Your Directors are pleased to present the Thirty Sixth Annual Report together with the Company's audited financial statements for the financial year ended March 31 2019.
FINANCIAL RESULTS - STANDALONE & CONSOLIDATED
The standalone and consolidated financial highlights of your Company are as follows:
( Rs. in crore)
|Year ended||Year ended|
|March 31 2019||March 31 2018||March 31 2019||March 31 2018|
|Profit before Finance Depreciation cost and||5621.34||5806.01||5705.16||5848.22|
|Depreciation and amortisation expenses||602.01||555.60||624.44||574.98|
|Profit from ordinary activities before share of Profit / (Loss) of associates||5010.73||5244.16||5043.54||5242.44|
|Profit/ (Loss) of associates|
|Shareinnetprofit /(loss) of||-||-||60.76||49.66|
|Profitfrom ordinary activities before||5010.73||5244.16||5104.30||5292.10|
|Net Profit from ordinary activities after tax||3384.87||3697.36||3466.35||3722.17|
|Other comprehensive income /(expense) (net of tax)||(17.81)||(4.71)||(14.98)||(7.26)|
|Total comprehensive income for the year||3367.06||3692.65||3451.37||3714.91|
|Net Profit / (loss) attributable to|
|a) Owners of the Company||3384.87||3697.36||3444.09||3720.40|
|b) Non-controlling interest||-||-||22.26||1.77|
|Other comprehensive income attributable to|
|a) Owners of the Company||(17.81)||(4.71)||(16.32)||(5.89)|
|b) Non-controlling interest||-||-||1.34||(1.37)|
|Total comprehensive income attributable to|
|a) Owners of the Company||3367.06||3692.65||3427.77||3714.51|
|b) Non-controlling interest||-||-||23.60||0.40|
|Balance of profit brought forward||9068.11||7418.53||9247.01||7597.60|
|- Interim 2018-19||1098.50||1098.41||1098.50||1098.41|
|- Final 2017-18||798.85||599.09||798.85||599.09|
|Corporate Dividend Tax||390.01||345.57||390.01||345.57|
|Adjustment on account of change in controlling interest||-||-||-||(23.50)|
|Other Comprehensive income arising from remeasurement of defined benefit obligation (net of income tax)||-||-||(18.43)||(4.42)|
|Balance carried to Balance Sheet||10147.81||9068.11||10385.31||9247.01|
|Earnings per equity share on Net Profit from ordinary activities after tax (face value Rs.2/- each) (In Rs.)|
During FY 2018-19 under review your Company clocked sales of 7820745 units over 7587154 units in the previous FY.
During FY 2018-19 revenue from operations was Rs.33650.54 crore as compared to Rs.32871.82 crore in FY 2017-18 registering an increase of 2.37%.
Profit before tax (PBT) in FY 2018-19 wasRs.5010.73 crore as compared to Rs. 5244.16 crore in FY 2017-18 reflecting a decrease of 4.45%. Profit after tax (PAT) wasRs.3384.87 crore as against Rs.3697.36 crore in FY 2017-18 a decrease of 8.45% from the previous year.
Earnings before Interest Depreciation and Taxes (EBIDTA) stood at 14.65% in FY 2018-19 as compared to 16.38% in FY 2017-18.
CONSOLIDATED FINANCIAL STATEMENTS
In accordance with the provisions of the Companies Act 2013 (`the Act') and Indian Accounting Standard (Ind AS)-110 on Consolidated Financial Statements read with Ind AS-28 on Investments in Associates and Joint Ventures the Audited Consolidated Financial Statements for the FY ended March 31 2019 are provided in this Annual Report.
CHANGES IN CAPITAL STRUCTURE
During the FY under review 15429 equity shares of Rs.2 each were allotted on exercise of employee stock options by the employees of the Company. Consequently the issued and paid-up share capital of the Company as on March 31 2019 was Rs.399453768 divided into 199726884 equity shares of Rs.2 each.
The Company has not issued any equity shares with differential rights sweat equity shares or bonus shares. The Company has only one class of equity shares with face value of Rs.2 each ranking pari-passu.
Your Directors are pleased to recommend for your approval a final Rs.32 per equity share (1600%) of face value ofdividendof Rs.2 each in addition to an interim dividend of Rs.55 per equity share (2750%) declared in the month of January 2019 aggregating a total dividend payout of Rs.87 per equity share (4350%) for FY 2018-19. In the previous FY total dividend payout of Rs.95 per equity share of the face value of Rs.2 each was made. Final dividend if approved at the ensuing Annual General Meeting shall be paid to the eligible Members within the stipulated time period. Dividend Distribution Policy of the Company as per the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (`Listing Regulations') is available at the following link: http://www.heromotocorp.com/en-in/about-us/key-policies/dividend-distribution-policy.html and is also provided as Annexure - I.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
The management discussion and analysis report forms an integral part of this report and gives details of the overall industry structure economic developments performance and state of affairs of your Company's business in India and abroad risk management systems and other material developments during the FY under review.
