REPORT OF THE BOARD OF DIRECTORS The Directors are pleased to present the Fifty third Annual Report together with the audited financial statements for the year ended 31st March 2016. TRANSFER TO RESERVES The Company has transferred Rs. 15000.00 lakhs to general reserves. DIVIDEND The Directors at their meeting held on March 09, 2016, had approved payment of second interim dividend at Rs. 1.30 per share (130%) of face value Rs. 1/- each absorbing a sum of Rs. 32.01 crores (including dividend distribution tax) for the financial year ended March 31, 2016 and the same was paid to the shareholders on 28th March, 2016. The Board had earlier declared first interim dividend of Rs. 0.85 per share (85%) of face of Rs. 1 each absorbing a sum of Rs. 21.44 crores (including dividend distribution tax) for the financial year 2015-2016 and the same was paid on 24th November, 2015. No final dividend has been recommended by the Board of Directors. Thus, the total dividend paid during the period under review aggregates to Rs. 2.15/- per share amounting to Rs. 53.45 crores (including dividend distribution tax). CONSOLIDATED FINANCIAL STATEMENTS The audited Consolidated Financial Statements of the Company prepared in accordance with the Act and the Accounting Standards, also form part of the Annual Report. Pursuant to the provisions of Section 136 of the Companies Act, 2013, the Company has placed separate audited accounts of its subsidiaries on its website www.sundram.com . The Company will make available the audited annual accounts and associated information of its subsidiaries, upon request by any of its shareholders. CORPORATE GOVERNANCE A separate report on Corporate Governance together with a certificate from the Company's auditors confirming the compliance of conditions of Corporate Governance is attached to this report. Management Discussion and Analysis detailing the state of the company's affairs is also attached to this report. DIRECTORS The existing composition of the Company's Board is fully in conformity with the applicable provisions of the Companies Act, 2013 and Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI Listing Regulations, 2015) with regard to independent directors and women directors. Sri K Ramesh, Director (DIN 00556922) of the company is liable to retire by rotation at the ensuing Annual General Meeting (AGM), and being eligible, offers himself for re-appointment. Necessary resolution for his re-appointment is being placed for approval of the members at the AGM. The board, therefore, recommends his re-appointment as a director of the Company. A brief resume of him and other relevant information have been furnished in the notice convening the AGM. KEY MANAGERIAL PERSONNEL Pursuant to Section 203 of the Companies Act, 2013, the following are the whole-time Key Managerial Personnel of the Company: • Sri Suresh Krishna, Chairman and Managing Director • Ms Arathi Krishna, Joint Managing Director • Ms Arundathi Krishna, Deputy Managing Director • Sri V G Jaganathan, Chief Financial Officer & Company Secretary, till 31st March, 2016 • Sri S Meenakshisundaram, Chief Financial Officer, effective 4th April, 2016 • Sri R Dilip Kumar, Vice President - Finance & Company Secretary, effective 4th April, 2016 STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS UNDER SUB-SECTION (7) OF SECTION 149 All the independent directors have submitted a declaration pursuant to Section 149(7) of the Companies Act, 2013 stating that they meet the criteria of independence as stipulated in Section 149(6). EXTRACT OF ANNUAL RETURN An extract of annual return in Form MGT-9 is annexed as Annexure - I and forms part of this report. BOARD MEETINGS The Company, in consultation with the Directors, prepares and circulates a tentative annual calendar for the meetings of the Board and Board Committees in order to facilitate and assist the Directors to plan their schedules for the meetings. There were seven Board Meetings during the year ended 31st March 2016, which were on 29th May 2015, 14th August 2015, 2nd November 2015, 18th January 2016, 4th February, 2016, 9th March 2016 and 31st March 2016. COMMITEES OF THE BOARD The Board of Directors has the following Committees: 1. Audit Committee 2. Nomination and Remuneration Committee 3. Corporate Social Responsibility Committee 4. Stakeholders' Relationship Committee 5. Finance Committee 6. Strategy Committee The details of the Committees along with their composition, number of meetings and attendance at the meetings are provided in the Corporate Governance Report. DIRECTORS' RESPONSIBILITY STATEMENT The Directors confirm that: a) in the preparation of annual accounts, the applicable accounting standards had been followed. b) they had selected appropriate accounting policies and applied