DIRECTORS' REPORT To, THE MEMBERS, MAZDA LIMITED 1. In the silver jubilee year of the company's operations, Your Directors are pleased to present the 25th Annual Report on the business and operations of the company together with the Audited Accounts for the year ended March 31, 2015. DIVIDEND & RESERVES Your Directors are pleased to recommend a dividend of 60% to its equity shareholders i.e. Rs. 6/- per equity share of face value of Rs. 10/- each aggregating to Rs. 255.48 Lacs (Previous year Rs. 5.50 per equity share of face value of Rs. 10/- each aggregating to Rs. 234.19 Lacs). The payment of dividend is subject to the approval of the Shareholders at the ensuing Annual General Meeting. During the year under review, your directors propose to transfer the amount of Rs. 125.00 Lacs (Previous year Rs.125.00 Lacs) to the General Reserve. OPERATIONS During the year under review, amid optimism and rising business sentiments, your company reported a top-line growth of 14% over the previous year. The Profit before Tax for the year is Rs. 16.06 Crores as against Rs. 14.79 Crores for the previous year showing increase by 9%. FINANCE AND ACCOUNTS There are no term loans or interest thereon outstanding during the year under review. Your company is at present using financial assistance in the form of working capital facilities from State Bank of India, Ahmedabad with overall banking limits upto Rs. 24.38 Crores to capture its fund based and non-fund based requirements. The fund based limits are in the form of Cash credit / PCFC loans and non-fund based limits are in the form of Bank Guarantees and LCs. Your company is sufficiently funded from the internal accruals and cash accrual from sale of valve division which has been invested in debt market instruments like fixed maturity plans, liquid funds and bond funds. The investment amount has increased from the previous year investment of Rs. 29.71 Crores to Rs. 32.66 Crores in the year under review. During the year under review, ICRA has conducted the surveillance of credit facilities and re-affirmed the long term credit ratings to 'A' and short term credit ratings to 'A1'. The outlook of the long term ratings is stable. 5. EXPORTS AND TECHNOLOGY DEVELOPMENTS Exports for the year were at Rs. 32.10 Crores as compared to Rs. 31.07 Crores for the previous year showing marginal increase compared to the last year. Despite adverse situations in the global economy, your company has maintained its exports. Your company is continuously improving their technology by way of in-house Research & Development facility and by way of technology collaboration agreement with the global entities. 6. FIXED DEPOSITS Your company has not accepted any new Fixed Deposits during the year under review. There are no fixed deposits pending in the financial year under review. 7. INSURANCE The properties and insurable assets and interest of the company, like building, plant and machinery and stocks, among others are adequately insured. 8. MANAGEMENT DISCUSSION AND ANALYSIS (a) Industry Structure and Developments: The global economy in financial year 2014-15 witnessed divergent trends among major economies. However as the world economy faces subdued conditions and uncertainties the Indian economy poised to accelerate. Specifically, India's economy is poised to return to its high-growth path, thanks to lower fiscal and current account deficits, falling inflation and structural reforms to boost investments. The manufacturing sector is likely to benefit from lower interest rates. Engineering Business: There is an overall improvement in the slowdown which was witnessed in the engineering sector in the financial year under review. The vacuum business of the company has increased by 20% compared to the previous financial year. The evaporator business has also increased in the current year and has shown growth of 10% compared to the previous year. The Absorption Refrigeration System business is also picking up and your company has dispatched the second system to France during the year under review. This system is manufactured under the technology received from Inven Absorption GmbH, Germany. Food Business: During the year under review the food division has once again expanded its product offering and also started supply in the domestic Indian market. The favourable conditions in the foreign exchange market with a weaker Indian rupee continues to benefit our division which is largely export oriented. This year your company have added new liquid fruit based products to their existing range such as fruit squash and fruit chutneys which have helped in attracting new customers from different territories. The natural lines of flavouring and food essences that were introduced last year continue to move very well and your company has added new packing sizes for these. This year we will focus our efforts into identifying needs and demands within the Indian market whilst trying to establish a customer base for our products locally in addition to our export sales. (b) Segment-wise Performance: Your company has divided the business in two segments i.e. Engineering Division and Food division. Your company's performance in the engineering segment