DIRECTORS' REPORT

TO THE SHAREHOLDERS

1. Your Directors have great pleasure in presenting the 27th Annual Report together with the Audited Accounts for the year ended March 31, 2015.

2. OPERATIONAL REVIEW & STATE OF AFFAIRS:

Total revenue of your Company, during the year under review, increased at Rs. 528193369.30 as against the total revenue of Rs. 400994598.99 in the previous year. Your Company has been able to earn net profit after tax of Rs. 24997071.27 for the year as against the net profit after tax of Rs. 19512005.51 in the previous year.

The financial year ended 31st March 2015, was another successful year, where despite a challenging environment, our business grew well ahead of competition, your Company based on its core strengths and sincere efforts of all the Rexnord team members, performed well. The company also ventured into a new product range of Energy Saving Fans and Motors in order to have an edge over the existing competition as well as display its core strengths to meet the emerging needs and aspirations of our consumers. The company aims to increase its global identity by creating unique branding techniques and thereby enhancing its distribution networks in Export market so that we can serve our consumers better with our wide range of product offerings. The Board expects better results for the current year.

3. DIVIDEND & TRANSFER TO RESERVES:

To consolidate the financial position of the Company, the Board does not propose any dividend for the year ended March 31, 2015. The Board does not propose to transfer any amount to General Reserves for the aforesaid financial year.

4. SHARE CAPITAL OF THE COMPANY:

During the Financial Year 2014-15, your Company has increased its Authorised Share Capital from Rs. 10,00,00,000/- to Rs. 15,00,00,000/-.

The Paid up Equity Share Capital, as at 31st March, 2015 was Rs. 7,57,86,000/-divided into 75,78,600 Equity shares, having face value of Rs. 10/- each fully paid up. During the year 2014-15, your Company has issued 46,78,800 warrants carrying an entitlement to subscribe to an equivalent number of equity shares of face value of Rs. 10/- on preferential basis. Out of the above, 10,98,300 warrants were converted into equal number of Equity Shares each at a price of Rs. 13.40 to Promoters & Non-Promoters.

5. SUBSIDIARIES, JOINT VENTURES OR ASSOCIATE COMPANIES:

The Company does not have any subsidiaries, joint ventures or associate companies.

6. CHANGE IN THE NATURE OF BUSINESS:

There was no change in the nature of business activities during the financial year 2014-15.

7. BOARD OF DIRECTORS:

In accordance with the provisions of Section 152 of the Companies Act 2013 and the Articles of Association of the Company, Mrs. Nainy K. Tanna, Director of the Company, retires by rotation at the forthcoming Annual General Meeting and being eligible offers herself for re-appointment.

8. DECLARATION OF INDEPENDENT DIRECTORS:

Mr. Ram Sanehi and Mr. Ayyaswami Sundaram, both Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

9. DIRECTORS RESPONSIBILITY STATEMENT:

To the best of our knowledge and belief and according to the information and explanations obtained, Directors make the following statement in terms of Section 134 (3)(c) of the Companies Act, 2013 that:

(a) in the preparation of the Annual Accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any;

(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 and that such internal financial controls are adequate and were operating effectively; and

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

10. KEY MANAGERIAL PERSONNEL:

During the year under review, the Company has appointed the following personsas the Key Managerial Personnel.

11. COMMITTEES OF THE BOARD:

11.1 AUDIT COMMITTEE:

The Company has a qualified and independent Audit Committee comprising of Independent and Executive Directors constituted in compliance with the provisions of Section 177 of the Companies Act, 2013 and the Listing Agreement with the Stock Exchange. The Audit Committee acts in accordance with the terms of reference specified from time to time by the Board. The details of the terms of Audit Committee and other details are explained in the Voluntary Corporate Governance Report.

11.2 NOMINATION AND REMUNERATION COMMITTEE:

The Company has, during the year, renamed the existing Remuneration Committee to "Nomination and Remuneration Committee" which partly complies the requirement of Section 178 of the Companies Act, 2013 in respect of constitution of the committee. The company is in process of appointment of one more non-executive director to comply with the requirements. The Board of Directors has framed a policy which lays down a framework in relation to remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. The policy lays down the criteria determining qualifications, positive attributes, independence of a director and other matters pursuant to the provisions of sub-section (3) of Section 178 of the Companies Act, 2013. The details of the policy are explained in the Voluntary Corporate Governance Report.