them consistently, and made judgments and estimates that have been made 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 of the Company for the year ended 31st March 2016. c) they had 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. d) they had prepared the annual accounts on a going concern basis. e) they had laid down the internal financial controls to be followed by the company and such internal financial controls are adequate and are operating effectively. f) they had devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively. NOMINATION AND REMUNERATION POLICY (I) Criteria for Determining Qualifications, Positive Attributes & Independence of Director 1. Qualifications of Independent Director: An independent director shall be a person of eminence, standing and knowledge with significant achievements in business, professions and/or public service or professional practice and desirable to have industry experience in which the company operates. An Independent director shall possess appropriate skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, operations or other disciplines related to the company's business. 2. Positive attributes of Independent Directors: Nomination and Remuneration Committee shall take into account the following positive attributes while recommending the appointment of independent director. a) To demonstrate integrity, credibility, trustworthiness, ability to handle conflict constructively, and the willingness to address issues proactively. b) Continuously update their knowledge and skills with the latest developments in the automobile industry, market conditions and applicable legal provisions. c) Ability and willingness to devote sufficient time and attention to the Company's business and discharge their responsibilities. d) Ability to bring an independent judgment to the Board's deliberations especially on issues of strategy, performance, risk management, key appointments and standards of conduct. e) Ability to develop a good working relationship with other Board members and contribute to the Board's working relationship with the senior management of the Company. f) To act within their authority, assist in protecting the legitimate interests of the Company, its shareholders and employees g) Assist the company in implementing the best corporate governance practices. 3. Independence of Independent Directors: An Independent director should meet the requirements of the Companies Act, 2013 and SEBI Listing Regulations, 2015, concerning independence of directors as may be specified from time to time. (II) Remuneration Policy for Directors, Key Managerial Personnel and other employees A. NON-EXECUTIVE DIRECTORS Sitting Fees Non-executive Directors will be entitled to sitting fees for attending meetings of the Board and its Committees as may be decided by the Board from time to time within the limits prescribed under the Act. The sitting fees presently paid to the Non -Executive Director is Rs. 50,000/- per meeting of the Board and Rs. 20,000/- per meeting of any Committee of the Board or separate meeting of independent directors thereof. Reimbursement of expenses Non-executive Directors will be entitled to reimbursement of expenses incurred in connection with attending the Board meetings, Board Committee meetings, meeting of independent directors, general meetings and in relation to the business of the Company towards hotel accommodation, travelling and other out-of-pocket expenses. B. MANAGING DIRECTOR, KEY MANAGERIAL PERSONNEL AND OTHER EMPLOYEES The following will be the guiding factors with respect to remuneration to Managing Director(s), Key Managerial Personnel and other employees. a) The objective of the policy is directed towards having a compensation philosophy and structure that will reward and retain talent. b) The Remuneration to Managing Director shall take into account the Company's overall performance, Managing Directors' contribution for the same and trends in the industry in general, in a manner which will ensure and support a high performance culture. c) As the company does not have any stock options, such instruments do not form part of his remuneration package. d) The remuneration and commission to be paid to the Managing Director shall be in accordance with the percentage / limits / conditions laid down in the Companies Act, 2013. e) Remuneration to Key Managerial Personnel and Senior Management personnel will have a balance between fixed and incentive pay reflecting both short and long term performance objectives appropriate to the working of the Company and its goals and objectives. Such remuneration will generally comprise of fixed pay, performance pay, perquisites, provision of car and other work related benefits, Directors & Officers' Liability