shows increase in turnover by 15% and the profit in the engineering segment has increased by 3%. The food business has been stagnant in this year which reflects by an increase in turnover by 8% and the profit of the food business has reduced. (c) Outlook: The GDP increased by 2.6% in 2014-15 as there was a notable divergence in performance, Growth is expected to rebound given political certainty, positive policy measures and improved business confidence. • LICENCE AGREEMENT WITH CONSTRUCTIONS INDUSTRIELLES DE LA MEDITERRANEE S.A. FRANCE ("CNIM") Originally Mazda had entered into a collaboration agreement on September 20, 2012 with Inven Absorption GmbH, Germany ("Inven") for Absorption Refrigeration Units. On June 2, 2014 Inven sold to CNIM its intellectual property rights, know-how and associated assets related to the design and manufacture of Absorption Refrigeration Units. Consequent to the above, Inven and Mazda terminated the collaboration agreement on June 24, 2014. Since Mazda was still interested in manufacture and selling specific units of Absorption Refrigeration Unit they entered into a fresh agreement with CNIM on 8th August, 2014. Under the said agreement Mazda would pay to CNIM a royalty of 3% on sale of Absorption Refrigeration Units sold in the territory. The license agreement with CNIM did not provide for training and technical assistance. Hence, on November 18, 2014 Mazda entered into training and technical assistance agreement with Inven (name changed to J.S. Energie & Beratung GmbH w.e.f. October 22, 2014). Under the terms of this agreement Mazda would have to pay a lumpsum amount of Euro 1,00,000 in four installments to J.S. Energie & Beratung GmbH. The transfer of technology for Absorption Refrigeration Units is now completed and your company has already dispatched two systems indigenously manufactured under the said technology. The full fledged commercial launch for the domestic / export market will commence shortly. This is likely to boost the top line of your company as a new vertical will be added. • TECHNOLOGY AND KNOW-HOW LICENSE AGREEMENT WITH A SPANISH COMPANY Mazda has entered into a technology and know-how license agreement for freeze crystallization technology with a Spanish company in October, 2014. Under the said agreement Mazda has a non-exclusive license for the territory of India for manufacture and selling of products based on freeze crystallization technology for a period of seven years. Mazda is required to pay a lumpsum license fee of USD 1 million and running royalty of 4% on goods manufactured and sold using the freeze crystallization technology. Freeze crystallization technology is for zero liquid discharge in chemical process industry as well as for increase in concentration of liquids / juices in food processing industry. Considering the vast applicability of the technology, the future of the product looks bright. Transfer of technology is in process & your company will commence the commercial sales shortly. (d) Opportunities and threats: Your company is continually upgrading its technology and improvements in their product mix and looking for the new business dimensions in the engineering sector. While the Indian manufacturing industry is expected to recover swiftly in 2015, global situation can impact its path of recovery. The overall engineering market is facing pressure of slow down and the same can affect your company. (e) Internal control systems and risk management: Your company maintains adequate and effective Internal Control System commensurate with its size and complexity. We believe that this internal control system provide, among other things, a reasonable assurance that transactions are executed with management authorisation and that they are recorded in all material respects to permit preparation of financial statements in conformity with established accounting principles and that the assets of your company are adequately safe-guarded against significant misuse or loss. Some significant features of the internal control system are: • Implementation and control of all transactions including finance, materials, dispatch, quality, costing etc. across all locations. • Internal audits are conducted by external auditors and they audit all aspects of business. • Extensive Audit programme and periodic review by Management and Audit Committee. The processes and practices of risk management of the company encompasses risk identification, classification and evaluation. The company identifies all strategic, operational and financial risks that the company faces by assessing and analyzing the latest trends in risk information available internally and externally and uses the same to plan for risk mitigation activities. The company has set up a Risk Review Team to review the risks faced by the company and monitor the development and deployment of risk mitigation action plans. The Team reports to the Board of Directors and Audit Committee to provide oversight for the entire risk management framework in the company. (f)Health, Safety & Environment: Your company maintains the highest standards of Occupational Health, Safety, Security and Environment (HSSE) and complies with all applicable