DIRECTORS' REPORT TO THE MEMBERS Your Directors are pleased to present the 30th Annual Report of the Company together with the Audited Accounts for the year ended March 31, 2015. BUSINESS OPERATIONS Your company recorded the gross turnover of Rs.1,333 Crores during the year as against Rs.1,314 Crores in the previous year resulting increase of 1.44%. During the year under review, the company has sold 962,603 nos. of A.C. systems as against 917,349 nos. in the previous year. Company has been making investments in building up the capacities technology up gradation, new product development and Localization to sustain its market leadership in line with company's growth plans. The Indian automobile industry has however grown at the marginal pace of 2-3% over last three years. However, the business arising from these investments is expected to yield better results from the Financial Year 2015-16. The company has made significant efforts to sustain its margins through cost reduction in material cost by import substitution and other cost optimization initiatives. The performance of the company is also discussed in Management Discussion and Analysis, as stipulated under clause 49 of the Listing Agreement with the Stock Exchanges, which forms part of the Directors' Report. Your company expects the growth in the automobile sector due to improvement in Global economic factors, stable Government in India and fuel prices. In view of expected cost pressure, your company planned extensive localization and cost down initiative. Further your company is also working to expand sales by catering the demand from existing and new automobiles manufacturers in India. In the current year, the company will start supplying to Renault Nissan from its Chennai plant and expand its business in Chennai to take care of other Southern India based OEM customers including Rail coach factory. The company has also expanded its facilities of Tool Engineering Centre and focusing on in-house development of all Moulds/Dies, which are required for its new product development. This will help the company to shorten the lead-time of product development at reduced cost. The company expects growth in coming years due to increased share of business from its existing customers and expansion of business in new business domains like bus air conditioning, truck refrigeration and radiators. In nutshell company will focus on cost management initiative to be more competitive with other suppliers to cater additional business from customers and expand in new domains. Company is setting up facility for production of radiator for their customers which will improve revenue of the company. EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS There was no material change and commitment's which affect the financial position of the company subsequent to the date of financial statement. DIVIDEND Your company has earned a net profit (after tax) of Rs.2032 Lacs as against Rs. 2026 Lacs in the previous year. Your directors recommend a dividend of Rs 0.70. per share i.e. (35%) on the paid-up equity share capital for the year ended March 31, 2015 as against Rs. 0.70 per share i.e. (35%) declared in the previous year. The dividend, if approved by the shareholders at the ensuing Annual 20 General Meeting, shall absorb a sum of Rs.420 lacs exclusive of Dividend Tax. (i) Directors & Key Managerial Personnel (Appointment & Resignation) During the year, the following changes took place in the Board of your company: a) Directors • Resignation of Mr. Y. Makino from the office of Nominee Director (Representative of Denso Corporation, Japan) w.e.f. November 03, 2014 • Appointment of Mr. Katsuhisa Shimokawa as Nominee Director (Representative of Denso Corporation, Japan) w.e.f. November 03, 2014 • Reappointment of Mr D M Reddy as Executive Director w.e.f. 01.04.2015 on expiration of his term. The requisite resolutions pertaining to the Appointment/Re-appointment appears at the respective items of the notice along with the Explanatory Statement and are recommended to the shareholders for approval. b) Key Managerial Personnel • Resignation of Mr. Vikas Sabharwal from the office of Dy. Company Secretary w.e.f. February 14, 2015. • Appointment of Mr. Hemant Kumar Agarwal, as Dy. Company Secretary w.e.f. March 5, 2015. (ii) Retire By Rotation Pursuant to the provisions of Section 152 of the Companies Act, 2013 Mr. Kenichi Ayukawa, Non Executive Director of the Company retire by rotation at the ensuing Annual General Meeting and being eligible, offer himself for reappointment. Brief profile of Mr. Kenichi Ayukawa as required under Clause 49(VIII)(E) of the Listing Agreement is provided in the Corporate Governance, attached hereto. (iii)Declaration From Independent Directors The company has received necessary declaration from all the Independent Directors of the Company under Section 149(7) of the Companies Act, 2013 that the Independent Directors of the Company meet with the criteria of their Independence laid down in Section 149(6). (iv) Board Annual Evaluation In compliance with the provisions of the Companies Act, 2013,the Board during the year adopted a formal mechanism for evaluation of its performances as well as that of its committees and individual Directors, including the Chairman of the Board. Nomination & Remuneration Committee has approved the draft evaluation formats for the Board, Executive and Non Executive Directors and Chairperson of the company considering qualification, expertise, attributes and various parameters based on which evaluation of the Board has to be carried out by the company. (v) Board Meeting