DIRECTORS' REPORT To, The Members, We are delighted to present the Seventh Annual Report together with the Audited Statement of Accounts for the year ended 31st March, 2016: REVIEW OF OPERATIONS: The Company operates into the single business segment of manufacturing of aluminum alloy castings wheels mainly used in automobile industry. This year was the year of stabilization. The Company has maintained the sales of above Rs. 4000 Millions despite of slowdown in 2 wheeler segment. TURNOVER During the year under review, the Company has recorded Gross Sales of Rs. 4,372.41 million (net Sales of Rs. 3,854.86) in current fiscal year as compared to Gross Sales of Rs. 4,315.93 million (net sales of Rs. 3839.31 million) last fiscal year. There was a slight increase in sales of the Company as compared to last year. CAPITAL During the year under review, Company has allotted 706,500 Equity Shares on Preferential basis on 11th January 2016 against share application money of Rs. 13,28,22,00 at Rs. 188 (including the premium of Rs. 183) each received from its Holding Company i.e. Enkei Corporation, Japan after obtaining requisites approvals from all competent authorities. MANAGEMENT DISCUSSION & ANALYSIS REPORT a) Industry Structure and Development: Production: The 4 wheeler industry produced a total of 3,413,859 Passenger vehicles including utility vehicles & Vans in Financial Year 2015-2016 as against 3,221,419 in Financial Year 2014-2015, registering a growth of 5.97% on year to year basis. 2 wheeler industry produced a total of 18,829,786 including Scooter, Motor cycles & Mopeds in Financial Year 2015-2016 as against 18,489,311 in Financial Year 2014-2015, registering merely growth of 1.84% on year to year basis. Domestic Sales The domestic sales of Passenger Vehicles grew by 7.24% in Financial Year 2015-2016. Within the Passenger Vehicles segment, Passenger Cars and Utility Vehicles grew by 7.87% and 6.25% respectively, while Vans sales increased by 3.58%. Two Wheelers domestic sales registered growth of 3.78% in Financial Year 2015-16 on year to year basis. Within the Two Wheelers segment, Scooters sales grew by 11.79%, while Motorcycles and Mopeds registered negative growth by -0.34% & -3.32°%. Exports In financial year 2015-16, passenger cars exports grew by 5.24% on year to year basis. In Passenger Vehicles utility vehicles registered highest growth in exports of 54.13% as compared to last year. In case of 2 wheelers total exports merely increases by 0.97% on year to year basis. In case of 2 wheelers Scooters has registered highest growth of 31.77%. b) Opportunities, Threats & Outlook: Your Company's product mainly used in utility vehicles and mid-size car segments. According to research firm J D Power Asia-Pacific. In the last four years there has been a significant shift in the vehicle body-types being considered by car buyers. In 2012, 65 % of new-vehicle buyers considered a small car during the shopping process. This has come down to 45% in 2015. At the same time, consideration for utility vehicles and mid-size cars has gone up by 12 % and 7 % respectively over the same period. As per the study, consideration for newly launched models has increased among new vehicle shoppers in India. In 2015, 10 % of all shoppers considered a newly launched model, the highest in the last three years. So, the market demand will be increase with rise in sales of utility & mid-segment vehicles. c) Product wise Performance Your Company has mainly two products i.e. Aluminum alloy wheels for 2 Wheeler & Aluminum alloy wheels for 4 Wheeler. Following is the product wise installed capacity: For 2 Wheeler: 110,000 pcs/avg. per month For 4 Wheeler: 80,000 pcs/avg. per month d) Risks & Concerns: The management is accountable for the integration of risk management practice into the day to-day activities. The risk assessment and minimization procedures being followed by the management and steps taken by it to mitigate these risks are periodically placed before the Board and Audit Committee along with findings of the internal auditors. All the assets of the Company are adequately insured. Your Company evaluates potential risks, and has evolved over the years a comprehensive risk-management strategy. It takes into account changing market trends, competition scenario, emerging customer preferences, potential disruptions in supplies and regulatory changes, among others. e) Internal Control Systems & their adequacy: Your Company has an adequate system of internal controls commensurate with its size and nature of business to ensure adequate protection of Company's resources, efficiency of operations, check on cost structure and compliance with the legal obligations and the Company's policies and procedures. This ensures high degree of system-based checks and control and continuous monitoring of the effectiveness of the controls. Your Company's internal audit team performs audits in all its areas. The audit findings and management's resolution plans are reported on quarterly basis to the Audit Committee of the Board, headed by a Nonexecutive Independent