DIRECTORS' REPORT TO THE SHAREHOLDERS Your Directors have pleasure in presenting the Forty Second Annual Report of the Company together with audited accounts for the year ended 31st March 2016. DIVIDEND In view of small profit for the Financial year 2015-16, Your Directors are constrained to skip Dividend for the year. Your Directors assure you that various steps are being taken for improving the performance of the Company. FLOODS IN CHENNAI As members may be aware, there were unprecedented rainfall and floods in the 3rd week of November 2015 and 1st week of December 2015 in Chennai. The manufacturing facility in Padi, Chennai was affected due to the floods and with the timely response and restoration measures taken, the loss of production was minimised totally to 9 days. Insurance claims for damages to Machinery, Buildings and Inventory have been made and are in the process of being settled. OPERATIONS The net sales for the year 2015-16 were at Rs 227.52 crores as against Rs.236.51 crores in the previous year. Your Company had to face the following challenges in 2015-16 : 1. Sales to OE customers remained subdued with marginal decline of about 4% over previous year. 2. Additional burden on account of wage hike for workmen due to long term wage settlements for workmen in Padi, TSK Plant 1 & Plant 2. However there was relief in the expenditure on fuel on account of continuous decline in price of furnace oil due to fall in crude prices. Steps taken to reduce consumption of power and fuel for operations also continue to yield favourable results. EXPORTS Your company continued its thrust in the export market segment and its focus for meeting the expectations of overseas customers in terms of timely delivery and quality. Net Foreign Exchange earned by your company in the year under review was Rs. 82.22 crores as against Rs.77.68 crores in 2014-15. Your Company continues to enjoy the status of Star Export House in accordance with the provisions of the Foreign Trade Policy 2009 - 2014, with a Certificate of Recognition issued by the Office of the Zonal Joint Director General of Foreign Trade, Chennai, which is valid up to 31st March 2018. Your Company continues to take steps for adding new customers and new products in export market. RESEARCH & DEVELOPMENT Your Company's R&D facility located in Padi has been enjoying recognition as an approved R&D unit by the Department of Scientific & Industrial Research (DSIR), Ministry of Science & Technology, Government of India, New Delhi, and the recognition is valid up to 31st March 2018. Your Company continues to give thrust for development of new products, viz., Commercial Vehicle Linings, Passenger Vehicle Linings & Clutch Facings both for new and existing customers. Your company continues its efforts for implementing various initiatives for reduction in energy costs which constitute a major portion next to Raw Material costs & Employees' costs. The total expenditure for R&D incurred in 2015-16 was Rs.5.94 crores as against Rs.6.31 crores in the previous year. OUTLOOK FOR 2016-17 The Indian Economy is predicted to grow by 7.5% to 8% in 2016-17. While the IMD has predicted a good monsoon, its delayed arrival is a matter of concern. If the economy grows as predicted & the monsoon is good, the automotive sector should prosper and the company may be expected to do well. PUBLIC DEPOSITS Your Company does not hold any deposit from the public. BOARD MEETINGS The Board of Directors of the Company met four times during this financial year. Audit Committee and Stakeholders' Relationship Committee of the Board of Directors met four times during the year. Nomination and Remuneration Committee of the Board of Directors met two times during the year and Independent Directors had their meeting one time during the year. DIRECTORS Mr. K Ramesh, Director of the Company who retires by rotation and being eligible for re-appointment offers himself for re-appointment as Director of the Company subject to the approval by the Shareholders of the Company by an Ordinary Resolution. DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS The Company has received necessary declaration from all 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) of the Act. The format of the Disclosure is given as Annexure I. VIGIL MECHANISM The Company has adopted a Whistle Blower Policy establishing vigil mechanism to provide a formal mechanism to the Directors and employees to report their concerns about unethical behavior, actual or suspected fraud or violation of the Company's Code of Conduct or ethics policy. The Policy provides for adequate safeguards against victimization of employees who avail the mechanism and also provides for direct access to the Chairman of the Audit Committee. It is affirmed that no personnel of the Company has been denied access to the Audit Committee. The policy of Vigil mechanism is available on the Company's website www.tvsbrakelinings.com. MATERIAL CHANGES & COMMITTMENTS There are no material changes and commitments affecting the financial position of the company which have occurred between the end of the financial year (FY 2015-16) of the Company to which the financial statements relate and date of the report. DIRECTORS' RESPONSIBILITY STATEMENT In pursuance of Section 134(5) of the Companies Act 2013, your Directors confirm : 1. that in the preparation of the annual accounts, the applicable Accounting Standards have been followed; 2. that they have 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 profit and loss of the Company for that period; 3. that they 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 frauds and other irregularities; 4. that they had prepared the annual accounts on a going concern basis; 5. they 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 6. 