Directors' Report Dear Members, The Directors of your Company are pleased to present the 55th Annual Report, with the audited financial statements for the financial year ended on 31st March, 2016 Change in the Financial Year In order to align the accounting year of the Company with the practices followed in India, it was decided that the accounting year of the Company be changed from calendar year to fiscal year April to March. Accordingly, the current accounting period of the Company covered 15 months starting from 1st January, 2015 to 31st March, 2016 and therefore previous year figures are not directly comparable. Operations The Turnover of the Company for the fifteen months period ended on 31st March, 2016 stood at Rs. 29,555.6 million as compared to Rs. 23,726.4 million in the previous year. The Company's Profit before tax for the year ended March 31, 2016, was Rs. 3964.1 million as compared to Rs. 3,061.7 million in the previous year. The Profit after Tax for the fifteen months period ended 31st March, 2016 was Rs. 2,571.5 million, compared to Rs. 2,027.7 million during the previous year. As stated above, these figures are not directly comparable with the previous year due to the change in accounting year. Dividend Your Directors are pleased to recommend a dividend of Rs. 15 per share (150%) for the year ended 31st March, 2016, as compared to Rs. 10.0 per share, for the preceding year ended 31st December, 2014. This Dividend is subject to the approval of the Members at the 55th Annual General Meeting of the Company. The total dividend will absorb a sum of Rs. 791 million. This would involve a cash outflow of Rs. 952 million including tax on dividend. The total dividend pay-out (including dividend tax) for the current year is 37.0 per cent as against 30.6 per cent in the previous year. Transfer to Reserves The Company proposes to transfer Rs. 800.0 million to the general reserve out of the amount available for appropriation and an amount of Rs. 7,236.8 million is proposed to be retained in the profit and loss account. Awards / Accolades Your Directors are happy to report that during the year, your Company was recognized and felicitated for its exemplary performance in various fields by our esteemed customers and organization, some of the significant achievement were : • Dun & Bradstreet's award for the best Company in bearing sector for 9th consecutive year for 2015 • Gold award from Frost & Sullivan India Manufacturing Excellence Award for SKF Haridwar in the engineering sector of Large Business Category • Platinum award from Frost & Sullivan India Manufacturing Excellence Award for Future Ready factory for SKF Pune • Partner Level Supplier Award from John Deere for the 3rd consecutive year • Best Supplier Award from CLAAS India • Quality Silver Award from Bajaj Auto for Valuable support and contribution for the year 2015. Management's Discussion and Analysis A detailed review of the operations, performance and future outlook of the Company and its business is given in the Management's Discussion and Analysis report, which forms part of this Report Corporate Governance As required by Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a detailed report on Corporate Governance along with the Auditor's certificate thereon, forms part of this Report as Annexure II. Directors and Key Managerial Personnel Mr. K. C. Mehra, Chairman, resigned from the Board of the Company in July 2015 on attaining the age of superannuation as per the 'Directors Policy' framed by the Company. Mr. Mehra was the Chairman of your Company from August 2003 onwards. His vision, leadership and guidance have been an inspiration to the Board. He has been a great mentor to the Board and his contribution has been exemplary. The Board expresses its gratitude for the valuable services rendered and guidance provided by him during his tenure with the Company. On behalf of SKF, we express our deepest appreciation and our fondest wishes for his bright future. The Board appointed Mr. Rakesh Makhija as a Chairman of your Company effective from 22nd July, 2015. Mr. Henrik Lange resigned as a Director of the Company with effect from 1st June, 2015 and Mr. Vartan Vartanian with effect from 30th March, 2015, the board placed on record its appreciation of the invaluable contribution and guidance provided by them. As per the provisions of Sections 149 and 152 of the Companies Act, 2013, the shareholders at their 54th Annual General Meeting held on 23rd April 2015, had approved the re-appointment of all the existing Independent Directors of the Company for tenure of up to five consecutive years. None of the Independent Directors are liable to retire by rotation. In accordance with Section 149(7) of the Companies Act, 2013, each Independent Director has confirmed to the Company that he or she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Mr. Stephane Le Mounier has been appointed as an Additional Director of the Company with effect from 26th June, 2015 subject to the approval of the Members. As per provisions of Section 161 of the Companies Act, 2013 and Article 129 of the Articles of Association of the Company, Mr. S. Le Mounier holds office up to the date of the forthcoming 55th Annual General Meeting and is eligible for appointment. Notice under Section 160 of the Companies Act, 2013 has been received from a member signifying his intention to propose the appointment of Mr. S. Le Mounier as a Director of the Company. Mr. Rakesh Makhija (DIN: 117692) retires by rotation and being eligible, offers himself for re-appointment. The resolution seeking approval of the members for the appointment of Mr. S. Le Mounier and re-appointment of Mr. R. Makhija has been incorporated in the Notice of the Annual General Meeting and brief detail about them have been provided in the