Insurance Policy (D&O Policy) f) The Remuneration to the key managerial personnel and other employees will be such as to ensure that the relationship of remuneration to performance is clear and meets appropriate performance benchmarks. POLICY ON BOARD DIVERSITY Pursuant to requirements under SEBI Listing Regulations, 2015, the Nomination and Remuneration Committee (NRC) has framed a Policy on Board diversity appropriate to the business requirements of the Company, which inter-alia specifies optimum combination of Executive Directors, Non-Executive Directors and Independent Directors, the recommendatory requirement for each of the directors to possess functional diversity and role of NRC to ensure that the Policy on Board diversity is considered while recommending the appointment of new directors on the Board of the Company. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013 Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient are provided in the standalone financial statement (Please refer to Note No. 9, 10 and 31 (18)(IV) & (29) to the standalone financial statement). PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES (REFERRED TO IN SUB-SECTION (1) OF SECTION 188 OF THE COMPANIES ACT, 2013) All transactions with related parties were on arms' length basis and were in the ordinary course of business. There was no material related party contract during the year. Form AOC-2 as required under Section 134 (3)(h) is enclosed as Annexure - II to this report. MATERIAL CHANGES AND COMMITMENTS 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 relate and the date of the report. The Company's joint venture with Bleistahl Produktions GmbH through its subsidiary company is expected to be terminated during the financial year 2016-2017 as the asset purchase and sale agreement and technical collaboration agreement had expired. In view of the above, the name of the subsidiary company - Sundram Bleistahl Limited (i.e. the joint venture company) has been changed to Sundram Precision Components Limited during the year under review. Upasana Engineering Limited (UEL) is a 100% subsidiary of Sundram Fasteners Limited (SFL), which is a part of TVS Group. T.V Sundram Iyengar & Sons Private Limited and Southern Roadways Limited are the promoters of SFL. As UEL is a wholly-owned subsidiary of SFL, the Board of Directors felt that it would be appropriate to have the word 'TVS' as a part of its name, which helps easily in identifying the Company as a part of the 'TVS' Group. In view of the above, the name of the subsidiary company - Upasana Engineering Limited has been changed to TVS Upasana Limited during the year under review. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO Information with respect to conservation of energy, technology absorption, foreign exchange earnings and outgo pursuant to Section 134 of the Act read with Companies (Accounts) Rules, 2014 is enclosed as Annexure - III. RISK MANAGEMENT The Company faces diverse risks in terms of slowdown in economy, input prices, reputation, interest rates, foreign exchange, information systems, etc. The auto component industry has been operating in a challenging environment due to slowdown in the economy in general and in particular automotive industry. The Company manages its risks in the following manner: a) exercising prudence while incurring capital expenditure or outlays on new projects b) entering into long term contracts with customers to underwrite the capacities created c) determination of product prices after engineering studies d) adoption of a diversified business model in terms of products, market segments, geography and customers to ensure that Company is able to withstand any instability in the entire business eco-system e) judicious approach to proportionate sourcing of inputs from indigenous and overseas markets in order to take advantage of commodity prices and exchange rate movements f) analysing credit risks through market feedbacks g) management of interest rate risks through a combination of loan products, tenor of financing and currency denomination h) monitoring, reviewing and hedging foreign exchange risks in accordance with the risk management policy All the above mentioned risks are managed through continuous review of business parameters on a regular basis by the management. Insurable risks are analysed and insurance policies are taken to protect the company's interests. The Board of Directors are also informed periodically of the risks and concerns. Corrective actions and mitigation measures are taken as and when needed. CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY AND IMPLEMENTATION The Company has undertaken activities as per the CSR Policy (available on the Company's website <http://www.sundram.com/investors.php> and the