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. INFORMATION ABOUT THE FINANCIAL PERFORMANCE / FINANCIAL POSITION OF THE SUBSIDIARIES / ASSOCIATES / JV AND INFORMATION ABOUT SUBSIDIARY / JV / ASSOCIATE COMPANY There is no Subsidiary or Associate Company or JV and hence these are not applicable. EXTRACT OF ANNUAL RETURN As required pursuant to Section 92(3) of the Companies Act 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014 an extract of Annual Return in Form No. MGT 9 as a part of this Annual Report is given in Annexure II. STATUTORY AUDITORS M/s. Sundaram & Srinivasan, Chartered Accountants, Chennai were appointed as Statutory Auditors for a transitional period of 3 years in the Annual General Meeting held on 1st August 2014 subject to the approval and ratification by the shareholders at each annual general meeting during the transitional period. The Company has obtained certificate under Section 141 of the Companies Act 2013 conveying their eligibility for re-appointment. The Audit Committee and the Board reviewed their eligibility and recommended the ratification of the Re-appointment for Third year from the conclusion of the ensuing Annual General Meeting till the conclusion of the next Annual General Meeting as Auditors of the Company. SECRETARIAL AUDITOR Pursuant to the provisions of Section 204 of the Companies Act 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Company has appointed Mr. V Suresh, Practising Company Secretary to undertake the Secretarial Audit of the Company. The Secretarial Audit Report for the Financial Year 2015-16 is annexed to this report as Annexure III. QUALIFICATIONS IN AUDIT REPORTS Explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made - (a) by the Statutory auditor in his report; and (b) by the Company Secretary in practice in his Secretarial audit report. Not applicable as there are no qualifications in Statutory Auditors' Report and in Secretarial Auditors' report. COST AUDIT Cost audit is not applicable to the Company from the Financial Year 2014-15 based on the amended Companies (Cost Audit & Record) Rules 2014 dated 31st December 2014 issued by the Ministry of Corporate Affairs, Govt. of India. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO A. CONSERVATION OF ENERGY (a) Energy conservation measures taken during 2015-16: • Steps taken for reduction of Electrical energy consumption for various operations by reducing the running time of motors in specific areas of operations. • Appropriate reduction of motor horse power was done after required study, which has helped in reducing the Electrical energy consumption and power cost. (b) Additional proposals implemented for reduction of Consumption of energy: • Replacement of the Sodium Vapor Lamps (SVL) outside the factory with Compact Fluorescent Lamps (CFL), wherever required, was carried out during the year. • Steps taken in reducing heat loss in operations by reducing the travel length of pipes carrying hot oil, thereby reducing the fuel consumption. (c) Impact of the above measures: The measures taken above have helped in reducing electrical energy and Fuel cost and would continue to help in reducing the energy cost in the months to come. B. TECHNOLOGY ABSORPTION Research & Development (R & D) (1) Specific areas in which R&D carried out by the Company (a) Developed and obtained OEM approval for Drum Brake Lining for Heavy Commercial vehicle application. (b) Developed and obtained OEM approval for Drum Brake Lining for Passenger vehicle application. (c) Developed and obtained OEM approval for New grade Woven clutch facings. (2) Benefits derived as a result of the above (a) Continued recognition of in-house R&D by Department of Scientific and Industrial Research, Government of India valid up to 31.03.2018 (b) Reduction in Raw material costs through up-gradation in quality and yield improvement. (3) Future plan of action (a) Development of Disc pads and Drum brake linings for various new vehicle application for Domestic OEM & Export Market. (b) Development of Driver Experience of Friction CONditions (DEFCON) project - Android based software for smart phone (Vehicle data acquisition system) development and collecting field data for understanding and improving our new and existing products. C. Technology absorption, adaptation and innovation 1. Efforts in brief, made towards technology absorption, adaptation and innovation a) Exposure to advance methodology for problem solving in product and process development. b) Process optimization for Quality Improvement. c) Product and Process improvement by reverse engineering the product. 2. Benefits derived as a result of the above efforts a) Development of products for export and domestic markets b) Quality up-gradation and optimal use of raw material leading to substantial savings. c) The R&D efforts have resulted in development of better products, more new products and quality improvement of existing products for domestic and export markets. DEPOSITS Not applicable as the company has not accepted any deposits. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS / COURTS / TRIBUNALS During the year 2015-16, no significant and material orders were passed by the Regulators or Courts or Tribunals impacting the going concern status and company's operations in future. INTERNAL FINANCIAL CONTROLS The Board and the Audit Committee have been reviewing the Internal Financial controls and strengthening the same. Further Audit Committee periodically reviews the Internal Audit Reports and suggestions and corrective actions are implemented. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS During the year, the Company has not given any loan (Secured or Unsecured) and had not given any guarantee or provided any security to any person. RISK MANAGEMENT The Risk Management policy adopted by the Board formalizes the Company's approach to overview and manage material business risks. All the risks associated with the business of the Company have been taken care of by taking adequate measures by the Company, which have been reviewed by the Audit committee and the Board in their meetings held from time to time. CORPORATE SOCIAL RESPONSIBILITY(CSR) CSR is not applicable to the Company as the average net profits of the Company for the preceding three years is NIL as the Company has incurred losses. REASON FOR NOT SPENDING FOR CSR As the average net profits of the Company for the preceding three years is NIL and there have been losses, the Company has not spent on CSR during the FY 2015-16. ANNUAL REPORT ON CSR Annual Report on CSR in the prescribed format has been enclosed as Annexure IV. RELATED PARTY TRANSACTIONS All the related party transactions entered by the Company are normal business transactions entered in the ordinary course of business and are on arm's length basis. The Company has been following a policy of getting omnibus approval for the Related Party Transactions (RPTs) from the Audit Committee. The actual RPTs entered were approved by the Audit Committee and by the Board at the quarterly meetings during the Financial Year 2015-16. The policy on Related Party Transactions, as approved by the Board is uploaded on the Company's website. Particulars of Contracts or Arrangements with Related parties referred to in Section 188(1) in form AOC-2 are furnished as Annexure V. JUSTIFICATION FOR ENTERING INTO RELATED PARTY TRANSACTIONS The Company's Related Party Transactions have been made to meet the requirements of operations and at an arm's length basis and have been entered in the ordinary course of business. BOARD EVALUATION In terms of Section 134 (3) (p) of the Companies Act, 2013 and Regulation 4(2)(f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, the Board reviewed and evaluated its own performance from the following perspectives: (a) Company Performance; (b) Risk management; (c) Corporate Ethics; (d) Performance of the Individual Directors; and (e) Performance of the Committees, viz., Audit Committee, Nomination and Remuneration Committee (NRC) and Stakeholders' Relationship Committee (SRC) The Board upon evaluation considered that the board is well balanced in terms of diversity of experience covering all the activities of the Company. The Board, after discussion and review, noted with satisfaction of its own performance and that of its committees and individual Directors. RATIO OF REMUNERATION OF DIRECTOR As per Section 197 (12) of the Companies Act 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the details of Ratio of Remuneration to each Director to the median employee's remuneration is furnished as Annexure VI. PARTICULARS OF EMPLOYEES The information on employee who was in receipt of remuneration of not less than Rs.60 lakhs during the year or Rs.5 lakhs per month during any part of the said year as required under Section 197 of the Companies Act 2013 read with Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is provided in the Annexure VII. LISTING WITH STOCK EXCHANGES The Company confirms that it has paid the Annual Listing Fees for the year 2016-17 to National Stock Exchange, where the company's shares are listed. CORPORATE GOVERNANCE Your company has taken adequate steps to adhere to all the conditions laid down in SEBI (Listing Obligations and Disclosure requirements) regulations, 2015 with respect to Corporate Governance. A report on Corporate Governance is included as a part of this annual report as Annexure VIII. A Certificate from the Statutory Auditors of the Company confirming the compliance of conditions of Corporate Governance as stipulated in SEBI (Listing Obligations and Disclosure requirements) regulations, 2015 is forming part of this Annual report. The Managing Director and the Chief Financial officer of the Company have certified to the Board, that the financial statements and other matters are in accordance with the Regulation 17(8) of the SEBI (Listing Obligations and Disclosure requirements) regulations, 2015 pertaining to CEO/CFO certification for the financial year ended 31st March 2016. ACKNOWLEDGEMENT Your Directors wish to thank State Bank of India and Export-Import Bank of India for their continued support and assistance. Your Directors also wish to thank all the Customers, the Wholesalers both in India and worldwide for their continued support. Yours Directors wish to place on record their sincere appreciation for the good work of all the employees. For and on behalf of the Board K MAHESH KRISHNA MAHESH Chairman Managing Director Place: Chennai Date : May 24, 2016 |