CHANGE IN NATURE OF BUSINESS
During FY 2018-19 there was no change in the nature of Company's business.
CAPACITY EXPANSION NEW PROJECTS & STRATEGIC ALLIANCES
During FY 2018-19 construction of sixth manufacturing facility at Sricity in Chittoor District in the state of Andhra Pradesh has reached at an advanced stage with an annual installed capacity of 1.8 million units. Your Company has invested approx. Rs.650 crore in Phase I out of total projected investment of Rs.1600 crore in setting up the manufacturing facility. Phase I is expected to be operational by October 2019.
Further the overseas plant of your Company at Jessore in Bangladesh achieved its designed production capacity of 1.5 lakh units during FY 2018-19 and consolidated decent market share.
Transition to BS VI emission norms has been a key focus area in FY 2018-19 and your Company is consolidating all efforts to optimize capacities and investments across all locations.
Your Company is constantly expanding the boundaries on innovation both internal and external. It has been running internal idea generation contests successfully involving employees for many years now. As a responsible corporate your Company voluntarily took important steps to release its first ever Sustainability Report encompassing ESG (Environment Social and Governance) aspects at organization level. Your Company has also formulated a long term strategy HATS 2020 to address the material issues with the objective of making it one of the sustainable organizations.
Your Company continues to strengthen its presence in Global Markets. During FY 2018-19 the focus was on the existing markets and continued innovation efforts across these markets. Despite the tough macroeconomic environment in many of the markets your Company managed to increase its volumes in the global markets. Your Company achieved the number one position in Bangladesh during the festive season. In significant markets such as Colombia your Company was able to reach close to the set targets. Your Company has taken innumerable innovation efforts helping it offer differentiated retail financing unmatched lending and leasing solutions and increased digital footprints through innovative region-specific marketing and communication efforts.
Working closely with strong and allied business partners has been the key for your Company to grow in the global markets.
Your Company introduced world class motorcycle and scooter models across its markets and also showcased its models in various Auto Shows across the globe including the ones in Italy Colombia Argentina Turkey Bangladesh Nepal Sri Lanka and Bolivia.
Your Company accelerated the momentum on fostering a culture of innovation. Your Company has created an incubation center - HeroHatch - to enable internal teams work like startups.
Your Company initiated two projects at this incubation center through a few handpicked employees who came together to launch their own startups.
The Company-wide Idea Contest was undertaken for the 6th year in FY 2018-19 but in an evolved format. Your Company also tapped the external innovation ecosystem through the Open Innovation project. The Company completed a couple of projects successfully while the others provided valuable learnings. Your Company also launched an organization wide Innovation Survey in FY 2018-19.
SUBSIDIARIES ASSOCIATE AND JOINT VENTURE COMPANIES
The Company has 7 subsidiaries including step down subsidiaries and 3 associate companies. During the FY under review the Company has set up a Tech Center in Germany as its wholly owned subsidiary under the name Hero Tech Center Germany GmbH. The Company regularly monitors the performance of these companies.
The Company shall make available the annual accounts of the subsidiary companies to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and respective subsidiary companies. Further the annual accounts of the subsidiaries are also available on the website of the Company viz. www. heromotocorp.com. The consolidated financial statements presented by the Company include the financial results of its subsidiary companies.
Hero Tech Center Germany GmbH (`HTCG')
HTCG has been incorporated as a wholly owned subsidiary in Germany to undertake research and development and such other ancillary activities for the manufacture testing validating etc. of two wheelers and components / parts thereof. It will also undertake coordinate and facilitate two-wheeler rally participation and development activities. During the period ended FY 2018-19 HTCG has reported unadjusted revenue of Rs.1.77 crore and a net loss of Rs.0.48 crore.
HMCL Netherlands B.V. (`HNBV')
HNBV a wholly owned subsidiary of your Company was incorporated in Amsterdam as a private company with limited liability under the laws of The Netherlands with the primary objective of promoting overseas investments. During FY 2018-19 HNBV has invested in operating companies in Colombia and Bangladesh and has reported unadjusted revenue of Rs.20.01 crore and a net profit ofRs.19.27 crore.