During the financial year 2014-15, Five Board meetings were held on 26.05.2014, 28.07.2014, 03.11.2014, 13.02.2015 and 24.03.2015. COMPOSITION OF AUDIT COMMITTEE The Composition of Audit Committee of the Company is given in Corporate Governance Report, as stipulated under Clause-49 of the Listing Agreement with the Stock Exchanges, which forms part of the Director's Report. DIRECTORS' RESPONSIBILITY STATEMENT As required under section 134 (5) of the Companies Act, 2013, the Directors hereby confirm that: (a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; (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 at the end of the financial year and of the profit and loss of the company for that period; (c) The directors have 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; and (e) The directors have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively. (f) The directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively INFORMATION ABOUT THE FINANCIAL PERFORMANCE / FINANCIAL POSITION OF THE SUBSIDIARIES/JOINT VENTURE 1. SUBSIDIARY During the financial year under review THAI SUBROS LIMITED Subsidiary Company in Thailand, achieved gross revenue of THB 64 Lacs as against THB 95 Lacs during the last financial year, the sales has decreased by 33% over the last year and the company was having a loss of THB (14.68) Lacs as against loss of THB (16.27) lacs during the current year. As the business of the Customers of Subsidiary Company has not grown as per business plan. It is not economically viable to continue the business operations at Thailand. Accordingly Company decided to transfer all the inventory and assets lying at Thailand to our Pune Plant. 2. JOINT VENTURE During the financial year under review the financial performance of Denso Subros Thermal Engineering Centre India Limited (JV), achieved gross revenue of Rs.1,463.03 Lacs as against Rs.1,680.78 Lacs during the last financial year, the sales has been decreased by13% over the last year and the company incurred loss of Rs.0.98 Lacs during the year as against profit ofRs. 320.73 Lacs in last year. Subros Limited is holding 26% share in JointVenture. CONSOLIDATION OF ACCOUNTS In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Accounting Standard AS-27 on financial reporting for interest in Joint Ventures, the Audited Consolidated Financial Statements are provided in the Annual Report. EXTRACT OF ANNUAL RETURN As required pursuant to section 92(3) of the Companies Act,2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of annual return in MGT9 as a part of this Director's Report is enclosed as ANNEXURE I. AUDITORS AND AUDITORS REPORT (i) Statutory Auditor M/s. V.K. Dhingra & Co., Chartered Accountants, Statutory Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting and being eligible for reappointment, offered themselves for reappointment. The notes of accounts referred to in the Auditors Reports are self explanatory. No Qualification remark in Audit report. (ii) Cost Auditor The Company has appointed M/s. Chandra Wadhwa & Company, Cost Accountants, as Cost Auditor of the Company to conduct the audit of cost records maintained by the Company for the Financial Year ending 31st March, 2016. (iii)Secretarial Auditor The Company has appointed M/s. RSM & Co., Company Secretaries as Secretarial Auditors to conduct the audit of secretarial and related records of the Company for the Financial Year ended 31stMarch, 2016. Secretarial Auditor report is annexed herewith as Annexure II for financial year 2014-15 which is self-explanatory. No Qualification remark in Secretarial Audit Report. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO Conservation of Energy: Information relating to conservation of Energy, Technology Absorption etc.,in terms of Section 134 (3) (m) of the Companies Act,2013 read with relevant rules is annexed herewith. FIXED DEPOSITS During the year the Company has not received any deposits from the public under section of 73 to 76 of Companies Act,2013 read with the Companies (Acceptance of Deposit) Rules. SIGNIFICANT &MATERIAL ORDERS PASSED BY THE REGULATORS There are no material orders passed by the regulators or Courts or Tribunals impacting the going concern status and the company's operations in future. DETAILS OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS The adequacy of Internal Financial Controls is also discussed in Management Discussion and Analysis, as Stipulated under Clause 49 of the Listing agreement with the Stock Exchanges, which forms part of the Director Report. LOANS, GUARANTEES OR INVESTMENTS The Company has not made any transaction of Inter-Corporate Loan & Investment during the year. CORPORATE SOCIAL RESPONSIBILITY The Company has formulated a Corporate Social Responsibility (CSR) Policy to undertake CSR initiative as specified in Schedule VII of the Companies Act, 2013. The Company has constituted a robust and transparent governance structure to oversee the implementation of CSR policy, in compliance with the requirement of Section 135 of the Companies Act, 2013. During the year, the Company has undertaken CSR initiatives in the areas of Environmental Sustainability for social & environmental growth. The Annual Report on CSR activities is annexed herewith as "Annexure III". POLICIES (i) Remuneration Policy The Board of Directors has adopted a policy relating to the remuneration for the directors, key managerial personnel and other employees based on recommendation of Nomination and Remuneration Committee. Remuneration Policy has been placed on the website of the Company www.subros.com . (ii) Risk Management Policy The Board of