Disa India Ltd.
|BSE: 500068||Sector: Engineering|
|NSE: GEORGFISCH||ISIN Code: INE131C01011|
|BSE 00:00 | 24 Apr||Disa India Ltd|
|NSE 05:30 | 01 Jan||Disa India Ltd|
|Mkt Cap.(Rs cr)||508|
|Mkt Cap.(Rs cr)||508|
Disa India Ltd. (GEORGFISCH) - Director Report
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Company director report
The Board of Directors has pleasure in presenting the 34th Annual Report and AuditedFinancial Statements for the financial year ended 31st March 2019 together with theIndependent Auditors' Report.
Your company achieved for the second time in arrow an all-time high Revenue fromOperations of Rs. 2419.2 Million during the financial year 2018-19 with a growth of 23.5%over previous year. Profit after tax for the year also improved significantly by 71.1% toRs. 277.8 Million. Summarized financial results for the year are given below.
The Company and its subsidiary have adopted Indian Accounting Standards (Ind AS) witheffect from April 01 2017 pursuant to the notification of the Companies (IndianAccounting Standard) Rules 2015 issued by the Ministry of Corporate Affairs and thefinancial results are Ind AS compliant.
PERFORMANCE OF THE COMPANY
Overall performance of your Company for the financial year 2018-19 improvedsignificantly with 23.5% growth in revenue from operations and 71.1% growth in profitafter tax as compared to the previous financial year 2017-18. The growth is driven by anall-time high and consistent orders inflow during the financial year cost reductioninitiatives undertaken in bringing down the manufacturing and other costs maintaininghead count and adoption of various Lean initiatives for improvement in productivity. YourCompany has been able to maintain its market share in all its major product lines andexpect the trend to continue going ahead.
CHANGE IN THE NATURE OF BUSINESS
There has been no change in the nature of business of the Company during the financialyear.
Considering the dividend history of the Company and keeping in view the future outlookyour Board of Directors recommend a final Dividend of Rs. 2.50/- (i.e. 25%) per EquityShare of Rs.10/- each for the year amounting to Rs. 4.4 Million including dividenddistribution tax.
The Company has not proposed to transfer any amount to the general reserve.
The Authorized Equity Share Capital of your Company is Rs. 50 Million. The IssuedSubscribed and Paid-up Equity Share Capital of your Company as on 31st March 2019 stood atRs.14.54 Million.
During the year under review the Company has not issued any shares with differentialvoting rights nor granted Stock Options or Sweat Equity. The Company has also not boughtback any of its shares during the year under review. As on March 31 2019 none of theDirectors hold shares or convertible instruments of the Company.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT ECONOMIC SCENARIO AND OUTLOOK
The Indian economy is in a growing phase and your Company has witnessed positivedevelopments over the first three quarters in the year 2018-19 with some slowdown in theeconomic and industrial activities in the last quarter of the year due to generalelection. The GDP growth is forecasted to below 7% in next two quarters. The slowdown isexpected to be temporary and the outlook for second half of the financial year 2019-20provides positive expectations. The manufacturing PMI is expected to be above 53 and theinflation is expected to go beyond 4%.
INDUSTRY OUTLOOK AND OPPORTUNITIES
IIP & PMI have historically been good indicators for business sentiments inCapital Goods Order Intake.
The trends reported in recent quarters in Automotive industry shows a slowdown. It isexpected to witness some signs of improvement post elections in all sectors of theeconomy. The investments planned due to the regulatory changes for stricter emission byworld major automotive companies is expected to boost the industry. As your Company entersthe year 2019-20 it is temporarily witnessing lower utilization of foundries coupledwith a cautious capital investment program. The customer demand has tapered down and willtake some time to get to recovery path. The automotive industry is gearing up to
implement Euro Vi (BSVI) from 1st April 2020 which will impact introductions on newmodels and optimization of inventories during this financial year. The India automotivemarket is poised to grow in longer term with the investments from global and
India players in all the automotive segments of Passenger vehicle Commercial vehiclesTractors and Two wheelers and the government's push on infrastructure and consumption.
