Your Directors are pleased to present the 54th Annual Report of the Companyand Companys Audited Statement of Accounts for the financial year ended 31stMarch 2016.
| || ||(Rs. In Crores) |
|Particulars ||Current Year ended 31.03.2016 ||Previous Year ended 31.03.2015 |
|Revenue from Operations and other Operating Income ||3291.78 ||3833.83 |
|Less: Excise Duty Recovered on Sales ||50.01 ||53.93 |
|Add: Other Income ||295.39 ||279.80 |
|Total Revenue ||3537.16 ||4059.70 |
|Gross Profit ||1128.03 ||967.75 |
|Less: Depreciation and Amortization ||281.14 ||240.20 |
|Profit before Tax ||846.89 ||727.55 |
|Less: Provision for Taxation || || |
|Current Tax ||229.70 ||215.10 |
|Deferred Tax (Net) ||49.52 ||23.64 |
| ||279.22 ||238.74 |
|Profit after Tax ||567.67 ||488.81 |
|Balance brought forward from last year ||562.88 ||142.43 |
|PROFIT AVAILABLE FOR APPROPRIATIONS: ||1130.55 ||631.24 |
|Transfer to General Reserve ||503.07 ||50.00 |
|Interim Dividend ||53.16 ||NIL |
|Tax on Interim Dividend ||10.83 ||NIL |
|Proposed Final Dividend ||NIL ||23.20 |
|Tax on Final Dividend ||NIL ||4.63 |
|Adjustment to relating Earlier Year ||0.06 ||NIL |
|Add: Income Tax of Earlier Years ||NIL ||9.47 |
|Balance Carried forward to balance sheet ||563.43 ||562.88 |
During the previous year consequent to scheme of arrangement between BalkrishnaIndustries Limited Balkrishna Paper Mills Limited and Nirvikara Paper Mills Limited undersection 391 to 394 of the Companies Act 1956 the operations of the company for the partof the previous year also includes activities relating to its erstwhile papersubsidiaries. Therefore the above referred figures for the current year are notcomparable with that of previous year.
Your Company mainly operates in one single segment i.e. "tyres" with focus onmanufacture of wide range of "Off-Highway Tyres" (OHT). These tyres aremainly meant for Agricultural Industrial & Construction Earthmover & PortMining Forestry Lawn & Garden and All Terrain Vehicles (ATV).
More than 85% of our revenue is generated through exports.
During the year under consideration your Companys Total Revenue has decreasedfrom Rs. 3915 Crores to Rs. 3517 Crores (which includes exchange difference attributableto exports). The reduction in Total Revenue was mainly due to reduction in sales priceconsequent to reduction in raw materials prices and also due to general slowdown acrossthe globe. However the Earning before Interest Depreciation and Tax (EBITDA) of thecompany for year under consideration has increased to Rs.1162 Crores from Rs.1014 Croresduring the year under consideration.
EXPORT HOUSE STATUS:
Your Company enjoys the status of "Four Star Export House".
SHIFTING OF REGISTERED OFFICE:
Your Company shifted its registered office from H-3/1 MIDC "A" Road Tarapur(Boisar) 401 506 District Thane (Maharashtra) to B-66 Waluj MIDC Waluj Industrial AreaAurangabad 431 136 (Maharashtra) within same state w.e.f. 26th December 2015.
The work on green field tyre plant of the Company at Bhuj has been completed.
The Directors had declared and paid Interim Dividend of 150% (Rs.3.00 per equity share)as against 120% (Rs. 2.40 per equity share) in the previous year and a Special Dividend of125% (Rs. 2.50 per equity share) on account of successful completion of BHUJ Project. Thetotal Dividend paid was 275% (Rs. 5.50 per equity share) for the year with a total payoutof Rs. 63.99 Crores including tax on dividend as against Rs.27.83 Crores during previousyear. The Board has decided to treat said Interim Dividend as Final Dividend for thefinancial year 2015-2016.
The paid up Share Capital of the Company as on 31st March 2016 was Rs.19.33Crores. During the year under review the Company has not issued shares with differentialvoting rights nor granted stock options nor sweat equity. As on 31st March2016 none of the Directors of the Company hold convertible instruments.
The Company proposes to transfer Rs. 503.06 Crores to General Reserves.