11.3 STAKEHOLDERS RELATIONSHIP COMMITTEE:

The Company has, during the year, renamed the existing Shareholders Grievance Committee to 'Stakeholders Relationship Committee' in order to align it with the provisions of Section 178 of the Companies Act, 2013. The Committee has been constituted to strengthen the investor relations and to inter-alia, look into issues relating to security holders grievances pertaining to transfer of shares, non- receipt of declared dividends, non-receipt of Annual Report, issues concerning de-materialization etc. The details regarding composition etc. are explained in the Voluntary Corporate Governance Report.

12. VIGIL MECHANISM / WHISTLE BLOWER POLICY:

The Company has a Vigil Mechanism / Whistle Blower policy to report genuine concerns, grievances, frauds and mismanagements, if any. The Vigil Mechanism /Whistle Blower policy has been posted on the website of the Company i.e. www.rexnordindia.in

13. BOARD EVALUATION:

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an evaluation after taking into consideration various aspects of the Board's functioning, composition of the Board and its Committees, culture, execution and performance of specific duties, remuneration, obligations and governance.

The performance evaluation of the Independent Directors was completed. The performance evaluation of the Chairman and the Whole-time Director was carried out by the Independent Directors at their meeting held on 13th February, 2015. The Board of Directors expressed their satisfaction with the evaluation process.

14. NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS:

The details of the number of meetings of the Board held during the Financial Year 2014-15 forms a part of the Voluntary Corporate Governance Report.

15. CODE OF CONDUCT:

Your Company is committed to conducting its business in accordance with the applicable laws, rules and regulations and highest standards of business ethics. In recognition thereof, the Board of Directors has implemented a Code of Conduct for adherence by the Directors (including Independent Directors), Senior Management Personnel and Employees of the Company. This will help in dealing with ethical issues and also foster a culture of accountability and integrity. The Code has been posted on the Company's website i.e. www.rexnordindia.in

All the Board Members and Senior Management Personnel have confirmed compliance with the Code.

16. FIXED DEPOSITS:

Your Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014.

17. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS:

The Company has not made loans or given guarantees or made any investments, during the financial year 2014-15, therefore, the provisions of section 186 of the Companies Act, 2013 are not attracted.

18. ISO CERTIFICATION:

The Company's products were awarded as ISO 9001:2008 Certification.

19. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS:

There are no significant and material orders passed by the Regulators or Courts that would impact the going status of the Company and its future operations.

20. EXTRACT OF ANNUAL RETURN:

The details forming part of the extract of the Annual Return in Form MGT-9, as required under Section 92 of the Companies Act, 2013, is included in this Report as Annexure 'A' and forms an integral part of this Report.

21. RELATED PARTY TRANSACTIONS:

All related party transactions that were entered into during the financial year were on arm's length basis and were in the ordinary course of the business and comply with the provisions of Section 188 of the Companies Act, 2013. The disclosure in Form AOC-2 is given as per Annexure 'B'. Further, there are no materially significant related party transactions made by the company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the company at large except as mentioned in Form AOC-2.

All related party transactions are placed before the Audit Committee and also before the Board for their approval in accordance with the Policy on Related Party Transactions formulated by the Board of Directors of the Company. Omnibus approval was obtained on quarterly basis for transactions which are of repetitive nature.

22. STATUTORY AUDITOR:

M/s. R. S. Agrawal & Associates, Chartered Accountants, (Firm Registration No 100156W) were appointed as the Statutory Auditors of the Company at the 26th AGM held on August 30, 2014 to hold office until the conclusion of the 29th AGM subject to ratification by the members at every AGM held thereafter. As required under the provisions of Section 139 of the Companies Act, 2013, the Company has obtained written confirmation from M/s. R. S. Agrawal & Associates that their appointment, if made, would be in conformity with the limits specified in the said Section and they are not disqualified.