HMCL Colombia S.A.S. (`HMCLC')
HMCLC was incorporated in Colombia as a joint venture between HNBV and Woven Holdings LLC as a simplified stock corporation company. HNBV currently holds 68% equity in HMCLC and 32% equity is held by Woven Holdings LLC. The main business of HMCLC is to manufacture and sell two-wheelers in Colombia. It has a manufacturing facility with a production capacity of 60000 per annum. During the year ended March 31 2019 the Company has reported unadjusted revenue of Rs.167.98 crore and a net loss of Rs.34.49 crore.
HMCL Niloy Bangladesh Limited (`HNBL')
HNBL was incorporated in Bangladesh as a joint venture between HNBV and Niloy Motors Limited Bangladesh as a limited liability company. HNBV currently holds 55% equity in HNBL and 45% equity is held by Nitol Niloy Group Bangladesh. The main business of HNBL is to manufacture and sell two-wheelers. During FY 2018-19 HNBL reported unadjusted revenue of Rs.735.09 crore and a net profit of Rs.80.43 crore.
HMCL (NA) Inc.
HMCL (NA) Inc. a wholly owned subsidiary of your Company was incorporated as a Corporation pursuant to the General Corporation Law of the State of Delaware United States of America. HMCL (NA) Inc. has invested in Erik Buell Racing Inc. (`EBR') a Delaware corporation by subscribing to 49.20% of its equity share capital. During the period ended March 31 2019 HMCL (NA) Inc. has reported Nil revenue (unadjusted) and a net loss of Rs.0.01 crore.
HMCL Americas Inc. (`HMCLA')
HMCLA a wholly owned subsidiary of your Company was incorporated as a Corporation pursuant to the General Corporation Law of the State of Delaware United States of America with the primary objective to pursue various global businesses. During the year ended March 31 2019 HMCLA has reported unadjusted revenue of Rs.0.24 crore and a net loss of Rs.0.08 crore.
HMC MM Auto Limited (`HMCMMA')
Your Company has a joint venture with Magneti Marelli S.p.A Italy namely HMC MM Auto Limited in India which is set up for the purpose of carrying out manufacturing assembly sale and distribution of two-wheeler fuel injection systems and parts. Your Company holds 60% of the equity share capital in HMCMMA. During FY 2018-19 HMCMMA has reported unadjusted revenue of Rs.26.39 crore and a net loss of Rs.7.24 crore.
Associate Companies Hero FinCorp Ltd. (`HFCL')
HFCL an associate of your Company was incorporated in the year 1991. Your Company holds 41.18% in the equity share capital of HFCL. HFCL is a non-banking finance company engaged in providing financial services including two-wheeler financing and providing credit to Company's vendors and suppliers. Over the years it has added several new products and customers in its portfolio like SME and commercial loans loan against property etc.
During FY 2018-19 HFCL's profit attributable to the Company is Rs.83.26 crore.
Ather Energy Private Ltd. (`AEL')
AEL is a private limited company focused on developing designing and selling premium electric two-wheelers. During FY 2018-19 AEL's loss attributable to the Company is Rs.34.73 crore.
Erik Buell Racing Inc. (`EBR')
Your Company through its subsidiary HMCL (NA) Inc. has invested in Erik Buell Racing Inc. (`EBR') a Delaware Corporation by subscribing to 49.20% of its equity share capital. EBR has ceased its operations and entered into Assignment for the Benefit of Creditors under Chapter 128 of the Wisconsin Statutes (`Chapter 128 Process').
A statement containing salient features of financial statements of subsidiaries and associate companies forms part of the financials.
The Board of Directors of your Company (`the Board') has approved a policy for determining Material Subsidiaries. At present your Company does not have a Material Subsidiary. The Policy on Material Subsidiaries can be viewed on the Company's website www.heromotocorp.com at the following link: http://www.heromotocorp.com/en-in/about-us/key-policies/ policy-on-material.html.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
In terms of applicable provisions of the Act and the Articles of Association of the Company Mr. Vikram S. Kasbekar Director of the Company retires by rotation at the ensuing Annual General Meeting and being eligible has offered himself for reappointment. It is also proposed to re-appoint Mr. Kasbekar as Executive Director Operations (Plants) for a period upto 3 years. Brief resume and other details of Mr. Vikram S. Kasbekar who is proposed to be re-appointed as a Director of your Company have been furnished in the Explanatory Statement to the Notice of the ensuing Annual General Meeting.
During the FY under review your Company has appointed Prof. Jagmohan Singh Raju as an Additional Director of the Company in the category of Non-Executive and Independent Directors effective November 15 2018. The Board recommends his appointment as an Independent Director of the Company for a term of 5 years.