SCHEME OF AMALGAMATION:
The Board has approved the Scheme of Amalgamation ("the Scheme") of yourCompanys wholly owned subsidiary company BKT Exim Limited (BKT Exim) into it andtheir respective shareholders and creditors under Sections 391 to 394 of the CompaniesAct 1956. Pursuant to the Scheme (i) BKT Exim shall be amalgamated with the Company witheffect from the Appointed Date i.e. 1st April 2015 and (ii) The entire business and wholeof undertakings of the BKT Exim together with assets liabilities properties rightsbenefits and interest therein shall be vested with the Company as a going concern. Theentire issued subscribed and paid up share capital of the BKT Exim held by the Companyshall stand cancelled in the books of BKT Exim.
OUTLOOK FOR THE CURRENT YEAR 2016-2017:
The Companys earnings are mainly generated through exports. Due to recessionarytrends across the globe during past few years the business environment has been tough andchallenging which has marginally impacted the revenue of the company during the previousyear. However the long-term prospects of the company are good and promising. Your Companyis exploring all the avenues to ensure growth of the business which includes; deeperpenetration into existing market within India as well as outside India extendingrelationship with OEMs and expanding product range. With all such efforts your Companyhas aimed to achieve higher sales during the current year.
OPPORTUNITY & THREATS: OPPORTUNITIES:
Your Company operates into a segment predominantly known as "large varieties-lowvolume segment" which is not only capital intensive but also labour intensive. YourCompany is fully geared up to take advantage of the peculiarities of the said segment andhas developed a large base of SKUs to meet the diverse needs and applications.
Moreover this segment is neither exposed to any technological obsolescence nor wildfluctuations in demand for its products.
The Company is continuously marching ahead to encash incremental opportunity in theform of developing "Earthmovers & mining tyres markets and taking advantage ofthe shift from bias to radial tires which is growing up continuously. In order to takeadvantage of this opportunity the Company had first set up an all-steel OTR Radial tyreplant at its Chopanki location and now have added further capacity at its Bhuj plant toproduce large size all steel OTR radial tires besides other categories of tires. YourCompany is proud to be first Company in India to set up such plant. Your Company iscontinuously expanding its base into its various sub-segments like agriculturalindustrial construction mining winter and solid tyres under both technologies bias as well as radials.
Like any other Company your Company is also exposed to various threats likecompetition from small players retention of employees labor unrest increase in rawmaterial prices and other input costs etc.
RISKS / CONCERNS AND RISK MITIGATION:
Fluctuation in Raw Material prices: The Companys major raw material is NaturalRubber which is an agricultural commodity and actively traded on the commoditiesexchanges. Its prices fluctuate significantly and have witnessed significant volatility inthe past. During last two years the raw material prices have been soft in the back dropof subdued business environment across the globe. Of late it has started moving up. Incertain raw materials the movement has been sharp. We do not foresee any immediatereversal in the price trend. In order to minimize such risks the Company not only entersinto medium-term contracts but also adopts the policy to "Buy and Stock" largequantities during the lean period.
Since most of the raw materials are imported the company is exposed to foreigncurrency risk. However it enjoys natural hedge as most of its revenues are in foreigncurrency.
Labour Relations: Since Companys manufacturing process is that of batchprocessing it requires lot of skilled as well as un-skilled workers. Maintaining a hugework force is a big challenge.
In order to mitigate the said risk the Company follows good HR practices to promotethe welfare safety of its workmen and improve the work environment. All workers are paidmore than adequate remuneration for their work.
Retention of skilled manpower: Like other players in the industry the Company is alsoexposed to this risk more particularly when there is shortage of skilled manpower in theindustry.
The Company is able to manage the said risk by good HR practices and rewarding itsemployees handsomely.
Currency fluctuation: As stated earlier the company revenues are mainly generatedthrough exports. The Company also imports lot of its raw materials and capitalequipments. Moreover all its borrowings are in foreign currency and it is thereforeexposed to risks due to currency fluctuations.
The Company follows the system of hedging its receivables (net off payables) well inadvance by entering into Forward Contracts thereby protecting itself from thefluctuations in currencies.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:
The Company has adequate system of internal controls to ensure that all the assets aresafeguarded and are productive. Necessary checks and balances are in place to ensure thattransactions are adequately authorized and reported correctly. The Internal Auditors ofthe Company conduct Audits of various departments to ensure that the necessary controlsare in place. The Audit Committee of the Board reviews these and the Company when neededtakes corrective actions.
The Companys human resources continue to be its biggest asset. The team hasremained as committed as ever and produced results that are considered significant.Quality quick delivery and focus on resolving customer issues are the hallmark of theteam performance. There is a strong focus on TEAM spirit during the year manyevents/training programs were conducted to develop personality and outlook of itsemployees. Employee relations continue to be cordial.