Your Company has been leading the industry over last decades and is actively involvedto bring in new technologies and products to the Indian market. These technologies areintegrated well in the two world class manufacturing facilities near Bengaluru. YourCompany has been meeting most of the customers' needs through products manufactured inIndia. The Company's approach to the Indian market is supported through innovation speedand aftersales service for spares and equipment which are the three most important partsof our overall offerings. This is strengthened year over year through a continuousimprovement process on knowledge and manufacturing areas.
a) With the integration of Aluminium offerings from the Group the Company has startedto offer the Indian customers on Aluminium foundries as well. These offerings areAluminium Die Casting Machines from Italpresse and Melting and Dosing furnace fromStrokowestofen. These two offerings have strengthened the offer from the Group to theIndian market and now the Company can provide solutions on both Ferrous and Aluminiumfoundries.
b) With the global knowhow and the local knowledge on High Pressure Molding machinesyour Company has a COMPLETE FOUNDRY OFFER for the Indian market. Your Company has thecapability to provide end to end solution for both green field and brown field foundries.
c) Your Company has taken an initiative to provide higher level services to meet theneed for spares parts across the country by introduction of Distribution channels. TheCompany has introduced distributors to service the aftermarket requirements. This willhelp the Company to service the needs of customers faster than before. Your Companyintends to expand this initiative in the FY 2019/20.
d) Your Company's unique initiative on "Parts Partnership Program" withcustomers has been strengthened further with new customers in the program during the year.This is a simple way to understand the customer requirements well in advance and plan foravailability at the right time.
e) Your Company's Services team works closely with maintenance team of the Company'scustomers to improve the overall reliability of the operation by addressing repetitiveissues on unplanned downtime through a root cause analysis program. The Company shallenhance this program with new customers on board in 2019/20.
As required by SEBI (LODR)(Amendment) Regulations 2018 the Company is required tofurnish the details of significant changes (i.e. change of 25% or more as compared to theimmediately previous financial year) in key financial ratios along with detailedexplanations for the changes.
The Company has identified the following ratios as Key financial ratios
During the year there have been significant changes in the following key ratios.
Improvement in Operating Profit margin for the year 2018-19 is attributable to variouscost control measures taken by the Company and improvement in overall productivity.Reduction of corporate incometax rate from 30% to 25% contributed to the improvement innet profit margin. Debtors turnover ratio as at the end of the year was impacted due tocertain debtors which were realized subsequent to the yearend backed up by letter ofcredit.
The details of return on net worth at standalone and consolidated levels are givenbelow:
Return on net worth is computed as net profit divided by year end net worth. Growth inNet profit has resulted in increase in return on Net worth.
CORPORATE SOCIAL RESPONSIBILITY
Your Company is committed to comply with Corporate Social Responsibility as a goodcorporate citizen. The Directors are pleased to report that the Company is diligentlypursuing its efforts to support the community circles in which it operates. The Company'sCSR program titled "NORICAN Scholarship" has helped in providing financialassistance to less privileged students up to standard twelve as well to students seekingdiplomas in Engineering.
"NORICAN Scholarship" program has made scholarship available to students ineight educational institutions in the plant neighborhood of Tumkur and Hosakote inBengaluru. During the financial year scholarships were provided to 183 needy students. Inaddition your Company also invested in infrastructure development for the schools toprovide drinking water teaching aids and school sanitation. Your Company has alsoextended scholarships to 51 meritorious Engineering students through an NGO 'Foundationfor Excellence India Trust'.
The Company has initiated a new initiative to partner with the National Institute ofFoundry and Forge Technology (NIFFT) Ranchi to provide scholarship to 5 top meritoriousstudents every year to create Industry Academia interface to create future foundry men.This scholar ship would be named as "Jan Johansen DISAMATIC Scholarship" in thememory of Company's late Director Mr. Jan Johansen who steered the Company to betechnology self-sufficient in India.
