DIRECTORS' REPORT 1. Your Directors are pleased to present the Thirty Second Annual Report and the Company's audited financial statement for the financial year ended 31st March, 2015. 2. RESULTS OF OPERATIONS AND THE STATE OF COMPANY'S AFFAIRS Your Company has achieved Revenues from Operations and Other Income (Net) of Rs. 13,268.69 Lacs during the current financial year, as against Rs. 11,542.02 Lacs in the previous year, i.e. an increase of 15%. Profit before Tax for the year has improved by 33%, Profit after Tax has risen by 29%. Detailed analysis and future outlook of the Company's business are dealt in the Management Discussion and Analysis. 3. DIVIDEND The Directors of the Company are pleased to recommend a dividend of 12% i.e. Rs. 1.20 per equity share of Rs. 10 each for the financial year 2014-15 (12% i.e. Re. 1.20 per share for previous year). The total amount of dividend proposed to be distributed and tax thereon aggregate to Rs. 249.43 Lacs and dividend payout ratio comes to 32%. 4. TRANSFER OF RESERVES During the year, no amount has been transferred to the General Reserve. An amount of Rs. 533.14 Lacs is proposed to be retained in the Statement of Profit and Loss on Standalone basis. 5. MANAGEMENT'S DISCUSSION AND ANALYSIS REPORT Management's Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the BSE Limited, is presented in a separate section forming part of the Annual Report. 6. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES Your Company has one US based Wholly Owned Subsidiary named Pradeep Metals Limited Inc., Texas and one step-down subsidiary named Dimensional Machine Works, LLC. Financials of the said Subsidiaries are included in the Consolidated Financial Statements, which form part of this Annual Report. The acquisition process of 51% share in CNC Machine Shop at Houston, Texas (w.e.f. 1st January, 2015) has been completed in quarter ended 30thJune, 2015. The Company has created Pari Passu charge on assets of the Company and executed its Corporate Guarantee in favor of Union Bank of India for securing their Foreign Currency Loan of USD 2 mn to Pradeep Metals Limited Inc, Texas, Wholly Owned Subsidiary. The Company has remitted sums aggregating to USD 0.475 mn (Equivalent to Rs. 265.19 Lacs) during the financial year and USD 0.275 mn (equivalent to Rs. 174.19 Lacs) to WOS, towards its contribution for the acquisition. Dimensional Machine Works LLC, Texas. has become a Step-down Subsidiary of the Company. The Company does not have any joint venture or associate company. A statement containing salient features of the Financial Statements of the Subsidiaries is annexed to this Report as Annexure A. 7. DEPOSITS Your Company has not invited or accepted any fixed deposits from the public and, as such, no amount of principal or interest was outstanding on the date of the Balance Sheet. 9. CONSOLIDATED FINANCIAL STATEMENT The Consolidated Financial Statement of the Company are prepared with relevant Accounting Standards viz. AS-21, AS-23 and AS-27, issued by the Institute of Chartered Accountants of India and forms part of this Report. 10. DIRECTORS RESPONSIBILITY STATEMENT Your Directors state that: a) in the preparation of the annual accounts for the year ended 31st March, 2015, the applicable Accounting Standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same; b) The Directors have 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 Company for the year ended on that date; c) the Directors have 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) the Directors have prepared the annual accounts on a 'going concern' basis; e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. 11. CORPORATE GOVERNANCE As per Clause 49 of the Listing Agreement with the Stock Exchanges, a separate section on corporate governance practices followed by the Company, together with a certificate from the Company's Auditors confirming compliance forms an integral part of this Report. 12. BUSINESS RESPONSIBILITY REPORT As stipulated under the Listing Agreement, the business responsibility report describing the initiatives taken by the Company from environmental, social and governance perspective is attached as part of the Annual Report. 13. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES All contacts/ 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, other than WOS, which could be considered material in accordance with the policy of the Company on materiality of related party transactions. The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link:www.pradeepmetals.com 14. CORPORATE SOCIAL RESPONSIBILITY (CSR) The Corporate Social ResponsibilityCommittee (CSR Committee) has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board. The CSR Policy may be accessed on the Company's website at the link: www.pradeepmetals.com The key philosophy of all CSR initiatives of the Company is guided by three core commitments of Scale, Impact and Sustainability. The Company has identified five focus areas of engagement which have been enumerated in Annexure B to the Directors' Report. During the year, the Company has spent Rs.7.51 Lacs (about 47% of the average net profits of last three financial years) on CSR activities. The Annual Report on CSR activities is annexed herewith marked as Annexure B. 15. RISK MANAGEMENT During the year under review, your Directors have constituted a Risk Management Committee which has been entrusted with the responsibility to assist the Board in (a) Overseeing and approving the Company's enterprise wide risk management framework; and (b) Overseeing that all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks. Risk Management Policy was reviewed and approved by the Committee. 16. INTERNAL FINANCIAL CONTROLS The Company has in place adequate internal financial controls, commensurate with the activities and size of the Company, with reference to financial statements. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed. 17. DECLARATION BY INDEPENDENT DIRECTORS The Company has received declarations from all the Independent Directors of the Company, confirming that they meet the criteria of independence as provided under section 149(6) of the Companies Act, 2013. 18. DIRECTORS AND KEY MANAGERIAL PERSONNEL During financial year 2014-15, Board of Directors, on recommendation of Nomination and Remuneration Committee appointed Mr. Rajeev Dixit, F.C.A. with 20 years of experience as Chief Financial Officer of the Company. Pursuant to the provisions of Section 2(51) of the Companies Act, 2013, Board has identified Mr. Abhinav Goyal, Vice President- Marketing and Technology, as Key Managerial Personnel. In accordance with the provisions of Companies Act, 2013 and the Articles of Association of the Company, Dr. Kewal K. Nohria, Director retires by rotation at ensuing Annual General Meeting and, being eligible, has offered himself for re-appointment. 19. AUDITORS AND AUDITORS' REPORT a. Statutory Auditors M/s. S.R. Rege, Chartered Accountants, Mumbai (Firm Registration Number: 108813W) Statutory Auditors of the Company, hold office till the conclusion of the ensuing Annual General Meeting (AGM). However, they have informed their inability to continue as Auditors of the Company beyond the conclusion of forthcoming AGM due to other professional commitments. Board of Directors, on the recommendation of Audit Committee, has proposed to appoint M/s. N.A. Shah Associates, Chartered Accountants, Mumbai (Firm Registration Number: 116560W) as Statutory Auditors of the Company in place of the retiring auditors M/s. S. R. Rege & Co., to hold office for a period of five years from conclusion of this AGM till the conclusion of Thirty Seventh AGM of the Company to be held in the year 2020 (subject to ratification of their appointment at every AGM). M/s. N.A. Shah Associates, have confirmed their willingness to be appointed as Statutory Auditors of the Company and eligibility to the effect that their appointment, if made, would be within the prescribed limits under the act and that they are not disqualified for appointment. The Notes on Financial Statement referred to in the Auditors' Report are self-explanatory and do not call for any further comments. The Auditor's Report does not contain any qualification, reservation or adverse remark. b. Cost Auditors As per the requirement of Central Government and pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 as amended from time to time, the Company has been carrying out audit of its cost records every year. The Board of Directors, on recommendation of Audit Committee, has appointed M/s. J.J. Paleja & Co., Cost Accountants, Mumbai (Firm Registration Number: 100656) as Cost Auditor to audit the cost accounts of the Company for financial year 2015-16 at a remuneration of Rs. 1,25,000/- plus taxes and reimbursement of out of pocket expenses. As required under the Companies Act, 2013, a resolution seeking Member's approval for the remuneration payable to the Cost Auditor forms part of the Notice convening the Annual General Meeting. c. Secretarial Auditors and Secretarial Audit Report Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Rules made thereunder, M/s. Shweta Gokarn & Co., Practicing Company Secretaries, Navi Mumbai (Certificate of Practice Number: 11001) were appointed as the Secretarial Auditor to conduct a Secretarial Audit of the Company. The Secretarial Auditors' Report for the financial year ended 31st March, 2015 is annexed to this Report and marked as Annexure C. No adverse comments have been made in the said Report. 