The company has following 100% subsidiary companies:
BKT EXIM Limited BKT Tyres Limited Thristha Synthetics Limited and IndirectSubsidiary Companies i.e subsidiary companies of BKT Exim Limited; i.e. BKT EUROPE S.R.L.BKT USA INC BKT TIRES (CANADA) INC. BKT EXIM US INC. and subsidiary of BKT EXIM USINC. i.e. BKT TIRES INC. The Policy determining material subsidiaries as approved may beaccessed on the Companys website at the link https://cloud.bkt-tires.com/bkt-financials/others/policy-for-determining-material-subsidiaries.pdf.
Your Directors have approved the Scheme of Amalgamation ("the Scheme") of itswholly owned subsidiary company BKT Exim Limited (BKT Exim) into it and their respectiveshareholders and creditors under Sections 391 to 394 of the Companies Act 1956 at itsmeeting held on 18th May 2016 subject to the approval of the of HonorableHigh Court of Judicature at Bombay (the High Court) or National Company LawTribunal (NCLT) or such other competent authority.
A statement containing the salient features of the financial position of subsidiarycompanies in Form AOC-1 attached as Annexure I.
DIRECTOR RESPONSIBILITY STATEMENT:
Pursuant to the requirement under Section 134(3)(c) and 134(5) of the Companies Act2013 your Directors hereby confirmed that: (i) that in the preparation of the annulaccounts for the year ended 31st March 2016 the applicable accounting standards readwith requirements set out under Schedule III to the Companies Act 2013 have beenfollowed and there are no material departures from the same; (ii) the Directors haveselected such accounting policies and applied them consistently and made judgments andestimates that were reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company as at 31st March 2016 and of the Profit of the Company for theyear ended as on that date; (iii) the Directors have taken proper and sufficient care formaintenance of adequate accounting records in accordance with provisions of the CompaniesAct 2013 for safeguarding the assets of the Company and for preventing and detectingfraud and other irregularities; (iv) the Directors have prepared the annual accounts ofthe Company on a "going concern" basis; (v) the Directors have laid downinternal financial controls to be followed by the Company and the such internal financialcontrols are adequate and are operating effectively; and (vi) the Directors have devisedproper systems to ensure compliance with the provisions of all applicable laws and thatsystems are adequate and operating effectively.
As required by Regulation 34(3) read with Schedule V of the SEBI (Listing Obligationsand Disclosure Requirements) 2015 a Report on Corporate Governance together with aCertificate from the Companys Auditors confirming compliance forms an integral partof this report.
CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES:
All contracts /arrangements / transactions entered by the Company during the financialyear with related parties were in ordinary course of business and on an arms lengthbasis. During the year the Company has not entered into any contracts /arrangements /transactions with related parties which could be considered material in accordance withthe policy of the Company on materiality of related party transactions. The Policy onmateriality of related party transactions and dealing with related party transactions areapproved by the Board may be accessed on the Companys website at the link https://cloud.bkt-tires.com/bkt-financials/others/policy-on-materiality-of-related-party-transactions-and-on-dealing-with-related-party-transactions.pdf.Members can refer Note no. 41 to the financial statement which set out related partydisclosures.
The Board of Directors of the Company has approved the criteria for making the omnibusapproval by the Audit Committee within the overall framework of the policy on relatedparty transactions. Prior omnibus approval is obtained for related party transactionswhich are of repetitive nature and entered in the ordinary course of business and atarms length. All related party transactions are placed before the Audit Committeefor review and approval.
All related party transactions entered during the financial year were in ordinarycourse of the business and on arms length basis. No material related partytransactions were entered during the financial year by your Company. Accordingly thedisclosure of related party transactions as required under Section 134(3)(h) of theCompanies Act 2013 in Form AOC-2 is not applicable to your Company.
CORPORATE SOCIAL RESPONSIBILITY:
The nomenclature of Corporate Social Responsibility Committee has been changed toCorporate Social Responsibility & Governance Committee w.e.f 18th May2016. The committee is reconstituted which comprises of Mr. Sachin Nath Chaturvedi (Chairman) Mr. Arvind Poddar (Member) Mrs. Vijaylaxmi Poddar (Member) Mr. LaxmidasMerchant (Member) Mr. Sanjay Asher (Member) and Mr. Khurshed Doongaji (Member). The saidcommittee which is currently responsible to recommend the CSR activities to be undertakenby the Board shall now also be responsible to implement Business Responsibility Policy.