The Company's policy on Corporate Social Responsibility is available on the website ofthe Company at https://www.disagroup.com/en-in/investor-relations/ policies.
The Composition of CSR Committee details of the amounts spent during the currentfinancial year and the manner in which it was spent are provided in Annexure"A".
Your Company has formulated a Risk Management Policy and a mechanism to apprise theBoard about risk assessment and mitigation procedure. It also undertakes periodical reviewto ensure that Executive Management Controls risks by means of properly designed riskmanagement framework.
All the insurable assets of the Company have been adequately insured and all theinsurable risks have been insured.
As an established practice at each Meeting of the Board the Directors are updated onrisks identification and steps taken to mitigate the same. Risk Management Policy ishosted on the Company's website at https://www.disagroup.com/en-in/investor-relations/policies.
VIGIL MECHANISM / WHISTLE BLOWER POLICY
Your Company has a Whistle Blower Policy for vigil mechanism which is available onwebsite of the Company at https://www.disagroup.com/en-in/investor-relations/policies/. To the extent that complaints are raised they are dealt with as per thispolicy. No complaints have been substantiated during the last year.
DIRECTORS AND KMP
The Company has three Key Managerial Persons (KMP) Mr. Lokesh Saxena ManagingDirector Mr. Amar Nath Mohanty Chief Financial officer and Mr. G. Prasanna BairyCompany Secretary & Compliance Officer.
Mr. Andrew Thomas Carmichael has resigned from the office of Chairman and of Directorwith effect from July 12 2019. Similarly Mr. Vi raj Naidu has resigned from the officeof Director.
Mr. Anders Wilhjelm Mr. Andrew James Matsuyama and Ms. Ulla Hartvig Palthe Tonnesenwere appointed as Additional Directors with effect from July 12 2019. Their term asAdditional Directors expires in this AGM and it is proposed to appoint them as Directors.
The first term of all the three Independent Directors of the Company will expire inFebruary 2020/March 2020.The Directors are eligible for reappointment for a second term.Ms. Deepa Agar Hingorani and Mr. Sanjay Narendrakumar Arte Independent Directors havegiven their consent to act as Independent Directors for the second term. Accordinglytheir reappointment has been approved by the NRC and the Board at their respectivemeetings held on May 23 2019 subject to final
approval by the Shareholders in this Annual General Meeting. However Mr. Shyamal KumarSinha Independent Director did not seek his re-appointment for the second term startingfrom March 23 2020 owing to his personal reasons.
The Remuneration Policy of the Company for appointment and remuneration of theDirectors Key Managerial Personnel and Senior Executives of the Company and other relatedinformation have been provided in the Corporate Governance Report which forms part of thisreport.
Policy on appointment and remuneration of Directors and KMP is available on the websiteof the Company at https://www.disagroup.com/en-in/investor-relations/policies/.
Declarations from all the Independent Directors of the Company have been received underSection 149(7) of the Companies Act 2013 confirming that they meet the criteria ofindependence as provided in Sub-Section 6 of Section 149 of the said Act and as per theSEBI(LODR)Regulations 2015(The Listing Regulations).
Details on terms of appointment of Independent Directors and the familiarizationprogram have been displayed on website of the Company at
MEETINGS OF THE BOARD OF DIRECTORS
During the financial year four (4) Meetings of the Board of Directors were held asrequired under the Companies Act 2013 and the Listing Regulations. The details of theMeetings are furnished in the Corporate Governance Report.
The Meetings of the Board are held at regular intervals with a time gap of not morethan 120 days between two consecutive Meetings. The Agenda of the Meetings were circulatedto Directors in advance. Minutes of the Meetings of the Board of Directors were circulatedamongst the Directors for their perusal.
Pursuant to the requirements of the Companies Act 2013 and the Listing Regulationsthe Board of Directors has carried out an annual evaluation of its own performance itsCommittees and of individual Directors.