As per the provisions of Section 149 of the Act the Board recommends the re-appointment of Mr. M. Damodaran for his second term upto May 3 2022 as an Independent Director of your Company. Further due to the change in status of Mr. Pradeep Dinodia from Independent Director to Non-Executive Director the Board recommends the re-appointment of Mr. Pradeep Dinodia as a Non-Executive Director liable to retire by rotation pursuant to Section 152 of the Act effective April 25 2019.
The Company has received a notice in writing under Section 160 of the Act from the members proposing the candidature of Prof. Raju Mr. Damodaran and Mr. Dinodia.
During the year Gen. (Retd.) V. P. Malik and Dr. Pritam Singh ceased to be the Directors of the Company effective March 31 2019 due to operation of law and relevant provisions of the Listing Regulations. The Board placed on record its appreciation for the guidance and support provided by Gen. (Retd.) Malik and Dr. Singh during their tenure with the Company.
Key Managerial Personnel
Dr. Pawan Munjal Chairman Managing Director & CEO Mr. Niranjan Gupta Chief Financial Officer and Ms. Neerja Sharma Company Secretary & Chief Compliance Officer are the Key Managerial Personnel of your Company in accordance with the provisions of Section 2(51) and 203 of the Companies Act 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014.
Declarations from Independent Directors
Your Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed in the Act and the Listing Regulations.
In the opinion of the Board Independent Directors fulfil the conditions specified in the Act Rules made thereunder and Listing Regulations and are independent of the management.
During FY 2018-19 four meetings of the Board of Directors were held. For details of these Board meetings please refer to the section on Corporate Governance of this Annual Report.
ANNUAL EVALUATION OF THE BOARD ITS COMMITTEES AND INDIVIDUAL DIRECTORS
A formal evaluation of the performance of the Board it's Committees the Chairman and the individual Directors was carried out for FY 2018-19. Led by the Nomination & Remuneration Committee the evaluation was carried out using individual questionnaires covering amongst others composition of Board conduct as per Company values & beliefs contribution towards development of the strategy & business plan risk management receipt of regular inputs and information codes & policies for strengthening governance functioning performance & structure of Board Committees skill set knowledge & expertise of Directors preparation & contribution at Board meetings leadership etc.
As part of the evaluation process the performance of Non- Independent Directors the Chairman and the Board was conducted by the Independent Directors. The performance evaluation of the respective Committees and that of Independent and Non-Independent Directors was done by the Board excluding the Director being evaluated.
DIRECTORS' RESPONSIBILITY STATEMENT
Your Directors make the following statement in terms of Section 134 of the Act which is to the best of their knowledge and belief and according to the information and explanations obtained by them:
1. that in the preparation of the annual accounts for the financial year ended March 31 2019 the applicable accounting standards were followed along with proper explanation relating to material departures;
2. that appropriate accounting policies were selected and applied consistently and judgments and estimates that are reasonable and prudent were made so as to give a true and fair view of the state of affairs as at March 31 2019 and of the profit and loss of your Company for year ended March 31 2019;
3. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;
4. that the annual accounts for the financial year ended March 31 2019 have been prepared on a going concern basis;
5. that the Directors have laid down Internal Financial Controls which were followed by the Company and that such Internal Financial Controls are adequate and were operating effectively; and
6. that the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
Pursuant to provisions of the Act the Nomination and Remuneration Committee (`NRC') of your Board has formulated a Remuneration Policy for the appointment and determination of remuneration of the Directors Key Managerial Personnel Senior Management and other employees of your Company. The NRC has also developed the criteria for determining the qualifications positive attributes and independence of Directors and for making payments to Executive and Non-Executive Directors of the Company.
The NRC takes into consideration the best remuneration practices in the industry while fixing appropriate remuneration packages and for administering the long-term incentive plans such as ESOPs RSUs etc. Further the compensation package of the Directors Key Managerial Personnel Senior Management and other employees is designed based on the set of principles enumerated in the said policy.
Your Directors affirm that the remuneration paid to the Directors Key Managerial Personnel Senior Management and other employees is as per the Remuneration Policy of your Company.
The Remuneration details of the Directors Chief Financial Officer and Company Secretary along with details of ratio of remuneration of each Director to the median remuneration of employees of the Company for the FY under review are provided as Annexure - II.
The Remuneration Policy of your Company can be viewed at the following link: http://www.heromotocorp.com/en-in/aboutus/ key-policies/remuneration-policy.html. There has been no material change in the Remuneration Policy of the Company. The salient features of the Remuneration Policy are as under:
1. To determine remuneration of Directors KMPs and other senior management personnel keeping in view all relevant factors including industry trends and practices.