The Corporate Social Responsibility & Governance Committee has formulated andrecommended to the Board a Corporate Social Responsibility Policy (CSR Policy) indicatingthe activities to be undertaken by the Company which is approved by the Board. As a partof its CSR initiatives during the year the Company has spent Rs.13.20 Crores (2%) of theaverage net profits of last three years) on CSR activities.
The Annual Report on CSR activities is annexed herewith as Annexure II.
The Company has framed a Risk Management Policy to identify and access the key businessrisk areas and a risk mitigation process. A detailed exercise is being carried out thatthe organization faces such as strategic financial credit market liquidity securityproperty IT legal regulatory reputational and other risks. The Board periodicallyreviews the risks and suggests steps to be taken to control and mitigate the same througha properly defined framework.
DIRECTORS AND KEY MANAGERIAL PERSONNEL:
In accordance with provisions of the Companies Act 2013 and Articles of Association ofthe Company Mr. Vipul Shah Director of the Company retires by rotation at the ensuingAnnual General Meeting and being eligible seeks re-appointment. The Board recommends hisre-appointment. As recommended by Nomination and Remuneration Committee the Board ofDirectors of the Company has re-appointed Mr. Arvind Poddar as Chairman & ManagingDirector of the Company for a term of five years w.e.f. 1st August 2016subject to approval of Members of the Company.
Mrs. Vijaylaxmi Poddar has resigned as an Executive Director w.e.f. 8thAugust 2015. However she shall continue as Non-Executive Director on Board w.e.f. 9thAugust 2015.
Brief resume of the Director being re-appointed as required under SEBI (ListingObligations and Disclosure Requirements) 2015 is provided in the Annexure to the noticeconvening the Annual General Meeting of the Company.
The Company has received declaration from all Independent Directors of the Companyconfirming that they meet with the criteria of independence as laid down under Section 149(6) of the Companies Act 2013 and SEBI (Listing Obligations and Disclosure Requirements)2015.
CRITERIA FOR APPOINTMENT OF INDEPENDENT DIRECTORS:
The Independent Directors shall be of high integrity with relevant expertise andexperience so as to have as diverse Board with Directors having expertise in the fields ofmanufacturing marketing finance taxation Law governance and general management.
CRITERIA FOR APPOINTMENT OF MANAGING DIRECTORS / WHOLE TIME DIRECTORS:
The Nomination and Remuneration Committee shall identify persons of integrity whopossess relevant expertise and experience particularly in Tyre Industry leadershipqualities required for the position and shall take into consideration recommendation ifany received from any member of the Board.
The Company follows a policy on remuneration of Directors and Senior Managementemployees details of the same are given in the Corporate Governance Report.
Pursuant to the provisions of the Companies Act 2013 and Regulations 17 & 19 readwith part D of Schedule II to the SEBI (Listing Obligations and Disclosure Requirements)2015 the Board has carried out an evaluation of the Directors as well as the evaluationof the Board and Committees. The process was carried out by circulating evaluation formson the Board and Committees functioning on certain parameters set out in thePerformance Evaluation Policy adopted by the Board. The performance evaluation of theIndependent Directors was carried out by the entire Board. The performance evaluation ofthe non-Independent Directors including the Executive Directors was carried out by theIndependent Directors. The Directors expressed satisfaction with the evaluation processand performance of the Board of Directors and Committees.
FAMILIARISATION PROGRAMMES FOR BOARD MEMBERS:
On appointment the concerned Director is issued a Letter of Appointment setting out indetail the terms of appointment duties responsibilities and expected time commitments.Each newly appointed Independent Director is taken through a formal induction programincluding the presentation from the Managing Director on the Companys manufacturingmarketing finance and other important aspects.
The Company Secretary briefs the Director about their legal and regulatoryresponsibilities as a Director. The induction for Independent Director include interactivesessions with Managing Director Joint Managing Director Whole Time Director and Businessand Functional Heads visit to the manufacturing site etc. On the matters of specializednature the Company engages outside experts/consultants for presentation and discussionwith the Board members.
The details of such familiarisation programme have been displayed on the companyswebsite link: https://cloud.bkt-tires.com/bkt-financials/others/familiarisation-programme-for-independent-directors.pdf.
Messers Jayantilal Thakkar & Co. Chartered Accountants the Statutory Auditors ofthe Company hold office till the conclusion of the ensuing Annual General Meeting and areeligible for re-appointment and who have furnished certificates of their eligibility forreappointment as required under Companies Act 2013.