Director. Internal controls have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorised use, executing transactions with proper authorisation and ensuring compliance of corporate policies. Asit Mehta & Associates, the statutory auditors of the Company has audited the financial statements included in this annual report and has issued an attestation report on our internal control over financial reporting (as defined in section 143 of Companies Act 2013). Your Company has also appointed M/s Mrugendra Mandake & Associates, Chartered Accountant, Pune to oversee and carry out internal audit of its activities. The audit is based on an internal audit plan, which is reviewed each year in consultation with the statutory auditors and the audit committee. f) Discussion on Financial Performance with respect to operational performance At operational level your Company is doing good with the help of advance Japanese technology & benchmarking within Enkei Group. Your Company's value addition has increased as compared with Financial year 2014-15 & also productivity improved due to improvement in Pass through ratio (PTR) and reduction in rejection. Company has posted positive results of 2.4% of the sales with the value of Rs. 924.8 lacs before exceptional and Extra-ordinary items. Your Company will continue to evolve on operational level with the support of Parent & Group Companies. Your Company remains top Alloy wheels suppliers to the Japanese Car manufacturer in India. The Company continued to focus and enhance its technology to meet the expectation of the Customers thus expecting the consistent orders of new models lunching in the future. g) Human Resources: The Company is giving utmost importance to human resource development as Company's performance is highly depending on Human Resource. In this direction, the Company is providing intensive training in India and overseas to employees of all levels for improving competence, production, enhancing safety and social values. To retain the skill with the company a special drive has been given towards increasing the ratio of company and contractual labors. Achieving the high morale and motivation is the ultimate goal of each training program. The management also launched the "3E" - Enkei Evolving Education system and thereby ensuring a framed training to all employees. For all the employees of your company has a policy of annual health checkup and also conducts health and fitness education as an on-going process. Your Company follows its group standard's to up LEVEL & LABLE of its employees. For the year ended as on 31st March 2016 Company's attrition ratio was 7.02%. The management expects to continue the customized development program of employees during the current year also. The management of the Company enjoys cordial relations with its employees at all levels. The Board of Directors wishes to place on record its highest appreciation of the contribution being made by all the employees. The Company's total employee's strength as on 31st March, 2016 stands at 476. Expansion and Capital Expenditure: In view of decelerate growth in Automobile Industry Company is currently focusing on full utilization of existing capacity. The Company has also started the initial steps for enhancing the Manufacturing Process of Advance Technology as per the market and customers demand. The Company has incurred Rs. 13.24 Million on Capital Expenditure during the Financial Year 2015-16. Cautionary Statement: Certain Statements in Management Discussion and Analysis Report describing the Company's view's about Industry, objectives, projections, estimates and expectation may be considered as 'forward looking statements' within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied in the statement. The Company's operations may be affected with supply and demand situation, input prices and their availability, changes in Government regulations, tax laws and other factors such as Industrial relations and economic developments etc. PREVENTION, PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE : The Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace Act, 2013 provides for protection against sexual harassment of women at workplace and for the prevention and redressal of complaints of sexual harassment and for matters connected therewith or incidental thereto. The Company has framed a Policy on Prevention of Sexual Harassment at Workplace as per the provisions of this Act. There were no cases reported during the year under review under the said Policy. LISTING FEES: The annual listing fees for the year under review have been paid to BSE Limited where your Company's shares are listed. PARTICULARS OF INFORMATION FORMING PART OF THE BOARD'S REPORT PURSUANT TO SECTION 134 OF THE COMPANIES ACT, 2013, RULE 8 OF THE COMPANIES (ACCOUNTS) RULES, 2014 AND RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014: EXTRACT OF ANNUAL RETURN: The details forming part of the extract of Annual Return in Form MGT - 9 is annexed herewith as 'Annexure I' to this Report. NUMBER OF MEETINGS OF THE BOARD : During the year under review, Eight Board Meetings were convened and held. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and as per the SEBI (Listing Obligation & Disclosure) Regulations, 2015. Following are the details of the Board Meeting held during the year: SEPARATE MEETING OF INDEPENDENT DIRECTORS: Pursuant to schedule IV of the Companies Act, 2013, the independent directors of the Company shall hold at least one meeting in a year without attendance of non-independent directors and members of the Management. Accordingly, independent directors of the Company met on 15th March 2016 to consider the following business as required under the Companies Act, 2013: I. review the performance of non-independent directors and the Board as a whole; II. review the performance of the Chairperson of the Company, taking into account the views of executive directors and non-executive directors; III. assess the quality, quantity and timeliness of flow of information between the Company Management and the Board that is necessary for the Board to effectively and reasonably perform their duties. All the independent directors were present for the meeting. DIRECTOR'S RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 134(5) of the Companies Act 2013, with respect to Directors' responsibility Statement, it is hereby confirmed as under : a. That in the preparation of the annual accounts for year ending on 31st March 2016; the applicable accounting standards had 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 are reasonable and prudent so as to give true and fair view of the state of affairs of the company at the end of the financial year and of the Loss of the company for that year. c. That 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 assets of the company and for preventing and detecting fraud and other irregularities. d. That the Directors had prepared the annual accounts for the year ended on 31st March 2016 on a going concern basis. e. Proper internal financial controls were in place and that the financial controls were adequate and were operating effectively; f. Proper systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively. DIVIDEND In the view of accumulated losses of the company & to conserve the resources of the company, your Directors have not recommended any dividend for the current financial year. A STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS : All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013. COMPANY'S POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION : The Board had on the recommendation of the Nomination and Remuneration Committee framed a policy for selection and appointment of Directors, Key Managerial Personnel and Senior Management Personnel and their remuneration. The Company policy on Directors & KMP remuneration is available on the Company;s website at <http://www.enkei.in/Other.aspx> AUDITORS : A. Statutory Auditor The Members of your Company at fifth Annual General Meeting of your Company held on 25th September 2014 appointed M/s. Asit Mehta & Associates, Chartered Accountants, Mumbai (Firm Registration No. 100733W) as the Statutory Auditors of your Company to hold such office till the conclusion of the Annual General Meeting in the calendar year 2019. The ratification of appointment of Statutory Auditors is subject to the approval of the Members of your Company. The Company has received requisite certificate pursuant to Section 139 of the Companies Act, 2013. Your Directors propose ratification of appointment of M/s. Asit Mehta & Associates. as the Statutory Auditors of your Company. B. Secretarial Auditor Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. Shailesh Indapurkar, Practicing Company Secretary (Membership No. ACS 17306 CP No. 5701), to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is annexed herewith as 'Annexure II' to this Report. EXPLANATION ON COMMENTS ON STATUTORY AUDITORS' AND SECRETARIAL AUDITORS' REPORTS: There are no qualifications, reservations or adverse remarks or disclaimers made by M/s. Asit Mehta & Associates Statutory Auditors, in their Audit Report and by Mr. Shailesh Indapurkar, Practicing Company Secretary, in his Secretarial Audit Report. RISK MANAGEMENT The management is accountable for the integration of risk management practice into the day to-day activities. The risk assessment and minimization procedures being followed by the management and steps taken by it to mitigate these risks are periodically placed before the Board and Audit Committee along with findings of the internal auditors. All the assets of the Company are adequately insured. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS : During the year under review, the Company has not advanced any loans, given guarantees and made investments. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERRED TO IN SUB-SECTION (1) OF SECTION 188 OF THE COMPANIES ACT, 2013 : All contract/arrangement/transactions entered by the Company during the Financial Year 2015-16 with the related parties were in the ordinary course of business and on arm's length basis. Hence, no particulars are being provided in Form AOC-2. During the year, the Company has not entered into contract/arrangement/transactions with related parties which could be considered material in accordance with the Company's 'Policy on Related Party Transactions. The said policy is uploaded on the website of the Company. Further, we draw your attention to Note no 32(n) of the Financial Statements of the Company. STATE OF COMPANY'S AFFAIRS : Discussion on state of Company's affairs has been covered in the Management Discussion and Analysis. AMOUNTS PROPOSED TO BE CARRIED TO RESERVES : Particulars of the amounts proposed to be carried to reserves have been covered as part of the financial performance of the Company. MATERIAL CHANGES AND COMMITMENTS BETWEEN THE DATE OF THE BALANCE SHEET AND THE DATE OF REPORT : There have been no material changes and commitments affecting the financial position of the Company which have occurred between the end of the Financial Year of the Company to which the Financial Statements relate and the date of the report. EMPLOYEES' REMUNERATION : In terms of the provisions of Section 197(12) of the Act, there are no employees of the Company drawing remuneration in excess of the limits set out in the said provision. Details of the Remuneration as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as Annexure-III to this Report. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, RESEARCH AND DEVELOPMENT FOREIGN EXCHANGE EARNINGS AND OUTGO : CONSERVATION OF ENERGY : Your Company is committed to conservation of Energy which will result in reduction in Energy Cost. Being a Manufacturing Company, We have wide scope to conserve energy at different stages of production. We are following Group Policy "Save 20 Return 10" towards energy saving. Company's aim is to reduce Energy Cost by 20%. During the year under review, Company has started the Power Trading with Mittal Processors Pvt Ltd to reduce its electricity cost. Company has incurred capital expenditure of Rs. 1.9 Million towards this power trading. RESEARCH AND DEVELOPMENT: During the year under review your company has started its own Laboratory equipped with latest technology for further development in its Products. The Company has incurred Rs. 14.18 Million towards Research & Development during the year. FOREIGN EXCHANGE EARNINGS AND OUTGO: Total foreign exchange earned : Rs. 0.73 Million Total foreign exchange used : Rs. 1994.06 Million Detailed information on foreign exchange earnings and outgo is also furnished in the notes to accounts. CORPORATE SOCIAL RESPONSIABLITY ( CSR) The provisions of Section 135 of the Companies Act, 2013 are not applicable to the company. Therefore Company has not constituted the CSR committee. BOARD EVALUATION: Pursuant to provisions of the Companies Act, 2013, Rules thereunder, the Board has carried out evaluation of its own performance and that of its Committees and individual Directors. DETAILS OF DIRECTORS OR KEY MANAGERIAL PERSONNEL WHO WERE APPOINTED OR HAVE RESIGNED DURING THE YEAR: DIRECTORS APPOINTED DURING THE YEAR Mr. Kazuhiko Shimamura was appointed as an Additional Director on the Board of your Company effective from 1st March, 2016. Pursuant to the provisions of Section 161 of the Companies Act, 2013, Mr. Kazuhiko Shimamura will hold office up to the date of the ensuing AGM. He has confirmed his eligibility and willingness to accept the office of Directorship of your Company, if appointed. Your Company has received a notice under Section 160 of the Companies Act, 2013, proposing appointment of Mr. Kazuhiko Shimamura as Managing Director of your Company. A separate proposal seeking approval of the Members for the appointment of Mr. Kazuhiko Shimamura as a Managing Director of your Company has been incorporated in the Notice of the ensuing Annual General Meeting. In the opinion of your Directors, Mr. Kazuhiko Shimamura has the requisite qualifications and industry experience which would be useful to your Company and would enable him to contribute effectively in his capacity as an Managing Director of your Company. DIRECTORS AND KMP'S RESIGNED DURING THE YEAR: Mr. Masakatsu Uchiyama, Managing Director had resigned with effect from 29th February 2016. The Board places on record its sincere appreciation for the valuable services rendered by him as a Managing Director. DIRECTORS PROPOSED TO BE RE-APPOINTED AT THE ENSUING ANNUAL GENERAL MEETING: Mr. Junichi Suzuki, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment and Ms.Shilpa Dixit Independent Director of the Company whose term is expiring in the ensuing Annual General Meeting. It is proposed to re-appoint her for second term of 5 years up to the year 2021. DETAILS OF DEPOSITS WHICH ARE NOT IN COMPLIANCE WITH THE REQUIREMENTS OF CHAPTER V OF THE COMPANIES ACT, 2013: None. CHANGE IN THE NATURE OF BUSINESS, IF ANY: There has been no change in the nature of business during the Financial Year under review. SUBSIDIARY COMPANIES, JOINT VENTURE OR ASSOCIATE COMPANIES: During the year under review, there are no companies which has become/ ceased to become a Subsidiary/ Joint Ventures/ Associate Companies. