DIRECTORS' REPORT TO THE MEMBERS, Your Directors have pleasure in presenting their 31-' Annual Report together with audited accounts of the Company for the year ended 315< March, 2015. Revenue from operations increased by 3.4% to Rs. 10786 million. PBDIT improved by 10% to Rs. 1393 million. The Company changed the basis of providing depreciation in accordance with Schedule II of Companies Act, 2013. The change resulted in increase in Depreciation charge in Profit & Loss Account by Rs. 205 million. The Company reported PAT of Rs. 180 million after providing this additional depreciation. Improvement in PBDIT numbers shows the success of Company's efforts in reducing the material cost by following aggressive localization program and through backward integration. The growth in Company's revenues was in line with the growth in the Passenger Vehicle Market segment. FY15 closed on a brighter note for the Indian auto industry with passenger cars growing for the first time in three years and all segments except Commercial Vehicles (CV) registering positive growth. In FY15, Passenger Vehicles (PV) segment grew by 3.9% YoY to reach 2.6 million units. Within PV, Passenger Cars and UV registered a growth of 5.0% YoY and 5.3% YoY respectively, while Vans saw a decline of (-) 10.2% YoY. Passenger cars returned to positive growth territory after two years of decline, (-) 4.7% YoY in FY14 and (-) 7.7% in FY13, driven by slew of new launches and variants in the year amidst improving consumer sentiments under the new Government, fall in fuel prices, softening of interest rates and excise cuts that continued till December, 2014. The Capital Expenditure for 2014-15 was Rs. 650 million. The capital expenditure was principally on account of ongoing projects aimed at backward integration, achieving manufacturing excellence by reduction of cycle time and changing plant layout and increasing the production capacity for manual gear. Dividend Your directors are pleased to recommend a dividend of 65% on equity share capital of the Company for the financial year 2014-2015 as against the dividend paid at the rate of 80% on the equity share capital for the previous financial year. 4) Change of Nature of Business (if any) There has been no change in the nature of business of the Company during the financial year. 5) Share Capital The Paid Up Equity Share Capital of the Company as at March 31, 2015 stood at Rs. 1987.42 lacs. During the year under review, the Company has not issued any shares/securities. As on March 31, 2015, none of the Directors of the Company hold instruments convertible into equity shares of the Company. 6) Significant and material Orders passed by the Regulators or Courts There are no significant or material Orders passed by the Regulators or Courts that would impact the going concern status of the Company and its future operations. 7) Material changes and commitments, if any, affecting the financial position of the company There are 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 financial statements relate and the date of the report. 8) Details in respect of adequacy of internal controls Your Company has an effective internal control and risk-mitigation system, which are constantly assessed and strengthened with new/revised standard operating procedures. The Company's internal control system is commensurate with its size, scale and complexities of its operations. The internal and operational audit is entrusted to Ernst & Young LLP (E&Y), a reputed firm of Chartered Accountants. The main thrust of internal audit is to test and review controls, appraisal of risks and business processes, besides benchmarking controls with best practices in the industry. The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same. The Company has a robust management information system, which is an integral part of the control mechanism. The Audit Committee of the Board of Directors, Statutory Auditors and the Business Heads are periodically apprised of the internal audit findings and corrective actions taken. Audit plays a key role in providing assurance to the Board of Directors. Significant audit observations and corrective actions taken by the management are presented to the Audit Committee of the Board. To maintain its objectivity and independence, the internal audit function reports to the Chairman of the Audit Committee. 