20. DISCLOSURES: a. CSR Committee The CSR Committee comprises of Mrs. Neeru Goyal as Chairperson and Mr. Raj Kumar Mittal and Mr. Rajeev Mehrotra as other Members. b. Audit Committee The Audit Committee comprises of Independent Directors namely Mr. Raj Kumar Mittal (Chairman), Mr. Suresh G. Vaidya and Non-Executive Director Dr. Kewal K. Nohria. All the recommendations made by the Audit Committee were accepted by the Board. c. Vigil Mechanism The Vigil Mechanism of the Company, which also incorporates a whistle blower policy in terms of the Listing Agreement, includes an Ethics & Compliance Task Force comprising senior executives of the Company. Protected disclosures can be made by a whistle blower through an E-mail, or dedicated telephone line or a letter to the Chairman of the Audit Committee. The policy on vigil mechanism and whistle blower policy may be accessed on the Company's website at the link: www.pradeepmetals.com d. Remuneration and Nomination Policy The Board has framed a policy which lays down a framework in relation to remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. This policy also lays down criteria for selection and appointment of Board Members. The details of this policy are explained in the Corporate Governance Report. 21. Meetings of the Board During the financial year 2014-15, Six meetings of the Board were held on 10th May, 2014, 3rd July, 2014, 14th August, 2014, 26th September, 2014, 12th November, 2014 and 7th February, 2015. The gap between any two meetings did not exceed four months. Annual General Meeting for FY 2013-14 was held on 4thSeptember 2014. 22. Particulars of Loans given, Investments made, Guarantees given and Securities provided Particulars of loans given, investments made, guarantees given and securities provided and thereof are as follows:- During the financial year 2014-15, the Company has made further investment of USD 0.425 mn lakhs towards Equity in its WOS, Pradeep Metals Limited, Inc., Texas, and Pradeep Metals Limited, New York (upto 8th March, 2015), towards its contribution for acquisition of 51% stake in CNC Machine Shop at Houston, Texas, USA, which was merged with Pradeep Metals Limited, Inc., Texas with effect from 9th March, 2015. The Company has extended its corporate guarantee and created first pari passu charge on the fixed assets of the Company in respect of Term Loan of USD 2 mn taken by the WOS, Pradeep Metals Limited, Inc., Texas from Union Bank of India, Hong Kong, for the acquisition, subsequently. 23. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, are provided in Annexure D to this Report. 24. Extract of Annual Return Extract of Annual Return of the Company is annexed herewith as Annexure E to this Report. 25. Particulars Of Employees and Related Disclosures In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said Rules are provided in the Annual Report. As per the provisions of Section 136(1) of the Act, these particulars will be made available to the Members on request. The remuneration is being paid to Mr. Pradeep Goyal, Chairman and Managing Director, pursuant to the Special Resolutions passed at the EGM dated 25th January, 2014 and AGM dated 4th September, 2014. Necessary applications have been made to the Ministry of Corporate Affairs and approval has been received for appointment for term of 1 years from 17th December, 2013 to 16th December, 2014 and payment of remuneration upto 31st March, 2014. The approval for payments of remuneration for subsequent period is awaited in response to the applications/representations made. 26. GENERAL Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: 1. Neither the Managing Director nor the Whole-time Directors of the Company receive any remuneration or commission from any of its subsidiaries. 2. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future. Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. 27. ANNUAL EVALUATION OF BOARD'S PERFORMANCE Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of the working of its own performance, the Directors individually as well as evaluation of its committees. A structured questionnaire was prepared after taking into consideration inputs received from the Directors, covering various aspects of the Board's functioning. The evaluation was done on various parameters such as vision and strategy, Board participation, Board disclosures of interests, review of risk management policies and evaluating plans with reference to risk and return, good governance, leadership skills, operations, business development, human recourses development, corporate communication, etc The Directors expressed their satisfaction with the evaluation process. 28. ACKNOWLEDGEMENT Your Directors would like to express their sincere appreciation for the assistance and co-operation received from government authorities, Union Bank of India, customers, vendors and Members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services by the Company's executives, staff and workers. For and on Behalf of the Board of Directors Sd/- Pradeep Goyal Chairman and Managing Director REGISTERED OFFICE: Pradeep Metals Ltd., R-205, MIDC, Rabale, Navi Mumbai - 400 701 CIN: L99999MH1982PLC026191 |