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE : The Company has neither received nor is aware of any such order from Regulators, Courts or Tribunals during the year DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS : These details are already covered in Management Discussion & Analysis Report COMMITTEES TO THE BOARD : AUDIT COMMITTEE : The Audit Committee comprises of Dr. Haresh Shah, Chairman of the Committee and Mr. Satyavara P. Garimella, both being Independent Directors and Mr. Kazuhiko Shimamura, Managing Director. During the year under review Mr. Masakatsu Uchiyama has resigned w.e.f. 29th February 2016 & Mr. Kazuhiko Shimamura has been appointed as a Committee member w.e.f. 1st March 2016. The terms of reference of this Committee are wide enough covering the matters specified for Audit Committee under the SEBI (Listing Obligation & Disclosure) Regulations, 2015 and Section 177 of the Companies Act, 2013. The Company Secretary acts as the Secretary to the Committee. The representatives of the Internal Auditors and Statutory Auditors are also invited to the meetings. During the Financial Year 2015-16, 4 (Four) Audit Committee Meetings were held on following dates: 27th April 2015; 28th July 2015; 5th November 2015 and 5th February 2016. Powers of Audit Committee a. To investigate any activity within its terms of reference; b. To seek information from any employee; c. To obtain outside legal or other professional advice; d. To secure attendance of outsiders with relevant expertise, if it considers necessary. NOMINATION & REMUNERATION COMMITTEE The Remuneration Committee comprises of Dr. Haresh Shah, Chairman of the Committee, Mr. Shailendra Rai and Mr. Satyavara P. Garimella. Being all Non-Executive Directors of the Company. The composition is in conformity with the Companies Act, 2013. The terms of reference of this committee are: • Formulation of the criteria for determining qualifications, positive attributes and independence of a Director and recommend to the Board a policy, relating to the remuneration of the Directors, Key Managerial Personnel and other employees; • Formulation of criteria for evaluation of Independent Directors and the Board; • Recommending remuneration payable to Managing Director and other Directors as and when necessity arises. • Reviewing sitting fees payable to Directors for attending Board Meetings, Committee Meetings, etc During the Financial year 2015-16, 1 (One) meeting of Remuneration Committee was held on 5th February 2016. STAKEHOLDER GRIEVANCE COMMITTEE The Stakeholder Grievance Committee comprises of, Mr. Satyavara P. Garimella Chairman of the Committee, Dr. Haresh Shah and Mr. Kazuhiko Shimamura as members to look into redressal of Stakeholders' complaints on various issues. During the year Mr. Masakatsu Uchiyama resigned w.e.f. 29th February 2016 and Mr. Kazuhiko Shimamura was appointed w.e.f. 1st March 2016. There were no complaints received from the shareholders during the year 2015-16. Mr. Omkar kaulgud Company Secretary is Compliance officer of Company SHARE TRANSFER COMMITTEE The Share Transfer Committee comprises of Mr. Satyavara P. Garimella, Chairman of the Committee, Dr. Haresh Shah, and Mr. Kazuhiko Shimamura as members. During the year under review Mr. Masakatsu Uchiyama has resigned w.e.f. 29th February 2016 & Mr. Kazuhiko Shimamura has been appointed as a Committee member w.e.f. 1st March 2016. The terms of reference of this Committee are to approve the share transfers. During the Financial Year 2015-16, 1 (One) Share Transfer Committee Meetings was held on 13th November 2015. VIGIL MECHANISM : The Company has formulated and implemented the Whistle Blower Policy / Vigil Mechanism. This has provided a mechanism for directors and employees of the Company and other persons dealing with the Company to report to the Chairman of the Audit Committee; any instance of unethical behavior, actual or suspected fraud or violation of the Company's code of conduct. The aforesaid policy has also been uploaded on the Company's website. CASH FLOW: A Cash Flow Statement for the year ended 31 March 2016 is attached to the Balance Sheet. SHARE SUSPENSE ACCOUNT This is not applicable to the Company. CORPORATE GOVERNANCE : Enkei Wheels (India) Limited is falling within the criteria of Regulation 15 (2) of SEBI (Listing Obligation & Disclosure) Regulations, 2015. Therefore, Corporate Governance requirement prescribed under SEBI (Listing Obligation & Disclosure) Regulations, 2015 are not applicable to the Company as on 31st March, 2016. ACKNOWLEDGEMENT Your Directors wish to convey their appreciation to all the employees for their collective contribution to the Company's performance. Directors also wish to thank Enkei Corporation, our promoters, banks, financial institutions, and customers for their unstinted support and shareholders for their confidence reposed in the management. For & On Behalf of the Board of Directors Kazuhiko Shimamura Managing Director(DIN: 05129816) Haresh Shah Director (DIN: 00228471) Place : Pune Date : 27th May 2016 |