Further the Independent Directors at their exclusive Meeting held during the yearreviewed the performance of the Board its Chairman and Non-Executive Directors and otheritems as stipulated under the Listing Regulations. The Nomination and RemunerationCommittee has reviewed the performance of the Independent Directors.
DIRECTORS' RESPONSIBILITY STATEMENT
In accordance with the provisions of Section 134(5) of the Companies Act 2013 theBoard hereby submits its responsibility Statement: -
(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
(b) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit and loss of the Company for that year;
(c) the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets 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 had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively.
(f) the Directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
INTERNAL FINANCIAL CONTROL
Your Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. Internal Controls in the Company have been designed tofurther the interest of all its stakeholders by providing an environment which isfacilitative to conduct its operations and to take care of inter alia financial andoperational risks with emphasis on integrity and ethics as a part of work culture.
The scope and authority of the Internal Audit (IA) is defined every year by the AuditCommittee. To maintain its objectivity and independence the Internal Auditors report toChairman of the Audit Committee and the Board. The Internal Auditors monitor and evaluatethe efficacy and adequacy of internal control system in the Company and its compliancewith accounting procedures financial reporting and policies at all locations of theCompany. Based on the report of internal audit process owners undertake corrective actionin their respective areas and thereby strengthen the controls. Any significant auditobservations and corrective actions thereon are presented to the Audit Committee and theBoard. No major internal control weakness was identified during the year. The Company alsohas a well-functioning Whistle Blower Policy in place.
Your Company has neither accepted nor renewed any Deposits from the public within themeaning of the Companies Act 2013 as such no amount of principal or interest wasoutstanding on the date of the Balance Sheet and also on the date of this Report.
SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES
Your Company has one Wholly Owned Subsidiary "Bhadra Castalloy PrivateLimited" (Formerly Bhadra Castalloys Private Limited).
The performance of Subsidiary during the financial year 2018-19 being the third yearof operation has been quite satisfactory. The audited financial results of the WhollyOwned Subsidiary for the financial year ended March 31 2019 are consolidated with thefinancial results of Company for the financial year. The Net Sales and the Profit aftertax of the Subsidiary Company were Rs.113.0 Million and Rs.8.0 Million respectively.
Consolidated net Revenue from Operations of the Company crossed Rs. 2500 Millionduring the year.
Statement relating to Subsidiary Company in Form AOC-1 is part of this report.
Your Company did not have any Joint Venture or Associate Company as at the end of thefinancial year.
RELATED PARTY TRANSACTIONS
All related party transactions which were entered into during the financial year werein the ordinary course of business on an arm's length basis and were as per priorapprovals of the Audit Committee. There are no materially significant related partytransactions made by the Company with Promoters Directors Key Managerial Personnel orother designated persons which may have a potential conflict with the interest of theCompany at large.
All the related party transactions were placed before the Audit Committee as well asthe Board for approval. Prior omnibus approval of the Audit Committee was obtained on ayearly basis for the transactions which are of a foreseen and repetitive nature. Thetransactions entered into pursuant to the omnibus approval so granted are audited and astatement giving details of all related party transactions is placed before the AuditCommittee and the Board of Directors for their noting/approval on quarterly basis. Thedetails of all related party transactions are disclosed in the SI. No.39 of the Notesforming part of the Financial Statements.
None of the Directors has any pecuniary relationships or transactions vis-a-vis theCompany.
Form for disclosure of particulars of contracts/arrangements entered into by theCompany with related parties in Form AOC-2 is part of this report.
The Policy on related party transactions as approved by the Board is uploaded on theCompany's website and the details of all the related party transactions are disclosed inthe financials. None of the Directors has any pecuniary relationships or transactionsvis-a-vis the Company. The 'Related Party Transaction Policy' is available on website ofthe Company at https://www.disagroup.com/en-in/investor-relations/policies.
Persons constituting Group coming within the definition of "Group" as definedin the Competition Act 2002 includes the following:
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANYBETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT
There were no material changes and commitments between the end of the financial yearand the date of the report which affects the financial position of the Company.
