DIRECTORS' REPORT TO, THE MEMBERS, Your Directors have pleasure in presenting their 68th Annual Report on the business and operations of the Company, together with the Audited Statement of Accounts for the Financial Year ended March 31,2015. Company's Performance During the year under report, your Company has achieved a turnover of Rs. 51,080.32 lakhs (previous year Rs. 67,984.27 lakhs). The operations have resulted in a net loss of Rs. 12,974.63 lakhs (previous year net loss of Rs. 4,100.96 lakhs). Dividend In view of the losses in the year under report, your Directors' do not propose to declare any dividend forthe year under report. Reserves The Company has transferred Rs. 494.00 lakhs from Debenture Redemption Reserve and Rs. 271.75 lakhs from Revaluation Reserve to its General Reserve. Details in respect of adequacy of internal financial controls with reference to the Financial Statements. The Company has adequate internal financial controls during the year under review. Disclosure about Cost Audit M/s Rao, Murthy & Associates were appointed as Cost Auditors of the Company for the Financial Year 2014-15. M/s. Rao, Murthy& Associates has vast experience in the field of cost audit and have conducted the cost audit of the Company under the provision of erstwhile Companies Act, 1956 Details of Subsidiary Companies The Company as on March 31, 2015 had Six wholly owned Subsidiaries and one Associate Company. During the year, the following changes occurred. The Operation of Kirsons B.V, wholly owned subsidiary is transferred to company's wholly owned subsidiary M/s. Luxquisite Parkland Private Limited. Report on the performance and financial position of each of the subsidiaries, Associate Companies and Joint ventures has been provided in form AOC-1 as in Annexure XI forming part of this report. Share Capital During the year the Company had issued and allotted 1,595,890 (Fifteen Lakh Ninety Five Thousand Eight Hundred and Ninety) Compulsory Convertible Preference Shares ("CCPS") of Rs. 100/-(Rupees one hundred), to Vijay R Kirloskar (Promoter) by way of private placement for a tenor not exceeding 18 months which will carry a preferential cumulative dividend of 0.1% (zero point one per cent) per annum, payable till the date of conversion into equity shares. CCPS held by the promoter will get converted into 5,745,150 equity shares of Rs. 10/- each for cash at a premium of Rs. 20.44 (Rupees Twenty and Forty Four Paise) in two tranches in accordance with the SEBI Regulations and such issue and allotment of equity shares resultant on conversion of the preference shares will be made at such time or times as determined by the Board in such manner as the Board may in its absolute discretion think fit at the time of conversion. The Company has allotted 2,658,200 (Twenty Six Lakhs Fifty Eight Thousand Two Hundred) fully paid up equity shares of Rs. 10/-each at a premium of Rs.20.44 per share aggregating to Rs.80,915,608 (Rupees Eight Crores Nine Lakhs Fifteen Thousand Six Hundred Eight Only) to Mr. Vijay R Kirloskar. The Equity Shares as allotted above shall be subject to the Memorandum and Articles of Association of the Company and shall rank pari-passu in all respects with the existing Issued, Subscribed & Paid-up Equity Share Capital of the Company including dividend. Statutory Auditors M/s. B. K. Ramadhyani & Co.LLP, Chartered Accountants having their firm registration No. 002878S/S200021 and M/s. Sundar & Associates, Chartered Accountants, are the retiring Auditors in India and Malaysia respectively. They are eligible for re-appointment. The required certificates to the effect that the re-appointments, if made, will be within the limit specified in Section 139 of the Companies Act, have been received from M/s. B. K. Ramadhyani & Co.LLP, and M/s. Sundar & Associates. Internal Auditor The Company has appointed M/s. KPMG as its internal auditors for the financial year 2014-15. The reports of internal auditors are discussed in the Audit Committee Meetings. Extract of the annual return As provided under Section 92(3) of the Act, the extract of annual return is given as an Annexure V in the prescribed Form MGT-9, which forms part of this report. Conservation of energy, technology absorption and foreign exchange earnings and outgo The relevant data pertaining to conservation of energy, technology absorption and other details are given in the Annexure I to this report. Directors and Key Managerial Personnel In terms of Section 149 of the Act, the Members at their meeting held on September 30,2014, appointed the following Directors of the Company: • Mr. S.N Agarwal • Mr. Sarosh J Ghandy • Mr. Anil Kumar Bhandari • Mr. V.P Mahendra • Mr. Kamlesh Gandhi • Mr. Ram J Shahaney The Board of Directors declare that the Company has complied with the provision of sub-section (6) of section 149 of Companies Act, 2013 with regard to appointment of following