Board's Report Dear Shareholders, Your Directors hereby present the 56th Annual Report along with the audited accounts for the year ended 31st March 2016. Review of Business Operations The Company ended with net sales of Rs. 8691 Million as against Rs. 7759 Million in 2014-15. The details of division wise performance and other operational details are discussed at length in the Management Discussion and Analysis section. Transfer to reserves An amount of Rs. 23.80 Million has been transferred to General Reserve in the year 2015-16 as against Rs. 55.60 Million in the year 2014-15. Dividend For the financial year 2015-16, the Board of Directors has recommended a dividend of Rs. 1/- per share (100%) on the paid up share capital of Rs. 15,84,54,508. Subject to the approval of shareholders, an amount of Rs. 190.71 Million will be paid as dividend including Dividend Distribution Tax (previous year Rs. 190.71 Million). Share Capital The paid-up capital of the Company as at 31.03.2016 stood at Rs. 158.45 Million. During the year under review the Company has not made any fresh issue of shares. Transfer of unclaimed Dividend to Investor Education and Protection Fund In terms of Section 205(A) and 205(B) of the Companies Act, 1956, any unclaimed or unpaid Dividend relating to the Financial Year 2008-09 is due for remittance on 06.09.2016 to the Investor Education and Protection Fund established by the Central Government. Extract of Annual Return The extract of Annual Return pursuant to the provisions of Section 92 of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014, in form MGT-9 is furnished in Annexure 'A' and is attached to this report. Board Meetings and its Committees conducted during the period under review During the year under review, 4 Meetings of the Board of Directors, 4 Meetings of the Audit Committee, 2 Meetings of the Nomination and Remuneration Committee, 2 Meetings of the Corporate Social Responsibility and 36 Meetings of the Stakeholders Relationship Committee were held. Further details of the same have been enumerated in the Corporate Governance Report annexed herewith. Directors' Responsibility Statement Pursuant to the requirement under Section 134(3)(c) of the Companies Act, 2013, with respect to Director's Responsibility Statement, it is hereby confirmed that - (a) in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures from those standards. (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 of the Company for that period; (c) the Directors have taken Proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of the Companies Act for 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 had devised proper systems to ensure compliance with the provisions of all the applicable laws and such systems were adequate and operating effectively; Details in respect of frauds reported by Auditors under Section 143(12) of the Companies Act, 2013 other than those which are reportable to the Central Government There were no instances of frauds identified or reported by the Statutory Auditors during the course of their audit pursuant to Section 143(12) of the Companies Act, 2013. Declaration of Independent Directors 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 Companies Act, 2013 and Regulation 25 of the SEBI (LODR) Regulations, 2015. Company's Policy relating to Directors Appointment, Payment of Remuneration and other matters provided under Section 178(3) of the Companies Act, 2013 The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a policy for fixing and revising remuneration of Directors, Key Managerial Personnel, Senior Management Personnel and employees of the Company. The Criteria for determining qualifications, positive attributes, and independence of Directors and Senior Management Personnel has been stated in Annexure 'B' to this report. The Remuneration policy of the Company is annexed herewith as Annexure 'C' and can also be accessed on the Company's website at the link <http://www.elgi.com/> wp-content/uploads/Remuneration-policy.pdf. Comments on Auditors' Report: There are no qualifications, reservations or adverse remarks or disclaimers made by M/s.RJC Associates, Statutory Auditors and Mr. M.D. Selvaraj, Proprietor of MDS & Associates, Secretarial Auditor in their report. Particulars of loans, Guarantees or Investments made under Section 186 of the Companies Act, 2013 Details of loans given, investments made, guarantees given and securities provided pursuant to the provisions of Section 186 of the Companies Act, 2013 have been given in the notes to the Financial Statements. Particulars of contracts or arrangements with Related Parties All transactions entered into with related parties as defined under the Companies Act, 2013 and Regulation 23 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 during the financial year 2015-16 were in the ordinary course of business and on an arm's length pricing basis. Since there are no transactions which are not on arm's length basis and material in nature Form AOC-2 is not being annexed. The Policy on Related Party Transactions as approved by the Board of Directors of the Company has been uploaded on the company's website and may be accessed through the link at <http://www.elgi.com/> wp-content/uploads/Related-Party-Transactions-Policy.pdf. Material changes and commitments affecting the financial position of the Company: Consequent to the Company's decision to restructure its China (Shanghai and Zhejiang) operations by closing down Elgi Compressors Trading (Shanghai) Co Limited and continue to carry on Trading operations in Elgi Compressors Zhejiang Limited, the Company has written down the value of the investments, advances and receivables relating to Chinese operations to an extent of Rs. 551.76 Million, accounting it as an exceptional item to the Statement of Profit and Loss. Details of exceptional items have been given in the notes to Financial Statements. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo The information on foreign exchange earnings and outgo, technology absorption, conservation of energy stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is annexed herewith as Annexure 'D'. Risk Management Plan Implementation The Company has formed a committee comprising of senior management, one level below the Managing Director, to take stock of all risks affecting the Company, the existing controls and mitigation measures. The Board has taken note of the high level risks, the controls currently in place and the mitigating measures to be undertaken and accordingly provided certain suggestions for mitigating the risks. Details of policy developed and implemented by the Company on its Corporate Social Responsibility Initiatives The Board had formed a Corporate Social Responsibility Committee comprising of 1. Mr. Jairam Varadaraj, 2. Dr. T Balaji Naidu 3. Mr. B.Vijayakumar and 4. Dr. Madhavi Gopinath. The CSR policy of the Company deals with allocation of funds, activities, identification of programs, approval, implementation, monitoring and reporting mechanisms under the policy. As part of its initiatives under CSR for the year 2015-16, the Company has undertaken projects in the areas of Education, Social development, Medical relief, Sports, Women empowerment, animal welfare, Cultural protection etc. These projects are by and large in accordance with Schedule VII of the Companies Act, 2013. The CSR spend is predominantly directed through a Registered Trust. The Trust expends the sums contributed by the Company towards educational and related activities only and also for having a corpus for undertaking construction of new school building within the next 5-10 years. The Trust has a proven track record of over three years in involvement in educational activities and supports a full fledged school. The Trust has planned to support construction of a new school building with all modern amenities and aims to be a school of international standards in the years to come. Hence, the Company should continue to significantly contribute to the Trust. The Trust also expends the funds towards Educational Scholarships, Medical Relief, to help the upliftment of rural people by way of building infrastructure like Schools, Street Lights, Roads etc, to support Special Children's School and also for the Building Corpus. The Annual Report on CSR activities is annexed herewith as Annexure 'E'. Annual Evaluation of the Board on its own performance and of the Individual Directors On the advice of the Board of Directors, the Nomination and Remuneration Committee of the Board of Directors of the Company formulated a criteria for evaluation of the performance of the Board of Directors & its committees, Independent Directors, Non-Independent Directors and the Managing Director of the Board. Based on that, performance evaluation has been undertaken. The Independent Directors of the Company have also convened a separate meeting for this purpose. Directors and Key Managerial Personnel Mr. Sudarsan Varadaraj, Director of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. Your Directors recommend his re-appointment. Key Managerial Personnel of the Company as required pursuant to Section 2(51) and 203 of the Companies Act, 2013 are Mr. Jairam Varadaraj, Managing Director, Mr. S. Sriram, Chief Financial Officer and Mrs. Vaishnavi P.M, Company Secretary. Report on the performance and financial position of each of the subsidiaries, associates and Joint Venture companies included in the Consolidated financial Statements The Company has 15 subsidiaries and a joint venture Company. This includes Ergo Design Private Limited, an independent industrial design studio which was acquired during the year. Ergo Design Private Limited caters to the needs of the Company to a large extent. The acquisition was done in order that the Company has better control over the Intellectual Property rights created by Ergo Design Private Limited using the Company's inputs. The Company's Wholly Owned Subsidiary Belair SAS has been handed over to the French Judicial System for legal redressal on 26th April, 2016. The statement pursuant to Section 129 (3) of the Companies Act, 2013, containing the salient features of the financial statements of subsidiary companies, forms part of this Annual report. The Company does not have any material subsidiary whose net worth exceeds 20% of the consolidated net worth of the holding Company in the immediately preceding financial year or has generated 20% of the consolidated income of the Company during the previous financial year. The board has approved a policy for determining material subsidiaries, which has been uploaded on the company's website viz. www.elgi.com . The annual accounts of the subsidiary companies are kept for inspection by the shareholders at the registered office of the company. The Company shall provide the copy of the annual accounts of subsidiary companies to the shareholders upon their request. Fixed Deposits During the year, the Company did not accept or renew any fixed deposits and no fixed deposits remained unclaimed with the Company as on 31st March 2016. Details of significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and Company's operations in future There is no significant and material order passed by the regulators or courts or tribunals impacting the going concern status and company's operation in future. Adequacy of Internal Financial Controls with reference to the Financial Statements The Company has adequate internal control systems to monitor business processes, financial reporting and compliance with applicable regulations. The systems are periodically reviewed for identification of control deficiencies and formulation of time bound action plans to improve efficiency at all the levels. The Audit committee of the Board constantly reviews internal control systems and their adequacy, significant risk areas, observations made by the internal auditors on control mechanism and the operations of the Company and recommendations made for corrective action