DIRECTORS' REPORT Dear Shareholders, rd Your Directors are pleased to present the 53 Annual Report of the Company together with the audited financial statements of the Company for the year ended December 31, 2015 Financial and Operational Performance Indian business environment showed mixed signals in the year 2015. Forecast for economic growth as measured by GVA for the fiscal year 2015-16 is estimated at 7.3%. Growth in industrial production as reflected by development of Index of Industrial Production (IIP) is placed much lower at about 3% to 4% during the same year. Some of the sectors closely related to your Company's business such as agricultural equipment, for example, showed a strongly negative trend. Unfavourable developments in rural markets were also reflected in flat demand growth from two wheeler industry. Infrastructure development remained at a very moderate level. On a more positive note, Indian Government announced implementation of key projects to improve rail infrastructure in the country. Developments in Renewable Energy have been positive, though India still has significantly higher potential compared to current level of production in this sector. Lower level of capacity utilisation in user industries impacted growth in aftermarket demand. Exports business showed moderate growth. Helped by global decline in prices of crude oil and some other commodities, inflation in the country remained well under control. Slowdown in global economy, especially Chinese economy, turned many global competitors to intensify their Indian business activities thus leading to tough competition in local markets. Overall, the market environment for your Company's business was moderately positive. Performance Your Company's total Income (including other income) was placed at Rs. 17,806 million in year 2015 (Year 2014: Rs. 16,731 million) representing a growth of 6.4%. Profit before tax was placed at Rs. 2,938 million (Year 2014: Rs. 2,324 million) representing a growth of 26.4%. Reasonable growth in domestic and export markets together with improvement in operational efficiency led to favourable impact on bottom line. Our Company has been consistently practising prudent finance and working capital management. The strong focus on working capital and liquidity management has helped timely generation of sufficient internal cash flow to invest in long term strategic objectives of the Company. We consider your Company's performance as satisfactory. Strategy As a member company of Schaeffler Group, your Company focuses on quality, technology and innovation as cornerstones of its long term strategy. We continue to invest in expansion of our manufacturing and engineering capabilities in the country. We keep customer at the centre stage of all our actions, and get involved in customer projects at an early stage of development. This helps us in our endeavours to position FAG as a preferred partner of our customers. We believe that efficiency and control on costs are critical factors for success for business in India. Our programmes such as Fit for Quality and MOVE are consistently implemented in all areas to improve operational excellence. Competence of our people is a key differentiator in competitive Indian market. We continue to vigorously invest in talent development as a core process within our Human Resource Development initiatives. By consistent implementation of initiatives to improve market excellence, operational excellence and people excellence, your Company strives not only to achieve profitable growth but to also improve its long term competitiveness in the business. Outlook The forecast for GVA growth in FY 2016 -17 is likely to improve at 7.6% for the year 2016-17. Government is energetically pushing the Make in India initiative and is taking measures to accelerate infrastructure projects and rural development while continuing its emphasis on fiscal discipline. With commodity prices unlikely to move up much, inflation may remain in control. Above factors suggest further gradual improvement in economic and industrial outlook of the country. Experts however do caution that the economic recovery may be uneven and there are downside risks. The pick-up in the investment cycle is yet to gain strength, the banking system is weighed down by bad loans, and the weaker global economy can hit India's exports. Your Company believes that long term outlook for Indian economy is very positive, while for the short term we remain cautiously optimistic. FAG Bearings India Limited 02 With our strategy to invest in continued expansion of manufacturing and engineering footprint, your Company is determined to maintain its focus on profitable growth in the short and long term. At the same time, we will strive to improve organisational agility and minimise risks that any short term downturn could bring. The global situation currently is characterised by many challenges and uncertainties. In India, despite several chronic issues, we still see numerous opportunities in the long term. Being a leading player in this business we follow strong future orientation in our approach and continually work towards improving organisational competitiveness and agility. 