Independent Directors Mr. Sarosh J Ghandy, Mr. Anil Kumar Bhandari, Mr. V.P Mahendra, Mr. Kamlesh Gandhi, Mr. Ram J Shahaney and Mr. S.N Agarwal. All Independent Directors have declared that they met all the criteria of independence as provided under Section 149(6) of the Act 2013 and Clause 49 of the Listing Agreement. None of the Independent Directors will retire at the ensuing Annual General Meeting. Mr. Alok kumar Gupta has resigned from the Board of Directors of the company w.e.f. April 25, 2014. Mr. Vijay R Kirloskar was appointed as Executive Chairman of the Company w.e.f August 12, 2014. Mr. Anand B Hunnur was appointed as Director - Sales of the Company w.e.f August 12, 2014. Mr. Vinayak N Bapat was appointed as Managing Director of the Company w.e.f August 12, 2014. Mrs. Meena Kirloskar, woman Director as per provisions of the Companies Act, 2013 and Clause 49 of Listing Agreement, is serving on the Board of Directors for several years. In Accordance with the requirement of the Act, and the Articles of Association of the Company, Mr. Krishnamurthy Ganesh, is the Director whose period is liable to retire by rotation and is eligible for re-appointment. The Board has appointed Mr. Soumendra Kumar Mahapatra as Chief Financial Officer of the Company w.e.f. June 30, 2015. Ms. K.S Swapna Latha has resigned from the post of Company Secretary and General Manager - Legal of the company w.e.f. June 30, 2015. The Company is in the process of appointing a Company Secretary. Board Evaluation Clause 49 of the Listing Agreement mandates that the Board shall monitor and review the Board Evaluation framework. The Companies Act, 2013 states that the performance evaluation needs to be made by the Board of its own performance and that of its Committees and individual directors. Schedule IVof the Companies Act, 2013 states that the performance evaluation of Independent Directors shall be done by the entire Board of Directors, excluding Director being evaluated. The following process was adopted for the Board Evaluation. The Directors gave their inputs on the performance of the Board on various criteria such as degree of responsibility, Board Structure and composition, establishment of responsibilities to various committees, effectiveness of Board Process, information andfunctioning, Board culture and dynamic, quality of relationship between the board and the Management and enhanced communication with the external stakeholders. Feedback was provided to the Directors as appropriate, significant highlight, learning and action points arising out of evaluation were presented to the Board. A separate meeting of Independent Director's was also held to review the performance of Non-Independent Directors, performance of the Board as a whole and performance of the Chairperson of the Company. Number of meetings of the Board of Directors Eight meetings of the board of Directors were held during the year 2014-15. For details of the meetings of the board, please refer to the Annexure III - Corporate Governance Report, which forms part of this report. Audit Committee The details pertaining to composition of audit committee are included in the Annexure III - Corporate Governance Report, which forms part of this report. Nomination and Remuneration Committee The details pertaining to composition of Nomination and Remuneration Committee are included in the Annexure III - Corporate Governance Report, which forms part of this report. Risk Management Committee and Risk Management Policy The Company has duly constituted Risk Assessment and Risk Minimization Committee as required under clause 49 VI of Listing Agreement. Details pertaining to the Committee are included in the Annexure III - Corporate Governance Report, which forms part of this report. Corporate Social Responsibility (CSR) Corporate Social Responsibility as required under Section 135 of the Companies Act, 2013, the Board of Directors of the Company has constituted the Corporate Social Responsibility Committee which consists of Mr. Sarosh J Ghandy, Chairman of the Committee, Mr. Vijay R Kirloskar, Mr. Anil Kumar Bhandari and Mr. V.P Mahendra as the members of the Committee. In absence of the average net profit during the three immediately preceding financial years, the Company is not mandatorily required to contribute towards Corporate Social Responsibility activities. Stakeholders Relationship Committee The details pertaining to composition of Stakeholders Relationship Committee are included in the Annexure III - Corporate Governance Report, which forms part of this report. Vigil Mechanism for Directors and Employees The company has adopted a Whistle Blower Policy establishing Vigil Mechanism, to provide a formal mechanism to the Director and employees to report their concerns about any poor or unacceptable practice or any event of misconduct or violation of Company's code of conduct. The purpose of this