Corporate Governance Report Mr. Shishir Joshipura, Managing Director (DIN: 00574970), Mr. Chandramowli Srinivasan, Chief Financial Officer and Mr. Pradeep Bhandari, Company Secretary are the Key Managerial Personnel of the Company as on the date of this Report. Board Meetings The Board of Directors met five times during the year. In addition, an Annual Strategic meet was held to discuss strategic matters. Details of Board meetings are laid out in Corporate Governance Report, which forms part of this annual report. Board Evaluation Your Company believes in value for its stakeholders through ethical processes & integrity. The board plays a very important role in ensuring that the Company performance is monitored and timely inputs are given to enhance its performance and set the right direction for proitable growth and fully complying with relevant regulatory requirements. As per provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, an evaluation of the performance of the Board, its Committees including individual members was undertaken. The Nomination and Remuneration Committee formulated the Performance Evaluation Guidelines, the framework for evaluating the performance of the Board, its committees and individual director and recommended to the Board. The performance evaluation criteria were circulated to and responded by the Directors. A consolidated summary of the ratings as provided by the Directors was prepared. The results of such performance evaluation so arrived were presented to meeting of Independent Directors / NRC / Board in their respective meetings. Appointment of Directors and Remuneration Policy In accordance with Section 178(3) of the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and on recommendations of the NRC, the Board adopted a Policy for appointment of and remuneration for Directors and Senior Management including Key Managerial Personnel. The policy has been disclosed in the Corporate Governance Report, which forms part of this report. Familiarisation Programme The details of the programmes for familarisation of independent Directors with the Company have been displayed on the website "http://www.skf.com/in/investors/shareholder-info^ation/index.html <http://www.skf.com/in/investors/shareholder-info%5eation/index.html>". Audit Committee The Company has in place an Audit Committee in terms of the requirements of the Companies Act, 2013. The details relating to the same are given in the Report on Corporate Governance forming part of this Report. The Board has accepted all recommendations made by the Audit Committee during the year. Corporate Social Responsibility The Company has always endeavored to be an integral part of the society. The initiatives in the social sphere have always been built on the Company's Values of "SKF Care" which comprises of four pillars, namely 'Business care / Employee care / Environment care and Community care'. The Company considers it as its economic, environmental and social responsibility to foster sustainable local development as well as add value to the local economy in which it operates. Further, in accordance with the provisions of Section 135 of the Act and Rules framed there under, the Company has constituted a Corporate Social Responsibility ("CSR") Committee of Directors which reviews and monitors the CSR projects and expenditure undertaken by the Company. The brief outline of the CSR Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure III of this report. Risk Management The Company has a formulated 'Risk Policy' which provides a structured framework of identifying and prioritizing risks, reviewing it and framing mitigation plans for the same in line with the Company's risk capacity and appetite. A section on risk management practices of the Company forms a part of the chapter on 'Management Discussion and Analysis' in this annual report. Directors' Responsibility Statement In terms of Section 134(5) of the Companies Act, 2013, your Directors state that: 1. In the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures; 2. Appropriate accounting policies have been selected and applied consistently. Judgments and estimates made are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at 31st March, 2016 and of the profit of the Company for that period; 3. Proper and sufficient care has been taken 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; 4. Annual accounts of the Company have been prepared on a going concern basis; 5. Internal financial controls have been laid down and being followed by the Company and that such internal financial controls are adequate and were operating effective and 6. Proper systems to ensure compliance with the provisions of all applicable laws have been devised. Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors and the reviews carried out by the Management and Committees of the Board, the Board is of the opinion that the Company's internal financial controls were adequate and effective during the financial year ended 31st March, 2016. Related Party Transactions In accordance with Section 134(3) (h) of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contracts or arrangements entered into by the Company with related parties referred to in Section 188(1) in Form AOC-2 is attached as Annexure IV of this report. The transactions with the related parties are approved by Audit Committee / Board which are in line with the prevailing regulatory requirements on dealing with such transactions. The details of related party disclosures form part of the notes to the financial statements provided in this annual report. Subsidiaries, Joint Venture and Associates The Company doesn't have any Subsidiary or Joint Venture or any Associates as per definition of the Companies Act, 2013. Vigil Mechanism/Whistle Blower Policy Your Company