PARTICULARS OF LOANS GIVEN INVESTMENTS MADE GUARANTEES GIVEN OR SECURITY PROVIDED BYTHE COMPANY
Your Company has made an investment of Rs.44 Million in the Equity Share Capital of itsWholly Owned Subsidiary Company Bhadra Castalloy Private Limited. It has extendedinterestbearing intercompany demand loan of Rs 26 Million for the purpose of financing thepurchase considerations paid for acquisition of the foundry by the Subsidiary. The Companyhad also given a Corporate Guarantee of Rs. 35 Million to Kotak Mahindra Bank on behalf ofits subsidiary for providing banking facilities. The above Investment in equity loanextended and guarantees given are well within limits prescribed under the provisions ofSection 186 of the Companies Act 2013.
Pursuant to provisions of Section 139 of the Companies Act 2013 read with theCompanies (Audit and Auditors) Rules 2014 the Company at its 33rd Annual General Meetingheld on August 9 2018 had appointed Messrs Deloitte Haskins & Sells CharteredAccountants as Statutory Auditors of the Company for a second and final term of 5 yearsfrom the financial year 2018-19 to 2022-23.
During the year the statutory auditors have confirmed that they satisfy theindependence criteria as per Companies Act 2013 and Code of ethics issued by theInstitute of Chartered Accountants of India.
Pursuant to Section 148 of the Companies Act 2013 read with the Companies (CostRecords and Audit) Amendment Rules 2014 the cost records maintained by the Company inrespect of its activity are required to be audited. Your Directors have in their Meetingheld on May 24 2018 based on the recommendation of the Audit Committee appointed MessrsRao Murthy & Associates Bengaluru as Cost Auditors of the Company for the financialyear ended 31st March 2019. SECRETARIAL AUDITOR
Pursuant to the provisions of Section 204 of the Companies Act 2013 read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhas appointed Mr. Vijayakrishna KT Bengaluru a Company Secretary in Whole Time Practiceto undertake the Secretarial Audit of the Company. The Report of the Secretarial Auditoris annexed in Annexure-B.
EXPLANATION BY BOARD ON ADVERSE COMMENTS BY AUDITORS
There were no adverse comments by the Auditors of the Company and hence noexplanations are provided.
As required under the Listing Regulations certificates from Mr. Vijayakrishna KTPractising Company Secretary regarding compliance with conditions of Corporate Governanceas well as a confirmation [as required by Schedule V Part C (10)(i)] that none of thedirectors on the board of the company have been debarred or disqualified from beingappointed or continuing as directors of companies by the Board/Ministry of CorporateAffairs or any such statutory authority are annexed as Annexure C.
As required under SEBI(LODR) Regulations 2015 a report on Corporate Governance and aCertificate from Mr. Vijayakrishna K T Practising Company Secretary regarding complianceof conditions of Corporate Governance are annexed as Annexure - C and Annexure - D.
As required by SEBI (LODR)(Amendment) Regulations 2018 'Annual Secretarial ComplianceReport' issued by Mr. Vijayakrishna KT Practising Company Secretary has been filed withBSE on May 29 2019.
Further in compliance with the Listing Regulations your Board has adhered to theCorporate Governance Code. All the requisite Committees are functioning in line with theguidelines.
As reported earlier a reputed firm of independent Chartered Accountants has beencarrying out the responsibilities of Internal Audit of the Company and periodicallyreporting their findings of systems procedures and management practices.
Industrial relations have been cordial and constructive which have helped your Companyto achieve production targets. The Company's three year long term agreement with theworkmen union expired on September 30 2018. After several rounds of cordial negotiationthe next three year long term agreement is in the process of finalization which will beeffective from October 012018 to September 30 2021.
RESEARCH AND DEVELOPMENT CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION
CONSERVATION OF ENERGY
Your Company gives highest priority to conservation of energy through bettersupervision and training of employees to reduce the usage of electricity.