2. At the Board meeting only the Non-Executive and Independent Directors shall participate in approving the remuneration paid to the Executive Directors.
3. The remuneration structure for the Executive Directors would include Basic Salary Commission Perquisites & Allowances Contribution to Provident Fund and other funds. If the Company has no profits or its profits are inadequate they shall be entitled to minimum remuneration as prescribed under the Act.
4. The Non-Executive and/ or Independent Directors will also be entitled to remuneration by way of commission aggregating upto 1% of net profits of the Company pursuant to the provisions of Sections 197 and 198 of the Act in addition to sitting fees.
5. The compensation for Key Managerial Personnel senior management and other employees is based on the external competitiveness and internal parity through annual benchmarking surveys. It includes basic salary allowances perquisites loans and/or advances as per relevant HR policies retirement benefits performance linked pay out benefits under welfare schemes etc
EMPLOYEES' INCENTIVE SCHEME
In terms of the SEBI (Share Based Employee Benefits) Regulations 2014 as amended from time to time (`SEBI Regulations') the NRC of your Board inter-alia administers and monitors the Employees' Incentive Scheme 2014 of your Company and the Employees' Stock Option plans framed thereunder.
Further the NRC has at its meetings held on January 31 2019 and March 25 2019 approved grant of 17760 Restricted Stock Units (RSUs) at face value of Rs.2/- per unit under RSU Plan 2018 and 125000 stock options at an exercise price of Rs.2033/- per option under ESOP Plan 2018 respectively to certain eligible employees of the Company.
Applicable disclosures as stipulated under the SEBI Regulations with regard to the Employees' Stock Option Scheme are provided as Annexure - III to this Report and is available on the Company's website www.heromotocorp.com and can be viewed on the following link: http://www.heromotocorp.com/en-in/esop.php.
Your Company has received a certificate Statutory Auditors (Firm Registration No. 101248W/W-100022) that the Employees' Incentive Scheme 2014 for grant of stock options has been implemented in accordance with the SEBI Regulations and the resolution passed by the Members in their general meeting. The certificate Annual General Meeting for inspection by the Members.
Your Company is committed to benchmarking itself with global standards of Corporate Governance. It has put in place an effective Corporate Governance system which ensures that provisions of the Act and Listing Regulations are duly complied with not only in form but also in substance.
The Board has also evolved and adopted a Code of Conduct based on the principles of good Corporate Governance and best management practices that are followed globally.
The Code is available on your Company's website www. heromotocorp.com and can be viewed at the following link: http://www.heromotocorp.com/en-in/about-us/code-of-conduct.html.
In terms of Listing Regulations a report on Corporate Governance along with the certificate from M/s Sanjay Grover & Associates Company Secretaries (Firm Registration No. P2001DE052900) confirming compliance of the conditions of Corporate Governance is annexed hereto and forms part of this Annual Report as Annexure - IV and Annexure - V respectively.
TRANSFER TO GENERAL RESERVE
During the FY under review no amount has been transferred to General Reserve of the Company.
TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND
During the FY under review your Company has transferred unpaid/ unclaimed dividend amounting to Rs.12.78 crore for FY 2010-11 and 21296 shares to the Investor Education and Protection Fund (IEPF) Authority of the Central Government of India. As on March 31 2019 total shares lying in the demat account of IEPF Authority was 1000068. from M/s BSR & Co. LLP
MATERIAL CHANGES AND COMMITMENTS
No material change and/or commitment affecting the financial position of your Company has occurred between April 1 2019 and the date of signing of this Report. be placed at the ensuing
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
During FY 2018-19 your Company has not given any loan or guarantee pursuant to provisions of Section 186 of the Act. Details of investments made in terms of Section 186 of the Act are as under:
|Principal Amount (Shares)||Principal Amount (Bonds/ Debentures)||Total|
* HMC MM Auto Limited - Rs.9.93 crore HMCL(NA) Inc. - Nil HMCL Netherlands BV - Rs.24.07 crore HMCL Americas Inc. - Nil Hero Tech Center Germany GmbH - Rs.19.56 crore Hero FinCorp Limited - Rs.498.30 crore Ather Energy Private Limited - Nil
** Maturity of bonds and amortization
Your Company has neither accepted nor renewed any deposits during FY 2018-19 in terms of Chapter V of the Act.
CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES
During FY 2018-19 all contracts/arrangements/transactions entered into by your Company with related parties under Section 188(1) of the Act were in the ordinary course of business and on an arm's length basis. During FY 2018-19 your Company has not entered into any contract/arrangement/transaction with related parties which could be considered `material' in accordance with its Policy on Materiality of Related Party Transactions. Thus there are no transactions required to be reported in Form AOC-2.