The members are requested to ratify the appointment of M/s. R. S. Agrawal & Associates as statutory auditors of the Company from the conclusion of 27th AGM to 29th AGM of the Company.

23. SECRETARIAL AUDIT:

Pursuant to provisions of Section 204 of the Companies Act, 2013 and the Rules made thereunder, the company has appointed M/s. GMJ & Associates, Company Secretaries to undertake the Secretarial Audit of the Company. The Secretarial Audit report as required under section 204 (1) of the Companies Act, 2013 is annexed herewith as Annexure 'C' and forms an integral part to this Report.

24. COST AUDIT:

Pursuant to the provisions of Section 148 of the Companies Act, 2013 read with Rules made thereunder, Cost Audit is not applicable to the Company for the financial year 2014-15 and 2015-16.

25. AUDITOR'S REPORT/ SECRETARIAL AUDIT REPORT:

The observations of the statutory auditors contained in their report have been adequately dealt with in the notes to the financial statements which are self-explanatory and, therefore, do not call for any further comments.

As required under Section 204 (1) of the Companies Act, 2013 the Company has obtained a Secretarial Audit Report. The Company would ensure in future that all the provisions are complied with the fullest extent.

26. ANTI-SEXUAL HARASSMENT POLICY:

The Company has constituted an Internal Complaint Committee as required under Section 4 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules made thereunder. During the year under review, no complaints were reported.

27. RISK MANAGEMENT POLICY:

Your Company recognizes that risk is an integral part of business and is committed to managing the risks in a proactive and efficient manner; your Company periodically assesses risks in the internal and external environment, along with the cost of treating risks and incorporates risk treatment plans in its strategy, business and operational plans.

During the year, your Directors has framed a Risk Management Policy (a) to ensure that all the current and future material risk exposures of the Company are identified, assessed, quantified, appropriately mitigated, minimized and managed i.e. to ensure adequate systems for risk management (b) to establish a framework for the company's risk management process and to ensure its implementation (c) to enable compliance with appropriate regulations, wherever applicable, through the adoption of best practices (d) to assure business growth with financial stability.

There are no risks which threaten the existence of the Company.

28. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The internal audit functions of the company are carried out by a firm of Chartered Accountants. The scope and authority of the Internal Audit function is defined by the Audit Committee. The Internal Auditors reports to the Chairman of the Audit Committee of the Board.

The Internal Auditors monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies of the Company.

Based on the report of internal auditors, the Company undertakes corrective action in their respective areas and thereby strengthens the controls. Significant audit observations and recommendations along with corrective actions thereon are presented to the Audit Committee of the Board.

29. DEPOSITORY SERVICES:

The Company's Equity Shares have been admitted to the depository mechanism of the National Securities Depository Limited (NSDL) and also the Central Depository Services Limited (CDSL). As a result the investors have an option to hold the shares of the Company in a dematerialised form in either of the two Depositories. The Company has been allotted ISIN No. INE687C01012.

Shareholders' therefore are requested to take full benefit of the same and lodge their holdings with Depository Participants [DPs] with whom they have their Demat Accounts for getting their holdings in electronic form.

30. PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO:

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo pursuant to Section 134(3)(m) of the Companies Act, 2013, read with the Rule 8(3) of the Companies (Accounts) Rules, 2014 is given as under:

Efficient use of energy in all form has been a consistent corporate trust in the Company. Better maintenance of equipments, improved operating practice and installation of most modern machinery has resulted in lot of saving in energy cost and consumption of raw materials.

A. CONSERVATION OF ENERGY:

The Company is consistently doing research in the field of saving energy by implementing new cost-effective ideas. The steps taken during the year for conservation of energy are as under:

1. Due consideration has been given to energy consumption while procuring equipments.

2. As a responsible Corporate Citizen and in adherence to our climate change strategy, Company is continuously taking effective steps to conserve energy.

3. Except the emergency lights, all lights and electrical gadgets are turned off after working hours and on holidays at office premises of the Company to help in minimizing the energy consumption.