9) Details and Performance of Subsidiary Companies / Associate Company Subsidiary Companies The Company has the following two Subsidiaries and one Associate Company : a) JTEKT SONA Automotive India Limited (JSAI) In JSAI, the Company is holding 49% of the equity capital but it has the right to nominate majority of Directors on the Board of JSAI. This Joint Venture Company has been established with JTEKT Corporation, Japan with a business objective of manufacturing Column Type Electric Power Steering (C-EPS) Systems. The Plants of JSAI are located in Bawal (Haryana), Chennai and Bengaluru. During the year ended 31st March, 2015, JSAI has achieved total income of sona Driving Tomorrow Rs. 60,643.58 lacs and earned net profit of Rs. 3,613.42 lacs. b) Sona Fuji Kiko Automotive Limited (SFAL) In SFAL, the Company is holding 51% of the Equity Capital. This Joint Venture Company has been established with FUJI KIKO Co. Ltd., Japan with a business objective of manufacturing Columns to be used in the manufacturing of C-EPS by JSAI. The Plant of SFAL is located in Bawal (Haryana). During the year ended 31st March, 2015, SFAL has achieved total income of Rs. 6,162.10 lacs and earned net profit of Rs. 466.10 lacs. Associate Company a) Sona Skill Development Centre Limited (SSDCL) SSDCL is a skill development Company which provides skill development and training programs such as TQM, Problem Solving, Flow Manufacturing (Lean), Safety, and Innovation as well as comprehensive training program that includes 5S, safety, QC 7 tools, measurement, maintenance, Toyota Production System, basic conventional machine operation, CNC machine operation, material selection, and soft skills such as team work and conflict management. Sona Koyo Steering Systems Limited has made the investment in the equity share capital of SSDCL which is equivalent to 49.99% of the paid up share capital of SSDCL. Accordingly, SSDCL has been covered in the definition of Associate Company. During the year ended 31st March, 2015, SSDCL has achieved total income of Rs. 138.59 lacs and has incurred a loss of Rs. 129.56 lacs. No company has become/ceased to be a Subsidiary or Associate during the financial year 2014-15. 10) Subsidiary Companies Accounts During the year, the Board of Directors reviewed the affairs of the subsidiaries and associate companies. In accordance with Section 129(3) of the Companies Act, 2013, the consolidated financial statements of the Company forms part of the Annual Report. Further, a statement containing the salient features of the financial statement of the subsidiaries and associate companies in the prescribed Form AOC-1 is attached along with financial statement. The statement also provides the details of performance, financial position of each of the subsidiaries and associate company. In accordance with Section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and audited accounts of each of its subsidiaries and associate company, are available on Company's website www.sonakoyosteering.com These documents will also be available for inspection during business hours at Company's registered office. The Company shall provide the copy of financial statements of its subsidiaries and associate company to the shareholder upon their request. In accordance with the Accounting Standard 'AS-21' on Consolidated Financial Statements read with Accounting Standard 'AS-27' on Financial Reporting of interest in Joint Ventures, the Audited Consolidated Financial Statements are provided in the Annual Report. 11) Extract of Annual Return The extract of Annual Return as provided under Sub-Section (3) of Section 92 of the Companies Act, 2013 is enclosed as Annexure - I in the prescribed form MGT-9 and forms part of this Report. 12) Corporate Social Responsibility In compliance with Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules 2014, the Company has established Corporate Social Responsibility (CSR) Committee and statutory disclosures with respect to the CSR Committee and an Annual Report on CSR Activities forms part of this Report as Annexure - II. 13) Number of meetings of the Board of Directors The Board of Directors met 4 (four) times in the year ended 31st March, 2015. The details of the board meetings and the attendance of the Directors are provided in the Corporate Governance Report. 14) Nomination & Remuneration Committee and its policy A Nomination & Remuneration Committee has been constituted to review formulation of the criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board a policy, relating to the remuneration of the directors, key managerial personnel and other employees and such other ancillary functions as may be required. The Company follows a policy on remuneration of Directors and Senior Management Employees. The policy is approved by the Nomination & Remuneration Committee and the Board. 15) Particulars of contracts or arrangements with related parties The Company has entered into contracts / arrangements with the related parties in the ordinary course of business and on arm's length basis. Thus provisions of Section 188(1) of the Act are not applicable. However, in terms of Clause 49 of the Listing Agreement, all transactions with related parties, which are of material in nature, are subject to the approval of the Members of the Company. The requisite resolution in order to comply with the aforesaid requirements of Clause 49 of the Listing Agreement, as detailed at Item No. 7 of the Notice and relevant Explanatory Statement is commended for the members' approval. 