'Expect More' epitomises our organisation's spirit of continual improvement as we remain positive, raise the bar and strive for innovation and excellence through team work in all areas of operations. Dividend Your Company has a steady dividend payment history and in line with the financial performance for the year 2015, your Directors recommend for your approval on dividend for the year ended December 31, 2015 at the rate of Rs. 10/- (2014: Rs. 7.5) per equity share amounting to Rs. 166.2 million. (2014: Rs. 124.6 million). The Company will pay the Income Tax on dividend as per the provisions of the Income-Tax Act, 1961. Transfer to General Reserve A sum of M 400 million has been transferred to the General Reserves of the Company. This reflects well on the financial strength of the Company. Transfer to Investor Education and Protection Fund Pursuant to provisions of Section 205A of the Companies Act, 1956 [pursuant to rule 3 of the Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001] the unpaid/unclaimed dividend pertaining to the year ended on December 31, 2007 amounting to Rs. 2,64,912/- (including interest accrued thereon) which was lying in the Company's separate unpaid dividend account and remaining unclaimed for a period of seven years, was transferred to the Investor Education and Protection Fund (IEPF). Subsidiary and Associate Companies At the beginning of the year (effective from January 1, 2015) 'FAG Roller Bearings Private Limited' [CIN: U29130MH 2001PTC134044], became 'wholly owned subsidiary', which was amalgamated with the Company during the year. Corporate Restructuring The High Court of Judicature at Bombay sanctioned the Scheme of Amalgamation (appointed date: January 1, 2015) of 'FAG Roller Bearings Private Limited' with 'FAG Bearings India Limited' and their respective Shareholders and Creditors by passing an order that was received on November 3, 2015. The said order has been registered with 'Registrar of Companies', Mumbai, Maharashtra on November 10, 2015 and accordingly, the Scheme has become effective from November 10, 2015. The Company does not have any Subsidiary, Joint Venture or Associate Company incorporated in India, as on December 31, 2015. Management's Discussion and Analysis Pursuant to Regulation 34 read with Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, detailed review of operations, performance and future outlook of the Company is covered under a separate Annexure to this report as Management's Discussion & Analysis. (ANNEXURE - A) Corporate Governance A separate section on Corporate Governance is included in the Annual Report and the certificate from M/s. Samdani Kabra & Associates, Company Secretaries, Vadodara (Gujarat), the Company's Secretarial Auditors confirming the compliance of conditions on Corporate Governance is annexed thereto. (ANNEXURE - B) Conservation of Energy, Technology Absorption, Foreign Exchange Earning and Outgo The particulars as prescribed under sub-section (3) (m) of Section 134 of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 have been given in the Annexure forming part of this Report (ANNEXURE -C). Directors In accordance with the provisions of Section 152 of the Companies Act, 2013 read with provisions of the Articles of Association of the Company, Mr. Avinash Gandhi and Mr. Dietmar Heinrich will retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment. A brief resumé of and particulars relating to them are given separately under the report on Corporate Governance. Key Managerial Personnel (KMP) Pursuant to provisions of Sections 2(51) and 203 of Companies Act, 2013 read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 following persons are acting as Key Managerial Personnel of the Company as on December 31, 2015; • Mr. Rajendra Anandpara, Managing Director & Chief Executive Officer • Mr. Satish Patel, Chief Financial Officer • Mr. Raj Sarraf, Company Secretary None of the Key Managerial Personnel, has resigned during the year ended December 31, 2015. Policy on Nomination and Remuneration The Company's policy on Nomination and Remuneration is framed with objectives as under; 1. To formulate criteria and advise the Board in matters of determining qualifications, competencies, positive attributes and independence of Directors, and policies relating to their appointment and removal, 2. To review corporate goals and objectives, to set norms of performance evaluation and to lay out remuneration principles for Directors, KMP and Senior Management linked to their effort, performance and contribution towards achievement of organisational goals, 3. To evaluate performance and give recommendations to the Board on remuneration payable to the Directors, KMP and Senior Management, and 4. To review and