policy is to provide a framework to promote responsible and secure whistle blowing. It is to protect the employees who are willing to raise a concern about serious irregularities within the Company. The policy provides for adequate safeguards against victimization of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee. It is affirmed that no personnel of the Company has been denied access to the Audit Committee. The policy of Vigil Mechanism is available on the Company's website (URL:<http://www.kirloskar-electric.com/images/pdf/investor/> policies/Whistle-Blower-Policy.pdf). Particulars of contracts or arrangements with related parties The particulars of every contract or arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto shall be disclosed in Annexure IV- Form No. AOC-2 (Format enclosed). The Policy on Related Party Transaction is available on the Company's website (URL:<http://www.kirloskarelectric.com/images/pdf/investor/policies/RPT-policy.pdf>). Managerial Remuneration: The information required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is disclosed in the Annexure III - Corporate Governance Report. Secretarial Audit Report M/s. V.Sreedharan & Associates, Practicing Company Secretaries were appointed as Secretarial Auditors to conduct Secretarial Audit of records and documents of the company for the financial year 2014-15. The Secretarial Audit Report is given in Annexure -VIII. Corporate Governance Certificate Pursuant to the requirements of the Listing Agreements with Stock Exchanges, your Directors are pleased to annex the following: 1. Management Discussion and Analysis Report as Annexure II 2. Report on Corporate Governance as Annexure III 3. Auditors certificate regarding compliance of conditions of Corporate Governance as Annexure X 4. CEO and CFO certificate as Annexure IX 5. CEO certificate regarding compliance with the Code of Conduct as Annexure III (Please refer Corporate Governance Report). Particulars of Employees In terms of the provisions of Section 134 of the Companies Act, 2013, the names and other particulars of specified employees are set out in the Annexure to the Directors Report. However having regard to the provisions of section 136 of the Companies Act, 2013, the Annual Report is being sent to all members of the Company, excluding the aforesaid information. Any member interested in obtaining these particulars may write to the Managing Director at the Registered Office of the Company. Directors' Responsibility Statement The Directors' Responsibility Statement referred to in clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, shall state that— (a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (b) the directors had 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 had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; (d) the directors had prepared the annual accounts on a going concern basis; and (e) the directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively. (f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Explanations or comments on audit report A. Auditors' Report The comments/observations of the Auditors are self-explanatory and the Company's explanations thereto have been given in relevant notes in the Notes to Accounts. Further explanations in regard to the reservations/qualifications in the Auditors Report are furnished below: i) Your Company has already realised a part of the consideration and hence confident of realising the balance consideration due from the subsidiaries. ii) The said approval of the members by way of special resolution has been obtained in the Extra-Ordinary General Meeting held on 30 June 2015 subsequently. B. Secretarial Audit Report i) The Company has completed appointment of Chief Financial officer as required under section 203 sub section (1) clause (iii) of the Act read with Rule 8 of the Companies (appointment and remuneration of Manegerial Person) rules 2014, well within the timeline as prescribed therein. However just before the committed date of joining the company the candidate so appointed expressed his inability to join. Since the Company had to restart the process of recruiting the Chief Financial Officer, hence the delay ii) The Company is in the process of filling the required forms. Acknowledgements The Board of Directors take this opportunity to express its sincere appreciation for the continued support and confidence received from the Company's Bankers, Financial Institutions, Customers, Suppliers, Depositors, Shareholders. The Company considers its employees as its most valuable asset. Employees at all levels have put in their best to the services of the Company and the Board puts on record the sincere appreciation of their dedication and loyalty. For and on behalf of the Board of Directors of Kirloskar Electric Company Limited Vijay R Kirloskar Executive Chairman Place : Bangalore Date : August 13, 2015 |