Further during FY 2018-19 there were no materially significant related party transactions entered into by your Company with the Promoters Directors Key Managerial Personnel or other designated persons which might have potential conflict with the interest of the Company at large.
All related party transactions are placed before the Audit Committee for its approval. There was no related party transaction requiring approval of the Board. During FY under review the Audit Committee has approved transactions through the omnibus mode in accordance with the provisions of the Act and Listing Regulations. Related party transactions were disclosed to the Board on regular basis as per Ind AS-24. Details of related party transactions as per Ind AS-24 may be referred to in Note 36 of the Standalone Financial Statements.
The policy on related party transactions is available on the Company's website www.heromotocorp.com and can be viewed at the following link: http://www.heromotocorp.com/en-in/ aboutus/key-policies/related-party-transactions.html.
RISK MANAGEMENT FRAMEWORK
Your Company continues to follow a robust risk management process. For FY 2018-19 some of the illustrative risk areas where your Company focused on in addition to many others were-
a) Study of regulatory risks in key global markets and strategy thereof
b) Strengthening the IT infrastructure
Specifically on the IT infrastructure strengthening the current times have seen numerous data thefts/attacks on large organizations. Your Company has in place appropriate measures through deployment of technological infrastructure solutions and regular / periodic awareness sessions and mailers. You would be pleased to know that your Company is one of the early adopters of cyber insurance that insures an organization against losses during an unforeseen eventuality of a cyber-attack.
The Risk Management Committee periodically oversees the risks and their mitigation plans. The Committee provides its inputs on critical risks and shares its understanding on complex matters. The details of the Committee along with its charter are set out in the Corporate Governance Report forming part of this Report.
VIGIL MECHANISM/ WHISTLE BLOWER POLICY
Your Company is committed to highest standards of ethical moral and legal business conduct. Accordingly the Board of Directors has formulated Vigil Mechanism/Whistle Blower Policy which provides a robust framework for dealing with genuine concerns & grievances. Your Company has an ethics hotline managed by a third party which can be used by employees Directors vendors suppliers dealers etc. to report any violations to the Code of Conduct. Specifically employees can raise concerns regarding any discrimination harassment victimization any other unfair practice being adopted against them or any instances of fraud by or against your Company. During FY under review 16 complaints were received and 2 complaints were carried forward from previous FY. Out of these 15 complaints have been investigated & acted upon and remaining 3 are under investigation.
During FY 2018-19 no individual was denied access to the Audit Committee for reporting concerns if any.
The Vigil Mechanism/Whistle Blower Policy of the Company is available on the Company's website www.heromotocorp. com and can be viewed at the following link: http://www. heromotocorp.com/en-in/about-us/key-policies/vigil-mechanism-policy.html.
CORPORATE SOCIAL RESPONSIBILITY
Your Company has constituted a Corporate Social Responsibility (`CSR') Committee which functions under direct supervision of Dr. Pawan Munjal Chairman Managing Director & CEO of the Company who is also the Chairman of the CSR Committee. Other members of the Committee are Mr. Pradeep Dinodia Non-Executive Director and Prof. Jagmohan Singh Raju Independent Director. Prof. Jagmohan Singh Raju has been appointed as an additional director effective November 15 2018 and has been inducted in the CSR Committee on January 31 2019.
Your Company has in place a CSR Policy. The CSR policy lays down CSR activities to be undertaken by your Company. The CSR activities undertaken by your Company are based on the approved CSR policy which is available on the Company's website www.heromotocorp.com and can be viewed at the following link: http://www.heromotocorp.com/en-in/ about-us/key-policies/corporate-social-responsibility.html. There has been no material change in the CSR Policy of the Company.
The CSR Policy of your Company as adopted by the Board broadly covers the following focus areas:
a) To direct the Company's CSR Programmes inter-alia towards achieving one or more of the following - enhancing environmental and natural capital; supporting rural development; promoting education including skill development; providing preventive healthcare providing sanitation and drinking water; creating livelihoods for people especially those from disadvantaged sections of society in rural and urban India and preserving and promoting sports;
b) To develop the required capability and self-reliance of beneficiaries at the grass roots in the belief that these are pre-requisites for social and economic development;
c) To engage in affirmative as skill building and vocational training to enhance employability and generate livelihoods for persons including from disadvantaged sections of society;
d) To pursue CSR Programmes primarily in areas that fall within the economic vicinity of the Company's operations to enable close supervision and ensure maximum development impact;
e) To carry out CSR Programmes in relevant local areas to fulfil commitments arising from requests by government/ regulatory authorities and to earmark amounts of monies and to spend such monies through such administrative bodies of the government and/or directly by way of developmental works in the local areas around which the Company operates;
f) To carry out activities at the time of natural calamity or engage in Disaster Management System;
g) To contribute to the Prime Minister's National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Caste the Scheduled Tribes Other Backward Classes minorities and women;
h) To contribute or provide funds to technology incubators located within academic institutions which are approved by the Central Government;
i) To contribute to any fund setup by the Central Government or State Government(s) including Chief Minister's Relief Fund which may be recognised as CSR activity;
j) To promote sustainability in partnership with industry associations like CII PHD FICCI etc. in order to have a multiplier impact.