Annual report on CSR activities is enclosed vide Annexure - IV forming part of this report. BOARD EVALUATION The Nomination and Remuneration Committee (NRC) has laid down the criteria for performance evaluation of independent directors and other directors, Board of Directors and Committees of the Board of Directors. The criteria for performance evaluation cover the areas relevant to their functioning as independent directors or other directors, member of Board or Committees of the Board. Evaluation of all Board members is done by the Board, NRC and Independent Directors on an annual basis with specific focus on the performance and effective functioning of the Board and individual directors. During the year, the Board adopted a formal mechanism for evaluating its performance and as well as that of its Committees and individual directors, including the Chairman of the Board. The exercise was carried out through an evaluation process covering various aspects of the Boards' functioning such as composition of the Board and committees, frequency of meetings, administration of meeting, flow of information to the board, experience and competencies, performance of specific duties and obligations, disclosure of information to stakeholders, etc. Separate exercise was carried out to evaluate the performance of individual directors including the Chairman who were evaluated on parameters such as attendance, contribution at the meetings and independent judgement. The directors were satisfied with the evaluation results, which reflected the overall engagement of the Board and its Committees with the Company. PERFORMANCE AND FINANCIAL POSITION OF EACH OF THE SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE Report on the performance and financial position of each of the subsidiaries, associates and joint venture companies of the Company is given along with Consolidated Financial Statement in Form AOC-1. CHANGE IN THE NATURE OF BUSINESS There was no change in the nature of business of the Company during the financial year. NAMES OF COMPANIES WHICH HAVE BECOME OR CEASED TO BE COMPANY'S SUBSIDIARIES, JOINT VENTURES OR ASSOCIATE COMPANIES DURING THE YEAR A new wholly-owned subsidiary Company, Sundram International Limited (SIL) has been formed in United Kingdom. The company's shareholdings in Cramlington Precision Forge Limited, UK and Sundram Fasteners (Zhejiang) Limited, China has been transferred to SIL, UK effective 31st March, 2016. Windbolt GmbH, Germany has ceased to be an associate of our Company effective November, 2015. The Company has divested its shareholdings in Peiner Umformtechnik GmbH, TVS Peiner Services, GmbH and PUT Grundstucks GmbH, (Peiner Group), the wholly owned subsidiaries in Germany. Hence, Peiner Group companies have ceased to be subsidiaries of the Company with effect from 30th March, 2016. Except for the details given above, no other company has become or ceased to be Company's subsidiary, joint venture or associate company during the financial year. PUBLIC DEPOSITS During the year, the Company has not accepted any deposits, within the meaning of Section 73 of the Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014. No amount on account of principal or interest on deposits from public was outstanding as on Balance Sheet date. REGULATORY / COURT ORDERS There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status of the Company and its future operations. INTERNAL FINANCIAL CONTROLS The Company maintains all its financial records in System Applications and Products (SAP) System and all financial transaction flow and approvals are routed through SAP. The Company has in house internal audit team to observe the effective functioning of internal financial controls and verify whether the financial transaction flow in the organisation is being done based on the approved policies of the Company. During every quarter, internal auditor presents the internal audit report and management comments on the internal audit observations to the Audit Committee. Further, the Board of Directors of the Company have adopted various policies like Related Party Transactions Policy, Whistle Blower Policy, Material Subsidiary Policy for ensuring the orderly and efficient conduct of its business for safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and timely preparation of reliable financial information. APPOINTMENT AND REMUNERATION OF KEY MANAGERIAL PERSONNEL The statement of particulars of Appointment and Remuneration of Key Managerial Personnel as per Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed vide Annexure V forming part of this report. STATEMENT ON EMPLOYEES REMUNERATION Pursuant to Section 136 (1) of the Companies Act, 2013, the report of the Board of Directors is being sent to all the shareholders