has a well-defined whistle blower policy to ensure director and employees can raise concerns and alarms in case of potential or suspected misconduct and deviations. Under this policy, provisions have been made to safeguard persons who use this mechanism from victimization. The policy provides access to the chairperson of the Audit Committee under certain circumstances. The details of the procedure are also available on the Company's website "<http://www.skf.com/binary/83-166890/Vigil-Mechanism-> Policy-31.07.2014-FINAL.pdf" Reporting of frauds There have been no instances of fraud reported by the Statutory Auditors under Section 143 (12) of the Act and Rules framed thereunder either to the Company or to the Central Government. Fixed Deposits The Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013. Accordingly no disclosure or reporting is required in respect of details relating to deposits covered under this Chapter. Statutory Auditors Pursuant to provisions of Section 139 of the Act read with the Companies (Audit and Auditors) Rules, 2014, M/s Price Waterhouse & Co Bangalore LLP, Chartered Accountants (Firm Registration No. 0075675S with ICAI), were appointed as Statutory Auditors of the Company for a term of four years, to hold office from the conclusion of 54th Annual General Meeting held on 23rd April, 2015, until the conclusion of 58th Annual General Meeting, subject to ratification of their appointment at every subsequent Annual General Meeting. A certificate from them has been received to the effect that their appointment as Statutory Auditors of the Company, if ratified at ensuing Annual General Meeting would be according to the terms and conditions prescribed under Section 139 of the Act and Rules framed there under. A resolution seeking ratification of their appointment, forms part of the Notice convening 55th Annual General Meeting and the same is recommended for your consideration and approval. There have been no qualifications, reservations, adverse remarks or disclaimers in the auditor's reports, requiring explanation or comments by the Board. Secretarial Auditor Pursuant to Section 204 of the Companies Act, 2013 and the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, M/s Parikh & Associates, practicing Company Secretaries were appointed to conduct the secretarial audit of the Company for FY 2015-16. The secretarial audit report for FY 201516 is attached as Annexure V of this report. Based on the consent received and the recommendations of the Audit Committee, the Board has appointed M/s Parikh & Associates, practicing Company Secretaries, as secretarial auditor of the Company for inancial year 2016-2017. As regards the observations made in the said Secretarial Audit Report, regarding shortfall in the spend on CSR activities, explanation is given in Annexure III forming part of this Directors' Report Cost Auditor As per the new provisions of the Companies Act, 2013 the Company was not required to appoint a cost auditor for the financial year 201516. The cost audit report for the financial year 2014 was submitted on 14th May, 2015 as against the due date of 30th June 2015. Material Changes and commitment if any, affecting financial position of the Company There have been no material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of financial year of the Company to which the Financial Statements, relate and the date of this Report. During the year, there was no change in the nature of business of the Company. Significant and material orders passed by the Regulators or Courts There were no significant and/or material orders, passed by any Court or Regulator or Tribunal, which may impact the going concern status or the Company's operations. Particulars of Employees Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as Annexure VI of this report. However, pursuant to the provision of Section 136(1) of the Companies Act, 2013, the Annual Report, excluding the aforesaid information, is being sent to the members of the Company. The said information is available for inspection at the registered office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. Any shareholder interested in obtaining a copy thereof, may write to the Company Secretary in this regard. Transfer of Unpaid and Unclaimed Amounts to IEPF Pursuant to the provisions of Section 125 of the Companies Act, 2013, the declared dividends, which remained unpaid or unclaimed for a period of seven years, have been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government. Particulars of Loans, Guarantees or Investments The particulars of loans, guarantees and investments have been disclosed in the inancial statements, no fresh loan has been given during the year. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo Information as required to be given under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is provided in Annexure VII forming part of this Report. Policy on Prevention of Sexual Harassment at Workplace The Company has in place a Policy against Sexual harassment at workplace in line with requirement of the law. In this regard, the Committees at various locations have been set up to redress complaints received, if any. No complaint under the said Policy was received during the year. Extracts of Annual Return The extracts of Annual Return in Form MGT-9 as required under Section 92(3) of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014 forms part of this Report as Annexure VIII. Acknowledgements The Board of Directors take this opportunity to thank its Principals, Aktiebolaget SKF, customers, members, suppliers, bankers and business partners / associates for their valuable and sustained support and co-operation to the Company. For and on behalf of the Board SKF India Limited Rakesh Makhija Chairman Bengaluru 10th May, 2016 |