laws related to them. The HSSE performance has been integral to your company's business performance and your company is in continual process of improving safety measures of all the personnel. Your company's manufacturing facility at all four units and corporate office are OHSAS 18001:2007 and ISO 9001:2008 &14001:2004 certified. (g) Human Resources and Industrial Relations: During the year under review, focus continued to be on the development of the various facets of leadership capability and talent management with a view to ensure alignment to the overall business strategy. During the year, extensive training and developmental activities were undertaken for the employees. The company has employed 213 personnel as at 31/03/2015. All the employees are having the required qualifications to perform their jobs. The relationship with workmen and staff remained cordial and harmonious during the year and the management received full co-operation from the employees. 9. EMPLOYEE STOCK OPTION Your company has not issued any Stock Option to their employees. 10. SUBSIDIARIES AND JOINT VENTURES There are no subsidiaries or joint ventures of your company. 11. DIRECTORS The Board consists of Executive and Non-executive Directors including Independent Directors who have wide and varied experience in different disciplines of corporate functioning. During the year under review, members at their previous Annual General Meeting approved the appointment of Mr. Nilesh Mankiwala and Mr. Saurin Palkhiwala as Independent directors for a term of five years. In the said meeting Mr. Mohib Khericha was re-appointed as an Independent Director and Chairman of the company. Mr. Samuel W. Croll-III and Mrs. Houtoxi F. Contractor, Directors retire by rotation and being eligible, offer themselves for re-appointment. Brief resume, area of expertise and other details of these Directors are mentioned as Annexure-A. 12. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT-9 as required under section 92(3) of the Companies Act, 2013 is attached as Annexure - B. 13. NO. OF MEETINGS OF THE BOARD During the year under review, the Board of Director met five times. The details of the Board Meeting is provided in the Corporate Governance Report. 14. DIRECTORS' RESPONSIBILITY STATEMENT Your Directors confirm that: (i) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; (ii) 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 profit of the company for the year ended on that date; (iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; (iv) The Directors have prepared the annual accounts on a going concern basis; (v) 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; (vi) 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. 15. REPORTING OF FRAUD BY STATUTORY AUDITORS There are no incidence of fraud reported by the auditors as required under section 143 (12) of the Companies Act, 2013. 16. DECLARATION BY INDEPENDENT DIRECTORS All the Independent Directors of the company have furnished declarations that they qualify the conditions of being Independent as per Section 149(6) & (7) of the Companies Act, 2013. 17. POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION The requisite details as required by Section 178(3) &(4) and as per the requirement of clause 49 of the Listing Agreement with the Stock Exchanges is attached as Annexure -C. 18. AUDITORS AND AUDITORS' REPORT • Statutory Auditor At the 24th Annual General Meeting held on 30th September, 2014, the members have approved reappointment of Apaji Amin & Co., Chartered Accountants, Ahmedabad (Registration No. 100513W) to hold office from last AGM upto the conclusion of 25th Annual General Meeting on such remuneration as may be fixed by the Board apart from reimbursement of out of pocket expenses as may be incurred by them for the purpose of audit. There are no qualifications, reservations or adverse remarks or disclaimers made by the auditors in their report on the financial statements of the company for the financial year ended 31st March, 2015. The notes on the Financial Statements referred to in the Auditors Reports are self-explanatory and do not call for any comments or explanations. • Secretarial Auditor Pursuant to Section 204 of the Companies Act, 2013 Secretarial Audit Report for the financial year ended on 31st March, 2015 given by Rutul Shukla & Associates, Practicing Company Secretaries is attached as Annexure - D. The Secretarial Auditor Report are self-explanatory and do not call for any comments or explanations. • Cost Auditor In the year under review, cost audit is not mandatory for the company inspite of the same, the audit of cost accounts relating to the manufacturing of machineries is carried out during the year. As per the requirement of Section 148 of the Companies Act read with the Companies (Cost Records and Audit) Rules, 2014, the Board of directors have, based on the recommendation of the Audit Committee, appointed Shri V. H. Shah, Cost Auditors, Ahmedabad (Registration No. 100257) to audit the cost accounts of the company for the financial year 2015-16 commencing from 01st April, 2015 to 31st March, 2016 on a remuneration of Rs. 1 Lac. As required under the act, necessary resolution seeking members' ratification for the remuneration payable to Shri V. H. Shah is part of the notice. 19. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE ACT Particulars of loans given and the investments made by the company as at 31st March, 2015 are forming part of financial statements. During the financial year under review, the company has made investments in schemes of various mutual funds closing balance of which as on 31st March, 2015 is Rs. 32.63 Crores. 20. PARTICULARS OF RELATED PARTY TRANSACTIONS All related party transactions that were entered into, during the year under review were on arm's length basis and in ordinary course of business. There are no materially significant related party transactions made by the company during the year. Related party transactions policy is available on website of the company i.e. www.mazdalimited.com. 21.STATE OF AFFAIRS OF THE COMPANY The state of affairs of the company are mentioned in the Management Discussion and Analysis Report. 22. MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY No material changes and commitments affecting the financial position of the company have occurred between the end of financial year to which the financial statements relate and the date of the Directors' Report. 23. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, RESEARCH AND DEVELOPMENT AND FOREIGN EXCHANGE EARNINGS AND OUTGO The information on conservation of energy, technology absorption, foreign exchange earnings and outgo as required, to be disclosed in terms of Section 134 of the Act, read with the Companies (Accounts) Rules, 2014, is attached as Annexure - E. 24. RISK MANAGEMENT POLICY The company has structured a risk management policy. The details related to risk management is given in the Management Discussion and Analysis Report. 25. CORPORATE SOCIAL RESPONSIBILITY POLICY (CSR) Pursuant to the provision of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the company has constituted a CSR Committee. Mrs. Sheila Mody is the Chairperson of the Committee and Mr. Mohib Khericha and Mr. Percy Avari are members to the Committee. The Board of Directors, based on the recommendations of the Committee, formulated a CSR Policy encompassing company's philosophy, laying down the guidelines and mechanisms for undertaking various social welfare programme for development of the community at large. CSR policy of the company is available at its website: www.mazdalimited.com. The requisite details on CSR activities pursuant to Section 135 of the Act and as per Annexure attached to the Companies (Corporate Social Responsibility Policy) Rules, 2014 are attached as Annexure - F. 26. PERFORMANCE EVALUATION OF BOARD AND ITS DIRECTORS AND COMMITTEES TO THE BOARD In compliance with the provisions of the Companies Act, 2013 and clause 49 of the Listing Agreement, the performance evaluation of the Board, their Committees and their members were carried out. The criteria for the same is given in the Corporate Governance Report. 27. PARTICULARS OF REMUNERATION OF MANAGERIAL PERSONNEL AND RELATED DISCLOSURES The ratio of each director to the median employee's remuneration and other details in terms of section 197(12) of the Companies Act, 2013 read with rule 5(1) of the Companies (Appointment and remuneration of Managerial personnel) Rules, 2014 forms part of this report and is attached as Annexure - G. The statement containing particulars of employees as required under section 197(12) of the Companies Act, 2013 read with rule 5(2) & 5(3) of the Companies (Appointment and remuneration of Managerial personnel) Rules, 2014 forms part of this report and is attached as Annexure - H. 28. REPORT ON CORPORATE GOVERNANCE As per Clause 49 of the Listing Agreement with the Stock Exchanges, a separate section on Corporate Governance together with a certificate from the Practicing Company Secretary confirming compliance is set out in the Annexure forming part of Corporate Governance Report attached as Annexure - I. 29. SIGNIFICANT ORDERS PASSED BY THE REGULATORS, COURTS OR TRIBUNALS IMPACTING GOING CONCERN AND COMPANY'S OPERATIONS To the best of our knowledge, the company has not received any such orders passed by the regulators, courts or tribunals during the year, which may impact the going concern status or company's operations in future. 30. APPRECIATION Your Board takes this opportunity to express its sincere appreciation of the excellent contribution made by all its employees towards the overall performance of your company. Your Directors also thank all the shareholders, distributors, suppliers, bankers and other business associates for their valuable service and support during the year under review. 31. CAUTIONARY NOTE The statements forming part of the Directors' Report may contain certain forward looking remarks within the meaning of applicable security laws and regulations. The actual results, performance, achievements of the company may be materially different from any future results, performance or achievements that may be expressed or implied by such forward looking statements. For and on behalf of the Board, Sorab Mody Managing Director Percy Avari Whole-Time Director Place : Ahmedabad Date : 01/08/2015 |