of the Company excluding the statement prescribed under Rule 5 of the Companies (Appointment and Remuneration) Rules, 2014. The statement is available for inspection by the shareholders at the Registered Office of the Company during business hours. SECRETARIAL AUDIT Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Board of Directors had appointed M/s. S Krishnamurthy & Co., Company Secretaries, Chennai as the Secretarial Auditor of the Company for the financial year 2015-2016. Secretarial Audit Report issued by Sri K Sriram, Practising Company Secretary (CP No. 2215), Partner, M/s. S Krishnamurthy & Co., Company Secretaries, Chennai in Form MR-3 is enclosed in Annexure VI forming part of this report and does not contain any qualification. SECRETARIAL AUDITORS The Board of Directors has appointed M/s. S Krishnamurthy & Co., Company Secretaries, Chennai as the Secretarial Auditor of the Company for the financial year 2016-2017. Necessary consent has been received from them to act as Secretarial Auditors. STATUTORY AUDITORS Pursuant to Section 139 of the Companies Act, 2013, M/s Sundaram & Srinivasan, Chartered Accountants, Chennai,(Registration No. 004207S with the Institute of Chartered Accountants of India), were appointed as Auditors of the Company at the fifty first annual general meeting of the company for a consecutive period of three years commencing from 22nd September, 2014. Accordingly, the Board of Directors propose to ratify their appointment as Auditors of the Company for the third consecutive year (within the term of three consecutive years approved by the shareholders at the Fifty First Annual General Meeting held on 22nd September, 2014). The Statutory Auditors have confirmed their eligibility for appointment. COST AUDITOR In terms of Section 148 of the Companies Act, 2013 (the Act) read with Companies (Cost Records and Audits) Rules, 2014, as amended, the Board of Directors had appointed Sri P Raju Iyer, Practising Cost Accountant (Membership No.6987) as Cost Auditor for the financial year 2016-2017. The audit committee recommended his appointment and remuneration subject to the compliance of all the requirements as stipulated under the Act and circulars issued thereunder. AUDIT COMMITTEE The Audit Committee consists of Sri R Srinivasan, Sri V Narayanan and Sri R Ramakrishnan, all non-executive independent Directors of the Company, with Sri R Srinivasan as its Chairman. The Audit Committee met six times during the year on 29th May 2015, 13th August 2015, 2nd November, 2015, 18th January, 2016, 4th February, 2016 and 31st March, 2016. The role and terms of reference of Audit Committee cover the matters specified for Audit Committees under SEBI Listing Regulations, 2015 and Section 177 of the Companies Act, 2013. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 The Company has adopted the Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) of the Company has been constituted to redress complaints regarding sexual harassment. No complaint was received during the year 2015. WHISTLE BLOWER POLICY (VIGIL MECHANISM) The Company has a Vigil Mechanism through a Whistle Blower Policy. The policy enables stakeholders, including individual employees and their representative bodies, to freely communicate their concerns about illegal or unethical practices, if any, reporting of concerns by directors and employees about unethical behaviour, actual or suspected fraud or violation of the company's code of conduct or ethics policy or any other genuine concerns or grievances. It also provides for adequate safeguards against victimisation of employees and directors who avail of the vigil mechanism and also provide for direct access to the Chairman of the audit committee. No communication from any employee of the company under the whistle blower policy was received during the year. INDUSTRIAL RELATIONS Industrial relations continued to remain congenial during the current year. The Directors thank the employees for their contribution to the progress of the Company during the year under review. ACKNOWLEDGMENT The Directors wish to thank the Chinese Authorities, Officers of Haiyan County, Jiaxin City, Zhejiang province, Chinese tax and other administrative authorities for the support extended to Sundram Fasteners (Zhejiang) Limited. The Directors wish to thank One North East, the Regional Development Authority for Cramlington, United Kingdom for the continued support extended to the Subsidiary. The Directors wish to thank the Company's bankers, State Electricity Boards in Tamil Nadu, Puducherry, Andhra Pradesh and Uttarakhand, customers and vendors, employees for all the assistance rendered by them from time to time. On behalf of the Board SURESH KRISHNA Chairman and Managing Director Chennai May 20, 2016 |