recommend to the Board, measures to retain and motivate talent including KMP and Senior Management Personnel with a view to ensuring long term sustainability and competitiveness of the organisation. Criteria and Qualification for Nomination & Appointment A person to be appointed as Director, KMP or at Senior Management level should possess adequate and relevant qualification, expertise and experience for the position that he / she is being considered for. The Nomination & Remuneration Committee (NRC) will evaluate whether qualification, expertise and experience possessed by a person is sufficient / satisfactory for the concerned position and the NRC will make appropriate recommendations to the Board of Directors. Policy on Remuneration 1. The remuneration (including revisions) to Directors is recommended by NRC to the Board for approval. The remuneration (including increments) to the Directors, so recommended by NRC to the Board, should be within the limits under the Companies Act, 2013 read with the Rules thereunder and as approved by the shareholders of the Company. 2. None of the Directors (including Independent Directors) shall be entitled to any stock option of the Company. 3. Non-executive directors, who are in whole-time employment with other Associate Companies of the Schaeffler Group, will not be entitled to any remuneration, profit related commission or sitting fees. 4. While determining Remuneration to KMP, Senior Management Personnel and other employees, the Company encourages and rewards; merit and superior performance. The objective is to set the total remuneration at levels to attract, motivate, and retain high-calibre, and high potential personnel in a competitive global market. Formal Annual Evaluation Your Company believes that systematic evaluation contributes significantly to improved performance at three levels - Organisational, Board and Individual Board Member. It encourages the leadership, teamwork, accountability, decisionmaking, communication and efficiency of the Board. Evaluation also ensures teamwork by creating better understating of Board dynamics, board-management relations and thinking as a group within the Board. The process includes multi-layered evaluation based on well defined criteria consisting of relevant parameters. For the year 2015, the Board has carried out an annual performance evaluation of its own, and that of its Committees and individual Directors. Performance evaluation criteria for the Board, its Committees, the Directors and the Chairman of the Company were circulated to and responded by the Directors. A consolidated summary of the ratings as provided by the Directors, was prepared by the Company Secretary. Independent Directors in their meeting have, evaluated performance of the 'Board', the 'Non-independent Directors' as well as the 'Chairman' of the Company and submitted their recommendation to the Board. The Nomination and Remuneration Committee has further carried out evaluation of all Directors including Independent Directors. The report of performance evaluation so arrived at was then noted and discussed by the Nomination and Remuneration Committee and the Board in their respective meetings. Independent Director's Declaration The Company has received the declarations in the prescribed format from each Independent Director confirming that they meet the criteria of independence as envisaged in the provisions of Section 149 of the Companies Act, 2013, read with Regulation 16 of Securities and Exchange Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015. Auditors Statutory Auditors The Statutory Auditors, M/s. B S R & Co LLP, Chartered Accountants, Mumbai, (Firm Registration Number: 101248 W / W-100022) were appointed as Statutory Auditor of the nd Company in the 52 Annual General Meeting of Company held on April 24, 2015 for a period of five consecutive years, subject to ratification by members every year in the AGM. Based upon the declaration on their eligibility, consent and terms of engagement, your Directors propose ratification of their rd appointment in 53 Annual General Meeting until conclusion of th 54 Annual General Meeting of the Company. Secretarial Auditors M/s. Samdani Kabra & Associates, a firm of Company in practice was appointed as Secretarial Auditors, to carry out Secretarial Audit of the Company. In terms of provisions of section 204 of the Companies Act, 2013, a Secretarial Audit Report has been annexed to this Report. (ANNEXURE -H) Cost Auditors M/s Y. S. Thakar & Co., Cost Accountants were appointed as Cost Auditors to carry out the audit of the cost records of the Company for the Financial Year ending December 31, 2015. Based upon the declaration on their eligibility, consent and terms of engagement, your Directors propose their appointment for the year 2016. Explanation or Comments on disqualifications, reservations, adverse remarks or disclaimers in the auditor's reports; There have been no disqualifications, reservations, adverse