16) Secretarial Audit Report Pursuant to Section 204 of the Companies Act 2013, the Company had appointed Mr. S.S Gupta, Company Secretaries, in Practice, as its Secretarial Auditors to conduct the secretarial audit of the Company for the FY 2014-15. The Company provided all assistance and facilities to the Secretarial Auditor for conducting their audit. The Report of Secretarial Auditor for the FY 2014-15 is annexed to this report as Annexure - III. The report does not contain any qualification. 17) Risk Management Policy A Risk Management Committee was constituted on 13th November, 2014 to oversee the risk management process in the company. The company has laid down a well-defined risk management mechanism covering the risk mapping and trend analysis, risk exposure, potential impact and risk mitigation process. A detailed exercise is being carried out to identify, evaluate, manage and monitoring of both business and non-business risks. The Risk Management Committee periodically reviews the risks and suggests the steps to be taken to control and mitigate the same through a properly defined framework. 18) Corporate Governance The Company has been pro-active in following the principles and practices of good corporate governance. The Company has taken adequate steps to ensure that the conditions of corporate governance as stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges are complied in its letter and spirit. The Company has also complied with corporate governance requirements as per the provisions of the Companies Act, 2013. A separate section on Corporate Governance is produced as a part of the Annual Report along with the Auditors' Certificate on its compliance. 19) Vigil Mechanism The Company has established a vigil mechanism for Directors and employees to report their genuine concerns. For details, please refer to the Corporate Governance Report attached to this Report. 20) Listing The Securities of your Company are listed at National Stock Exchange and Bombay Stock Exchange and the Company has paid the Listing Fee due to them. 21) Deposits During the year the Company has not invited any deposits covered under Chapter V of the Act. 22) Loans, Guarantees and Investments Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to Financial Statements, which are self-explanatory. 23) Directors & Key Managerial Personnel As on 31st March, 2015, your Company has Twelve (12) Directors consisting of Six (6) Independent Directors, Three (3) Non-executive Directors and Executive Chairman, Managing Director & Dy. Managing Director. In terms of the definition of 'Independence' of Directors as prescribed under Clause 49 of the Listing Agreement entered with Stock Exchanges and Section 149(6) of the Companies Act, 2013 and based on the confirmation / disclosures received from the Directors, the following Non Executive Directors are Independent Directors :- 1) Mr. Ravi Bhoothalingam 2) Mr. Prem Kumar Chadha 3) Lt.Gen.(Retd.) Shamsher Singh Mehta 4) Mr. Ramesh Suri 5) Mrs. Ramni Nirula 6) Mr. Prasan Abhaykumar Firodia The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Act and Clause 49 of the Listing Agreement with the Stock Exchanges. During the year under review, our colleague Mr. Hiroyuki Miyazaki, Nominee of JTEKT, has ceased to be a Director of the Company due to withdrawal of his nomination by JTEKT. Consequent upon cessation of Mr. Hiroyuki Miyazaki from the office of Board of Directors of the Company, Mr. Keiichi Sakamoto, being an Alternate Director to Mr. Hiroyuki Miyazaki, has also ceased to be the Alternate Director of the Company. In place of Mr. Miyazaki, JTEKT has nominated Mr. Hidekazu Omura, who has been appointed as Director in the meeting of the Board of Directors held on 30th May, 2014. Our another colleague Mr. B.L. Passi, who has been on the Board of the Company since March 1995, also resigned from the Board with effect from 28th July, 2014. The Board of Directors have in their meeting held on 1st August, 2014 appointed Mr. Prasan Abhaykumar Firodia, as an Independent Director. Your Directors take this opportunity to place on record the appreciation of services rendered by Mr. Hiroyuki Miyazaki, Mr. Keiichi Sakamoto and Mr. B.L. Passi during their association with the Company. The Executive Chairman, Managing Director and Dy. Managing Director of the Company have not received any remuneration or commission, except Sitting Fee, from any of the subsidiaries of the Company. Pursuant to the provisions of Section 152(6) and Articles of Association of the Company, Mr. Jug Mohan Kapur (DIN: 00447138) will retire by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re-appointment. Pursuant to the provisions of Section 203 of the Act, the appointment of Mr. Sunjay Kapur, Managing Director, Mr. Sudhir Chopra, President & Company Secretary and Mr. Rajiv Chanana, Chief Financial Officer, were formalized as the whole-time Key Managerial Personnel of the Company. 