The Board has appointed Mr. G.B.B. Babuji Company Secretary in Whole time Practice toconduct Secretarial Audit for the financial year 2015-16. The Secretarial Audit Report forthe financial year ended 31st March 2016 is annexed herewith marked as AnnexureIII. Cost Auditor:
The Companys revenue from exports in foreign exchange exceeds seventy five percent of Companys total revenue as per Rule 7 (i) of the Companies (Cost Records andAudit) Rules 2014 Cost Audit is not applicable to the Company for the financial year2015-16.
There are no qualifications in the reports of the Statutory Auditors and SecretarialAuditor.
The industrial relations with staff and workers during the year under review continueto be cordial.
1. Vigil Mechanism /Whiste Blower Policy
The Vigil Mechanism of the Company which also incorporate a whistle blower policy inthe terms of SEBI (Listing Obligations and Disclosure Requirements) 2015 deals withinstances of fraud and mismanagement if any. The Policy on vigil mechanism and whistleblower policy may be accessed on the Companys website at the link: https://cloud.bkt-tires.com/bkt-financials/others/vigil-mechanism-and-whistle-blower-policy.pdf.
2. Audit Committee
The Audit Committee comprises of Two Independent Non-Executive Directors viz. Mr.Sachin Nath Chaturvedi (Chairman) Mr. Khurshed Doongaji and Mr. Rajiv Poddar (JointManaging Director). All the recommendations made by the Audit Committee were accepted bythe Board.
3. Number of Board Meeting
The Board of Directors of the Company met six times in the year the details of whichare provided in the Corporate Governance Report.
4. Particulars of loans given investment made guarantees given and securitiesprovided
Particulars of loans given investments made guarantees given and securities providedalong with the purpose for which the loan or guarantee or security is proposed to beutilized by the recipient are provided in the standalone financial statement (Please referto Note No. 14 21 and 31 to the Standalone Financial Statement).
5. Conservation of Energy Technology Absorption and Foreign Exchange Earningsand outgo
The particulars relating to conservation of energy technology absorption foreignexchange earnings and outgo as required to be disclosed under Section 134(3)(m) of theCompanies Act 2013 read with Rule 8 (3) of the Companies (Accounts) Rules 2014 areprovided in Annexure IV to this report.
6. Cash Flow and Consolidated Financial Statements:
As required under Regulation 34(2) of SEBI LODR Cash Flow and Consolidated FinancialStatements is annexed.
7. Extract of Annual Return
Extract of annual return of the Company is annexed herewith as Annexure V tothis report.
8. Particulars of Employees and related disclosures
The information required under Section 197(12) of the Companies Act 2013 read withRule 5 of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 is attached as Annexure VI. In terms of the provisions of Section197(12) of the Act read with sub-rules (2) and (3) of Rule 5 of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 a statement showing the names andother particulars of employees drawing remuneration in excess of the limits set out in thesaid Rules are provided in the Report.
However having regard to the provisions of the first proviso to Section 136(1) of theAct the details are excluded in the report sent to members. The required information isavailable for inspection at the registered office/corporate office and the same shall befurnished on request.
No disclosure or reporting is required in respect of the following items as there wereno transaction on these items during the year under review:
1. Details relating to deposit and unclaimed deposits or interest thereon.
2. Issue of equity shares with differential rights as to dividend or voting.
3. Issue of shares (including sweat equity shares) and Employee Stock Option Scheme ofthe Company under any scheme.
4. Neither the Managing / Joint Managing Director nor the Whole-time Director of theCompany receive any remuneration or commission from any of its subsidiaries.
5. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern and Companys operation in future.
Certain statements in the "Management Discussion and Analysis" describing theCompanys views about the Industry expectations/ predictions objectives etc. maybe forward looking within the meaning of applicable laws and regulations. Actual resultsmay differ materially from those expressed in the Statement. Companys operations mayinter-alia affect with the supply and demand stipulations input prices and theiravailability changes in Government regulations taxes exchange fluctuations and otherfactors such as Industrial relations and economic developments etc. Investors should bearthe above in mind.
Your Company is grateful to its valued customers for their continuous co-operation andpatronizing its products. A word of appreciation is also extended to its FinancialInstitutions and Banks for their continuous co-operation and assistance in meeting thefinancial requirements of the Company. Your company would also like to thank itsshareholders employees vendors and other service providers for their valuable servicesto the company. Last but not least your Directors wish to place on record their warmappreciation to you for your continuous support and encouragement.
| ||For and on behalf of the Board of Directors |
|Mumbai ||ARVIND PODDAR |
|Dated : 18th May 2016 ||CHAIRMAN & MANAGING DIRECTOR |