remarks or disclaimers in the auditor's reports, requiring explanation or comments by the Board. Contracts and Arrangements with Related Parties The transactions with the related parties are governed by prevailing regulatory requirements and Company's policy on dealing with such transactions. During the year, all transactions with the related parties have been carried out in normal course of business and based upon well set principles of arm's length. A separate report containing details of 'Material Related Party Transactions' carried out during the year is annexed to this report. (ANNEXURE - D) Corporate Social Responsibility (CSR) Being an Indian company, we are equally motivated by the Indian ethos of Dharma as a key plank for organisational selfrealisation. Guided by the prevailing regulatory requirements, the Company has constituted a 'Corporate Social Responsibility (CSR) Committee' and framed a Policy on CSR, summary of which together with details of CSR activities undertaken by the Company during the year 2015, have been covered in separate report on CSR annexed to this report. (ANNEXURE - E) Whistle Blower Policy/ Vigil Mechanism Your Company has a well-defined 'Whistle Blower Policy' and established Vigil Mechanism to provide for adequate safeguard against victimisation of Directors and employees who follow such mechanism and also make provisions for direct access to the chairperson of Audit Committee in appropriate cases. Whistle Blower Policy of the Company is available on the Company's website at the web-link: http://www.schaeffler.com/remotemedien/media/_shared_media/03_worldwide/02_websites_worldwide/india_2/ company/fag_india/ir/codes_policies/Vigil_Mechanism_OR_ Whistle_Blower_Policy.pdf Particulars of Loans given, Investments made, Guarantees given and Securities provided The particulars of loans have been disclosed in notes to the financial statements. Except prolongation of existing intercorporate loans, there have been no fresh loans given, investments made or guarantees given during the year. Deposit During the year, the Company has not accepted any deposits under the Companies Act, 2013. Particulars of Employees and related disclosures In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names of employees drawing remuneration in excess of the limits set out in the said rules forming part of this Report is given in the Annexure to this Report. However, pursuant to provisions of Section 136(1) of Companies Act, 2013 all reports and accounts are sent to all the shareholders of the Company except this annexure. Any shareholder, interested in inspecting this report, can visit to our registered office or write to the Company Secretary for a copy of it. Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, have been appended to this Report. (ANNEXURE - F). Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 The Company has in place a Policy against Sexual Harassment at workplace in line with the requirement of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set-up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary and trainees) are covered under this Policy. No complaint received by the Committee during the year. Extract of Annual Return As per regulatory requirements 'Extract of Annual Return' is provided in a separate report annexed to this Report. (ANNEXURE - G). Orders passed by the Regulators or the Courts or the Tribunals There are no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of the Company's operation. Directors' Responsibility Statement Pursuant to the requirement under Section 134(3) (c) of the Companies Act, 2013, your Directors hereby state that: a) In the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures from the same; b) The accounting policies have been selected and these have been applied consistently and judgments and estimates made thereon are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at December 31, 2015 and of the profit of the Company for that period; c) 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; d) Annual accounts of the Company have been prepared on a 'going concern' basis; e) Internal financial controls have been laid down and being followed by the Company and that such internal financial controls are adequate and were operating effectively; and f) 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 external consultants and the reviews performed by management and the Audit Committee, the Board is of the opinion that the Company's internal financial controls were adequate and effective during the financial year ended December 31, 2015. Acknowledgements Your Directors wish to place on record their sincere appreciation for the wholehearted and continued support extended by the Shareholders, Schaeffler Group, Suppliers, Customers, Stockists & Importers, Banks and all Employees of the Company during the year under report. For and on behalf of the Board Avinash Gandhi Chairman DIN: 00161107 Mumbai: February 12, 2016 |