24) Board Evaluation The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of the non-executive directors and executive directors. The performance evaluation of the Board, its Committees and individual directors was conducted and the same was based on questionnaire and feedback from all the Directors on the Board as a whole, Committees and self-evaluation. Based on the questionnaire and feedback, the performance of every director was evaluated in the meeting of the Nomination and Remuneration Committee. A separate meeting of the independent directors was convened, which reviewed the performance of the Board (as a whole), the non-independent directors and the Chairman. Post the Annual Independent Directors, meeting, the collective feedback of each of the Independent Directors was discussed by the Chairman of the Nomination & Remuneration Committee with the Board's Chairman covering performance of the Board as a whole; performance of the non-independent directors and performance of the Board Chairman. 25) Audit Committee Pursuant to the provisions of Section 177 of the Companies Act, 2013 and Clause 49 of the Listing Agreement with Stock Exchanges, the Audit Committee of Directors of the Company consists of the following members: 1) Mr. Ravi Bhoothalingam, Chairman 2) Mr. P.K. Chadha, Member 3) Mr. Sunjay Kapur, Member 4) Lt. Gen. (Retd.) Shamsher Singh Mehta, Member 5) Mrs. Ramni Nirula, Member More details on the committee are given in the Corporate Governance Report. 26) Directors' Responsibility Statement Pursuant to clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, the directors confirm that: a) in the preparation of the annual accounts, for the financial year 2014-15, the applicable accounting standards have been followed along with proper explanation relating to material departures; b) the directors have 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 have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for sona Driving TomorroH safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; d) the directors have prepared the annual accounts on a going concern basis; e) the directors have 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 have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 30) Statutory Auditors and their Report Pursuant to the provisions of Section 139 of the Companies Act 2013 and the rules framed thereunder, M/s. S.P. Puri & Co., Chartered Accountants (ICAI Registration No. 001152N), were appointed as Statutory Auditors of the Company from the conclusion of the 30th Annual General Meeting of the Company held on 23rd September, 2014 till the conclusion of the 33rd Annual General Meeting to be held in the year 2017, subject to ratification of their appointment at every Annual General Meeting. The Notes on financial statement referred to in the Auditors' Report are self-explanatory and do not call for any further comments. The Auditors' Report does not contain any qualification, reservation or adverse remark. 31) Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo A statement containing the necessary information on conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be given pursuant to provisions of Section 134 of the Companies Act, 2013, read with the rules made thereunder is annexed as Annexure - IV and forms part of this report. 32) Employees Disclosure 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 provided in Annexure - V(a) to this Report. A statement containing the names of every employee employed throughout the financial year and in receipt of remuneration of Rs. 60 lacs or more, or employed for part of the year and in receipt of Rs. 5 lacs or more a month, under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is enclosed as Annexure - V(b) to this Report. 33) Acknowledgements Your Directors acknowledge with gratitude the co-operation and support extended by SONA's customers namely Maruti Suzuki, Mahindra & Mahindra, Tata Motors, Honda, Hyundai, Fiat India, Toyota Kirloskar, General Motors, Ford, John Deere, Club Car, E-z-go and Renault-Nissan, the Financial Institutions, Banks, various agencies of the Government, SONA's collaborators - JTEKT Corporation, Japan and Fuji Autotech AB, Sweden. Your Directors also wish to place on record their sincere appreciation of the services rendered by all the employees of the Company and are thankful to the Shareholders for their continued patronage. For and on behalf of the Board Dr. Surinder Kapur Chairman Dated : 15th May, 2015 Place : Gurgaon |