as Cost Auditors for conducting Cost Audit for the financial year, 2014-15. However, in accordance with a clarification provided by the Ministry of Corporate Affairs, the cost audit for the financial year 2014-15 was not applicable to the Company and hence it was not conducted.

31. STATUTORY AUDITORS

M/s. Deloitte Haskins & Sells, Chartered Accountants, Bangalore had been appointed as the Statutory Auditors for a period of 3 years in the 38th Annual General Meeting held on 09th September, 2014, whose appointment is subject to ratification in each Annual General Meeting till their last year.

32. SECRETARIAL AUDITORS

The Company has appointed M/s. BG & Associates, Practicing Company Secretaries, Bangalore for conducting Secre­tarial Audit for the financial year 2014-15 in compliance with the provisions of section 2014 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

A report on Secretarial Audit in Form MR-3 is attached herewith in Annexure-4.

33. CORPORATE GOVERNANCE

Your Company is committed to maintaining high standards of Corporate Governance. A report on Corporate Gover­nance along with a Certificate from the Statutory Auditors on compliance of Corporate Governance is attached to this Report as Annexure -5.

34. MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis (MDA) forms part of this report as Annexure-6 setting out an analysis of business including the industry scenario, performance, financial analysis and risk mitigation.

35. CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard AS-21 on "Consolidated Financial Statements" read with Accounting Standard AS-23 on "Accounting for Investments in Associates", the audited Consolidated Financial Statements are provided in the Annual Report.

36. FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that involve risks and uncertainties. When used in this Report, the words "anticipate", "believe", "estimate", "expect", "intend", "will" and other similar expressions as they relate to your Company and / or its business are intended to identify such forward-looking statements. Your Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performance or achievements could differ materially from those expressed or implied in such forward looking statements. This report should be read in conjunction with the financial statements included herein and notes thereto.

37. ACKNOWLEDGEMENTS

Your Directors place on record their sincere thanks to the bankers, business associates, consultants and various Government Authorities for their continued support extended to your Company's activities during the year. Your Direc­tors also acknowledge their gratitude to the Shareholders of the Company, for their continuous support and confidence reposed on the Company.

For and on behalf of the Board of Directors

CP. Rangachar

Managing Director

R. Srinivasan

Director

Dr. Premchander

Director

Place: Bangalore

Date : 09th May, 2015