During the FY under review your Company spent Rs.101.95 crore on its CSR activities which is more than 2% of the average net profits of previous three financial years. The CSR initiatives undertaken by your Company along with other details form part of the Annual Report on CSR activities for FY 2018-19 which is annexed as Annexure - VIII. The overview of CSR activities carried out in FY 2018-19 is provided in a separate section in this Annual Report.
The Audit Committee of your Company comprises of the following Non-Executive and Independent Directors:
|1. Mr. M. Damodaran -||Chairman (effective April 26 2019)|
|2. Mr. Pradeep Dinodia - action/interventions such||Member|
|3. Mr. Paul B. Edgerley -||Member|
Mr. Paul B. Edgerley has been inducted in the Audit Committee on January 31 2019. Further details on the Audit Committee and its terms of reference etc. have been furnished in Corporate Governance Report which forms part of this Report as Annexure - IV.
During the FY under review all recommendations of the Audit Committee were accepted by the Board of Directors of the Company.
AUDITORS AND AUDITORS' REPORT
M/s BSR & Co. LLP Chartered Accountants (Firm Registration No. 101248W/W-100022) were appointed in 2017 as the Statutory Auditors of the Company until the conclusion of the 39th Annual General Meeting of the Company. They have audited the financial statements of the Company for the FY under review. The observations of Statutory Auditors in their Report read with relevant Notes to Accounts are self-explanatory and therefore do not require further explanation. The Auditors' Report does not contain any qualification reservation or adverse remark. Further there were no frauds reported by the Statutory Auditors to the Audit Committee or the Board under Section 143(12) of the Act.
The Board on the recommendation of Audit Committee has approved the appointment of M/s Ramanath Iyer & Co. Cost Accountants as Cost Auditors for the financial year ending March 31 2020. The Cost Auditors will submit their report for the FY 2018-19 on or before the due date.
In accordance with the provisions of Section 148 of the Act read with Companies (Audit & Auditors) Rules 2014 your Company is required to maintain cost records and accordingly such accounts and records are maintained by the Company.
Further since the remuneration payable to the Cost Auditors is required to be ratified by the shareholders the Board recommends the same for approval by Members at the ensuing AGM.
M/s Sanjay Grover & Associates Company Secretaries (Firm Registration No. P2001DE052900) were appointed to conduct Secretarial Audit of your Company during FY 2018-19.
The Secretarial Audit Report for the said FY is annexed herewith and forms part of this Report as Annexure - IX. The Report does not contain any qualification reservation or adverse remark.
INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY
Your Company has a robust and well embedded system of internal controls. This ensures that all assets are safeguarded and protected against loss from unauthorised use or disposition and all transactions are authorised recorded and reported correctly.
An extensive risk based programme of internal audits and management reviews provides assurance to the Board regarding the adequacy and efficacy of internal controls. The internal audit plan is also aligned to the business objectives of the Company which is reviewed and approved by the Audit Committee. Further the Audit Committee monitors the adequacy and effectiveness of your Company's internal control framework.
Comprehensive policies guidelines and procedures are laid down for all business processes. The internal control system has been designed to ensure that financial and other records are reliable for preparing financial and other statements and for maintaining accountability of assets.
INSIDER TRADING CODE
In compliance with the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations 2015 (`the PIT Regulations') on prevention of insider trading your Company has revised its Code of Conduct for regulating monitoring and reporting of trading by Designated Persons in line with the recent amendments brought by SEBI in the PIT Regulations. The said Code lays down guidelines which advise Designated Persons on the procedures to be followed and disclosures to be made in dealing with the shares of the Company and cautions them on consequences of non-compliances.
Your Company has also updated its Code of practices and procedures of fair disclosures of unpublished price sensitive information by including a policy for determination of legitimate purposes. Further your Company has put in place adequate & effective system of internal controls and standard processes have been set to ensure compliance with the requirements given in these regulations to prevent insider trading.