through the internal audit reports. The committee reviews the statutory auditors' report, key issues, significant processes and accounting policies. The Directors confirm that the Internal Financial Controls (IFC) are adequate with respect to the operations of the Company. A report of Auditors pursuant to Section 143(3)(i) of the Companies Act, 2013 certifying the adequacy of Internal Financial Controls is annexed with the Auditors Report. Change in the nature of Business, if any There was no change in the nature of business of the Company during the financial year ended 31st March, 2016. Auditors Statutory Auditors M/s. RJC Associates, were appointed as the Statutory Auditors of the company, at the Annual General Meeting held on 25th September, 2014, for a period of three years subject to ratification by the Shareholders at every consequent Annual General Meeting. The Company has received a letter pursuant to Section 139 and 141 of the Companies Act, 2013 from them to the effect that they are eligible to continue as the Statutory Auditors of the Company. Necessary resolution for ratification of appointment of the said Auditors is included in the Notice of Annual General Meeting for seeking approval of members. Secretarial Auditors Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. M.D.Selvaraj, M/s. MDS & Associates, Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The report of the Secretarial Audit report is annexed herewith as Annexure 'F'. Cost Auditors The Board of Directors at their meeting held on 31st July 2015 have appointed M/s. STR & Associates, Cost Accountants as the Cost Auditors of the Company for the financial year 2015-16. Pursuant to Section 148 of the Companies Act, 2013 read with Rule 14 of the Companies (Accounts) Rules, 2014, the remuneration payable to the Cost Auditors of the Company is subject to the ratification by the Shareholders at the Annual General Meeting. The Board recommends their remuneration. Human Resources and Industrial Relations The Company continues to enjoy cordial relationships with its employees at all levels. The total strength of employees as on 31st March, 2016 was 2000. Particulars of Employees Details pursuant to Section 197(12) of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 form part of this Report as Annexure 'G'. Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company has in place a policy on Sexual Harassment of Women at Workplace in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has been set up to redress complaints received. All employees (permanent, contractual, temporary, trainees) are covered under this policy. No complaints received from any employee or third parties during the financial year 2015-16. Corporate Governance A report on corporate governance is annexed and forms part of this report. The Company has complied with the conditions relating to corporate governance as stipulated in Regulation 27 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. Audit Committee Audit Committee is in existence in accordance with the provisions of Section 177 of the Companies Act, 2013. Kindly refer to the Section on Corporate Governance, under the head, 'Audit Committee' for matters relating to the composition, meetings, and functions of the Committee. The Board has accepted the Audit Committee recommendations during the year whenever required and hence no disclosure is required under Section 177(8) of the Companies Act, 2013 with respect to rejection of any recommendations of Audit Committee by Board. Whistle Blower Policy The Company has a Whistle Blower policy to deal with unethical or improper practice or violation of Company's Code of Business Conduct or any complaints regarding accounting, auditing, internal controls or disclosure practices of the Company. The Policy gives a platform to the Whistle Blower to report the complaints on the above mentioned practices to the Managing Director or Director (HR). Although the complainant is not expected to prove the truth of an allegation, the complainant aims to demonstrate that there are sufficient grounds for concern and that it is not done as a malicious act against an individual. The Audit Committee of the Board reviews the Complaints received, redressed, objected, withdrawn and dismissed for, every quarter in their meeting. The Whistle Blower policy is available in the website of the Company at the following address <http://www.elgi.com/> wp-content/uploads/Elgi-Whistle-Blower-Policy.pdf Shareholders Initiatives • Your Company adheres strictly to all the statutory and other legal compliances; • Your Company has in place the regulations for preventing and regulating Insider Trading as has adhered to the Code of Conduct and Business Ethics by which the shareholder is treated on par with an employee on the availability of information about the Company; • Your Company regularly intimates the shareholders (through quarterly news letters) on the performance of the company, even though it is not mandatory; • Your Company has consistently paid dividend throughout the years; • Your Company has been prompt and regular in its replies to your queries received by them; • Your Company also replies within the stipulated time to all legal and statutory authorities; • The custodial charges and listing fees are promptly paid by the Company to the depositories and the stock exchanges; • During this year, your Company dematted 806836 shares; with this, the total number of shares dematted as on 31st March 2016 are 15,60,89,143 shares, which represents 98.51% shares of the Company Acknowledgement Your Directors thank the shareholders, customers, suppliers, bankers and all stakeholders for their continued support during the year. Your Directors also place on record their appreciation of the contributions made by employees at all levels towards the growth of the company. For and on behalf of the Board Jairam Varadaraj Managing Director DIN: 00058056 N. Mohan Nambiar Director DIN: 00003660 Place : Coimbatore Date : 27/05/2016 |