Directors has constituted Risk Management Committee for development and implementation of Risk management policy for the company. During the year one meeting was held wherein Committee has advised to the Management to identify the elements of various risks which may threaten the existence of the company. Therefore Risk Management framework is in 24 the process of development. (iii)Whistle Blower Policy / Vigil Mechanism Pursuant to Section 177(9) of the Companies Act, 2013, the Company has established Vigil Mechanism for directors, employees, suppliers, contractors and other stakeholders etc of the Company. The same is also intended to cover the Whistle Blower Policy under the aspect of Clause 49 of the SEBI's listing agreement. The purpose and objective of this Policy is to cover serious concerns that would have a larger impact on image and values of the company due to incorrect financial reporting or serious improper conduct. The Whistle Blower Policy has been placed on the website of the Company www.subros.com . RELATED PARTY TRANSACTIONS The Board of Director had duly approved related party transaction policy for determining the Material Related Party Transactions. The Related Party Transactions Policy is disseminated in the website of the Company (www.subros.com/Investors /Policies /RPT). A Statement of all particulars of Contracts or Arrangements with Related parties referred to in Section 188(1) duly approved by the Board of Director is annexed herewith as ANNEXURE IV. LISTING The Equity Shares of your Company continue to be listed on BSE Limited (BSE), National Stock Exchange of India Limited (NSE) and Delhi Stock Exchange Limited. There is no default in payment of Annual listing fees and annual custodian fee in respect of shares held in dematerlisation mode to NSDL and CDSL. DEMATERIALISATION OF SHARES To provide better and smooth service to the shareholders, the Company's equity shares have been made available for dematerialisation in electronic form in the Depository systems operated by National Securities Depository Limited (NSDL) and Central Depository Services(India) Limited (CDSL), Mumbai. In order to avail the service, shareholders can dematerialized the shares in the electronic form. ANNUAL EVALUATION The company has carried out evaluation of Board, Executive Directors, Independent Directors and Chairperson. It is opinioned that the company's Board composition, structure, processes and working procedure are well laid. Board members have adequate expertise drawn from diverse industries, Banking, Administration, Technical, business and bring specific competencies relevant to the company's business. Information flow from Management to the Board and Committees are timely and of acceptable quality. The Board deliberations and participation of members were found to be quite satisfactory and the Board's overall functioning is effective. RATIO OF REMUNERATION TO EACH DIRECTOR Details/Disclosures of Ratio of Remuneration to each Director to the median employee's remuneration is annexed herewith as ANNEXURE -V. CORPORATE GOVERNANCE AND SHAREHOLDERS INFORMATION The Company is committed to maintain the highest standards of corporate governance. The Directors adhere to the requirement set out by the Securities and Exchange Board of India's Corporate Governance practices as per clause 49 of the Listing Agreement and have implemented all the stipulations prescribed. A Report on Corporate Governance along with a Certificate from the Auditors of the Company regarding compliance of the conditions of Corporate Governance pursuant to Clause 49 of the Listing Agreement with stock exchanges is annexed herewith as Annexure-VI and forms part of the Annual Report. Company is in compliance with the disclosure as per Secretarial Standard of ICSI. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES In terms of the provisions of Section 197(12) of the Company's Act, 2013 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. Having regard to the provisions of the first proviso to Section 136(1) of the Act, the Annual Report excluding the said statement of employee under section of 197(12) of Company's Act, 2013 is being sent to the members of the Company. The said information is available for inspection at the registered office of the Company during working hours and any member interested in obtaining said statement copy may write to the Dy. Company Secretary at the registered office of the company. ACKNOWLEDGMENT Your Directors wish to convey their appreciation to all the company's employees for their enormous efforts as well as their collective contribution to the company's performance. Your Directors acknowledge with gratitude the co-operation and support extended by company's bankers, Canara Bank, Kotak Mahindra Bank, & other Banks and the Management of our collaborators, Denso Corporation and Suzuki Motor Corporation, Japan for their continued support. Your Directors also take this opportunity to convey their thanks to the company's valued customers, particularly Maruti Suzuki India Limited, Tata Motors Limited, Mahindra & Mahindra Limited and Force Motors Limited, for the trust and confidence reposed by them in the Management for their unstinted co-operation and support provided to the company. Your Directors also take this opportunity to convey their thanks to the shareholders, suppliers, and all the other business associates for the continuous support given by them to the company and their confidence reposed in the management. For and on behalf of Board of Directors RAMESH SURI Chairman DIN NO - 00176488 Place: New Delhi Dated: 14th May, 2015 |