4. The steps taken by the company for utilizing alternate source of energy: The company is constantly exploring avenues for cost saving as an ongoing process.

5. The capital invested on energy equipments: To utilize the alternate source of energy, the company has initiated to set up a Boi-mass Gasifier at a capital cost of Rs. 1914662/-.

B. TECHNOLOGY ABSORPTION:

a) Research & Development

The Research & Development department of the Company has been arduously working to provide quality and value for money to the customer in keeping with market trends. Research and Development is being carried out in the following areas.

• Making design modifications in the products so as to simplify the manufacturing process and enhance productivity.

• Developing Jigs, Fixtures and devices to increase productivity.

• Improvements to tool design.

• Upgradation of machines.

• Design and development of special machines required for increasing capacity.

• Development of equipment required for testing product reliability at various stages.

b) Technology absorption, adaptation and innovation.

Technology for the manufacture of Instrument Cooling Fans of various sizes has been successfully absorbed.

C. FOREIGN EXCHANGE EARNED AND USED:

The particulars regarding foreign exchange earnings and expenditure appear at note nos. 34, 35 and 38 in the notes to the financial statements.

31. PARTICULARS OF EMPLOYEES:

The information required pursuant to Section 197 read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as Annexure "D" to this Report.

None of the employees have drawn remuneration more than Rs. 5,00,000/- p.m., if employed for the part of the year and Rs.  60,00,000/- p.a., if employed throughout the Year.

32. CORPORATE GOVERNANCE & MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

It has always been the Company's endeavor to excel through better Corporate Governance and fair and transparent practices, many of which have already been in place even before they were mandated by the law of the land. The company voluntarily complies with the requirement of clause 49 of the Listing Agreement.

The Board of Directors of the Company had also evolved and adopted a Code of Conduct based on the principles of Good Corporate Governance and best management practices being followed globally. The Code is available on the website of the Company www.rexnordindia.in . A separate report on Corporate Governance and Management Discussion and Analysis Reports which is voluntarily adopted by the Company is included in this Annual Report as Annexure "E".

33. LISTING:

The Shares of the Company are listed on the Stock Exchange at Mumbai. The company has paid the listing fees for the year 2015-16 to the Stock Exchange at Mumbai.

34. EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS:

There were 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 related and the date of the report.

35. CORPORATE SOCIAL RESPONSIBILITY:

Pursuant to the provisions of section 135 of the Companies Act, 2013 read with the Companies (corporate social responsibility policy) Rules 2014, the net profit of the company was below X 5 Crores during the last three immediately preceding financial years. Accordingly, the provisions of CSR policy were not applicable for the financial year 2014-15.

36. ENVIRONMENT AND SAFETY:

The Company is committed to:

• Maintain an organizational culture of Health, Safety & Environmental excellence by conducting its business in a manner that will promote consistent development.

• Safe work, resource conservation, waste management and emergency response measures for continual improvement in performance.

• Design, construct, operate & maintain its facilities while assuring the best material and service quality and operate in a way that mitigates and minimizes risks and hazards.

• Prevention of ill-health, injuries and pollution by adopting best practices, carrying out periodic risk assessments, reviews, inspections and providing awareness to employees and concerned stakeholders.

37. NEW SET OF ARTICLES OF ASSOCIATION:

In conformity of the provisions of the Companies Act, 2013, it is proposed to adopt new set of Articles of Association of the Company. Necessary Special Resolution is placed for member's approval.

38. ACKNOWLEDGMENT:

The Directors wish to convey their appreciation to the Company's shareholders, customers, suppliers, bankers and distributors for the support they have given to the Company and the confidence, which they have reposed in its management and the employees for the commitment and dedication shown by them.

For and on behalf of the Board

REXNORD ELECTRONICS AND CONTROLS LIMITED

KISHORECHAND TALWAR

(DIN: 00351751)

CHAIRMAN & MANAGING DIRECTOR

Registered Office:

92-D Govt. Ind. Estate, Charkop, Kandivli (W), Mumbai - 400 067

Dated: 26th May, 2015