BUSINESS RESPONSIBILITY REPORT
As stipulated under the Listing Regulations the Business Responsibility Report (`BRR') has been prepared and forms part of the Annual Report as Annexure - X. The Report provides a detailed overview of initiatives taken by your Company from environmental social and governance perspectives.
The equity shares of your Company are presently listed on the BSE Limited (`BSE') and the National Stock Exchange of India Limited (`NSE').
As on March 31 2019 total number of employees on the records of your Company were 8551 as against 8266 in the previous FY.
Your Directors place on record their appreciation for the significant contribution made by all employees their competence dedication hard work co-operation and support have enabled the Company to cross new milestones on a continual basis.
PARTICULARS OF EMPLOYEES
The statement of Disclosure of Remuneration under Section 197 of the Act and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 (`Rules') is appended as Annexure - II to the Report. The information as per Rule 5(2) of the Rules forms part of this Report. However as proviso to Section 136(1) of the Act and second proviso perfirst of Rule 5(2) of the Rules the Report and Financial Statements are being sent to the Members of the Company excluding the statement of particulars of employees under Rule 5(2) of the Rules. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.
EXTRACT OF ANNUAL RETURN
In terms of Sections 92(3) and 134(3)(a) of the Act and rules made thereunder extract of the Annual Return in Form No. MGT-9 is annexed to this Report as Annexure - XI and is also available under the `Investors' section of the Company's website www.heromotocorp.com.
COMPLIANCE WITH SECRETARIAL STANDARDS
The Company is fully compliant with the applicable Secretarial Standards (SS) viz. SS-1 & SS-2 on Meetings of the Board of Directors and General Meetings respectively.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
Information required under Section 134(3)(m) of the Act read with Rules made thereunder is annexed to this report as Annexure - XII.
Your Directors state that there being no transactions with respect to following items during FY under review no disclosure or reporting is required in respect of the same:
1. Deposits from the public falling within the ambit of Section 73 of the Companies Act 2013 and the Companies (Acceptance of Deposits) Rules 2014.
2. Issue of equity shares with differential rights as to dividend voting or otherwise.
3. Issue of shares (including sweat equity shares) to employees of your Company under any scheme save and except ESOS referred to in this Report.
4. Neither the Managing Director nor the Whole-time Director of your Company receive any remuneration or commission from any of its subsidiaries.
5. No significant or material Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future.
6. Buy back of shares.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE (PREVENTION PROHIBITION & REDRESSAL) ACT 2013
Your Company has in place a policy on Prevention of Sexual Harassment at workplace. This policy is in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention Prohibition & Redressal) Act 2013. All employees whether permanent contractual temporary and trainees are covered under this Policy.
As per the said Policy an Internal Committee is also in place to redress complaints received regarding sexual harassment. Following is the summary of complaints received and disposed off during FY under review:
No. of complaints received: 4 No. of complaints disposed off: 2* No. of complaints withdrawn: 1 No. of complaints pending: 1
* One of the complaints was disposed off on April 9 2019.
DISCLOSURE UNDER THE HUMAN IMMUNODEFICIENCY VIRUS AND ACQUIRED IMMUNE DEFICIENCY SYNDROME (PREVENTION AND CONTROL) ACT 2017
The Human Immunodeficiency Virus and Acquired Immune Deficiency Syndrome (Prevention and Control) Act 2017 has been notified by the Central Government on September 10 2018. During the period under review (i.e. from September 10 2018 till March 31 2019) no complaints were received by the Complaints Officer.
AWARDS AND RECOGNITION
During FY under review the Company received multiple awards and recognition. Some of them are listed below:
1. National Award for Excellence in Energy Management 2018 - Energy Efficient Unit Award by CII for Company's plants at Haridwar & Dharuhera.
2. Excellence in Environment Management by CII for Outstanding Policy Practice and Results in the field of orders were passed by the Environment Management.
3. Green Co Platinum Award by CII for being a world class manufacturing facility (Neemrana) in the area of sustainability.
4. Golden Peacock Global Award 2018 for Sustainability and CSR.
5. Bhamashah Award for CSR by the Rajasthan Government.
6. Diamond Certificate for Best CSR Summit 2018.
The Board of Directors would like to express their sincere thanks to the shareholders & investors of the Company for the trust reposed on the Company over the past several years. Your Directors would also like to thank the central government state governments financial institutions banks customers employees dealers vendors and ancillary undertakings for their co-operation and assistance. The Board would like to reiterate its commitment to continue to build the organisation into a truly world class enterprise in all respects.
|For and on behalf of the Board|
|Date: April 26 2019||Chairman|
|Place: New Delhi||DIN: 00004223|