RESEARCH AND DEVELOPMENT TECHNOLOGY ABSORPTION ADAPTATION AND INNOVATION
Your Company has been continuously seeking and adapting new technology from Principalsin order to develop skills locally and meet specific needs of Indian and global customers.Personnel at all levels are routinely sent to Principal's factories and design officesabroad for training and updating their skills.
FOREIGN EXCHANGE EARNINGS AND OUTGO
The Company earned Rs 128.9 Million of foreign exchange and expended Rs 412.3 Millionforeign exchange during the financial year under review.
EXTRACT OF ANNUAL RETURN
Pursuant to Section 92(3) of the Companies Act 2013 and the Companies (Management andAdministration) Rules 2014 a copy of the annual return is provided as Annexure E tothis Report.
MATERIAL ORDER PASSED BY ANY COURT OR REGULATOR OR TRIBUNALS IMPACTING GOING CONCERNSTATUS OF COMPANY
There were no orders passed by any Court or Regulator or Tribunal during the year underreview which impacts the going concern status of the Company.
DISCLOSURE RELATING TO REMUNERATION OF EMPLOYEES
The particulars of employees as required by Section 197 of the Companies Act 2013 readwith Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 are given in 'Annexure - F' forming part of this Report.
During the year there was one employee receiving remuneration exceeding Rs.10200000/- (Rupees One Crore Two Lakhs only) per annum and/or Rs.850000/- (RupeesEight Lakhs Fifty Thousand only) per month. The details are as under:
Name of the employee Designation (in Rs. Million)
Mr. Lokesh Saxena Managing Director 10.78
There were no employees posted and working in a country outside India not beingDirectors or relatives drawing more than the amount prescribed under the Rule 5(3) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014. Hence thedetails are not required to be circulated to the Members and also not required to beattached to this Annual Report.
The statement containing names of top ten employees in terms of remuneration drawn andthe particulars of employees as required under Section 197(12) of the Act read with Rule5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 is provided in a separate annexure forming part of this report. Further thereport and the accounts are being sent to the Members excluding the aforesaid annexure. Interms of Section 136 of the Act the said annexure is open for inspection at theRegistered Office of the Company. Any Member interested in obtaining a copy of the samemay write to the Company Secretary.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013
The Company has in place a Gender-Neutral Policy on Zero Tolerance towards SexualHarassment at Workplace in line with the requirements of the Sexual Harassment of Women atthe Workplace (Prevention Prohibition & Redressal) Act 2013. Internal ComplaintsCommittee (ICC) has been set up to redress complaints received regarding sexualharassment. All employees (permanent contractual temporary trainees) are covered underthis Policy.
The following is a summary of sexual harassment complaints received and disposed offduring the financial year 2018-19:
No of complaints received: NIL. No. of complaints disposed off: NIL
Your Directors place on record the appreciation for valuable contribution made byemployees at all levels active support and encouragement received from the Government ofIndia the Government of Karnataka Company's Bankers Customers Principals BusinessAssociates and other Acquaintances.
Your Directors recognize the continued support extended by all the Shareholders andgratefully acknowledge with a firm belief that the support and trust will continue in thefuture also.
Statement pursuant to first proviso to sub-section (3) of Section 129 of the CompaniesAct 2013 read with rule 5 of the Companies (Accounts) Rules 2014 relating to SubsidiaryCompany for the year ended March 31 2019
(Rs. In Million)
FORM NO. AOC-2
Form for disclosure of particulars of contracts/arrangements entered into by thecompany with related parties referred to in subsection (1) of Section 188 of the CompaniesAct 2013 including certain arm's length transactions under third proviso thereto for theyear ended March 31 2019
(Pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) ofthe Companies (Accounts) Rules 2014)
1. Details of contracts or arrangements or transactions not at arms length basis: N.A.
2. Details of material contracts or arrangement or transactions at arms length basis:
Date of the Board Meeting in which transactions were approved: August 9 2018 November13 2018 February 7 2019 &
May 23 2019.