Your Directors present their Report together with the audited financial statements of your Company for the year ended 31st March 2019.
A. FINANCIAL AND OPERATIONAL HIGHLIGHTS
(Rs. in crores)
|Revenue from Operations||53614||49445|
|Profit before Depreciation Finance Costs|
|Exceptional items and Taxation||8328||7259|
|Less: Depreciation and Amortisation|
|Profit before Finance Costs Exceptional items and Taxation||6468||5780|
|Less: Finance Costs||113||112|
|Profit before Exceptional items and Taxation...||6355||5668|
|Add: Exceptional items||(30)||434|
|Profit before Taxation||6325||6102|
|Less: Tax Expense||1529||1746|
|Profit for the year||4796||4356|
|Balance of profit for earlier years||25206||21781|
|Less: Transfer to Debenture Redemption|
|Profits available for appropriation||29988||26123|
|Add: Other Comprehensive Income/(Loss)*..||(9)||8|
|Less: Dividend paid on Equity Shares||932||807|
|Less: Income-tax on Dividend paid||80||118|
|Balance carried forward||28967||25206|
* Remeasurement of (loss)/gain (net) on defined benefit plans recognised as part of retained earnings.
Growth in global economic expansion and trade decelerated in the year gone by. Increased trade tensions and tariff hikes between the United States and China and the subsequent impact on other trading partners took a toll on sentiment. Moreover economic turmoil in Argentina and Turkey and the associated tightening in financial conditions across Emerging Markets continued deceleration in China's growth and geopolitical tensions led to a softening in global activity.
Domestic economic activity also slowed down through the year and weakened notably in the second half of Financial Year 2019. Monetary tightening during the first half of the Financial Year sharp movements in the Rupee tighter financial conditions a deceleration in NBFC lending and a surge in borrowing costs affected NBFC lending post the IL&FS default and impacted growth.
However even amidst this scenario your Company recorded an increase of 8.4% in revenue from operations at Rs. 53614 crores in the year under review as against Rs. 49445 crores in the previous year.
The Profit for the year before Depreciation Finance Costs Exceptional items and Taxation recorded an increase of 14.7% at Rs. 8328 crores as against Rs. 7259 crores in the previous year. Profit after tax increased by 10.1% at Rs. 4796 crores as against Rs. 4356 crores in the previous year.
Your Company continues with its rigorous cost restructuring exercises and efficiency improvements which have resulted in significant savings through continued focus on cost controls process efficiencies and product innovations that exceed customer expectations in all areas thereby enabling the Company to maintain profitable growth in the current economic scenario. No material changes and commitments have occurred after the closure of the Financial Year 2018-19 till the date of this Report which would affect the financial position of your Company. There has been no change in the nature of business of your Company.
Your Company's Automotive Sector posted record total sales of 607548 vehicles (537639 four-wheelers and 69909 three-wheelers) as against a total of 548508 vehicles (490870 four-wheelers and 57638 three-wheelers) in the previous year registering a growth of 10.8%.
In the domestic market your Company sold a total of 569092 vehicles as compared to 520286 vehicles in the previous year resulting in a growth of 9.4%.
In the Passenger Vehicle (PV) segment your Company sold 254351 vehicles [including 235362 Utility Vehicles (UVs) 17451 Vans and 1538 Cars] registering a growth of 2.2% as compared to the previous year's volume of 248859 vehicles [including 233915 UVs 14219 Vans and 725 Cars].
In the Commercial Vehicle (CV) segment your Company sold 248601 vehicles [including 53149 vehicles <2T GVW 176203 vehicles between 2-3.5T GVW 8235 LCVs in the LCV > 3.5T segment 176 vehicles in the 7.5-16.2T GVW segment and 10838 Heavy Commercial Vehicles (HCVs)] registering a growth of 14.7% over the previous year's volume of 216802 commercial vehicles [including 41305 vehicles < 2T GVW 158269 vehicles between 2-3.5T GVW 7744 LCVs in the LCV > 3.5T segment and 9484 HCVs].
In the three-wheeler segment your Company sold 66140 three wheelers registering a growth of 21.1% over the previous year's volume of 54625 three wheelers.
For the year under review the Indian automotive industry (except 2W) grew 6.4% with the PV industry growth of 2.7% and CV industry growth of 17.6%. The UV segment of the PV industry had a very nominal growth of 2.1% as against a growth of 21% in Financial Year 2018. The LCV<3.5T segment grew 22.4% while the HCV goods segment grew 10.2%.
Your Company's UV volume stood at 235362 units a growth of 0.6%. The UV market share for your Company stood at 25%. Your Company strengthened its UV portfolio with the launch of Marazzo in September 2018 Premium SUV Alturas G4 in November 2018 and the Stylish and Thrilling XUV300 in February 2019. All three launches were well received by the market and media. As a result of the new launches the UV market share for the Fourth Quarter of the Financial year 2019 stood at 27.9%. Scorpio XUV500 and Bolero continued to be strong brands for your Company in the UV segment.
Your Company is the pioneer for Electric Vehicles (EVs) in India and for the year under review sold [along with its subsidiary Mahindra Electric Mobility Limited (MEML)] 10276 EVs (1811 four wheelers and 8465 three wheelers) as against 4026 EVs in the previous year. This growth is supported by the Governments' thrust on adopting EVs and sustained effort by your Company in working with various stakeholders especially fleet operators.
In the LCV<3.5T segment your Company retained its No.1 position with a 44.5% market share. Your Company sold a total of 229352 vehicles in this segment which is a growth of 14.9% over the previous year. The LCV<3.5T segment has two sub segments viz. LCV<2T and LCV 2-3.5T which is the Pik-UP segment. Your Company has a market share of 22.6% and 62.9% in the two sub segments respectively.
In the HCV segment your Company sold 10838 trucks as against 9484 in the previous year. This is a growth of 14.3%. The Blazo series of trucks which are backed by guarantees on mileage and service are instrumental in building the brand and growing sales. Your Company's market share in the HCV segment stands at 4.6%.
During the year under review your Company posted an export volume of 38456 vehicles as against the previous year's exports of 28222 vehicles. This is a growth of 36.3%. This is the highest ever exports by your Company. The spare parts sales for the year stood at Rs. 2340.6 crores (including exports of Rs. 284 crores) as compared to Rs. 2103 crores (including exports of Rs. 195.3 crores) in the previous year registering a growth of 11.3%.
Farm Equipment Sector
Your Company's Farm Equipment Sector recorded total sales of 330436 tractors (domestic + export) as against 319623 tractors sold in the previous year thus recording a growth of 3.4%. This includes 3403 tractors sold under the Trakstar brand which is the third brand of your Company under the subsidiary Gromax Agri Equipment Limited.
For the year under review the tractor industry in India recorded sales of 787304 tractors a growth of 8%. In the first half of the year the industry had good growth on back of a third consecutive year of good monsoon increase in MSPs and Governments' thrust on Agriculture and rural development. In the second half of the year there was a reversal of the sentiment at large resulting in slowing down of the demand.
In the domestic market your Company sold 316742 tractors as compared to 304019 tractors in the previous year recording a growth of 4.2%. In a very competitive industry your Company continued its market leadership for the 36th consecutive year with a market share at 40.2%.
Your Company's growth was driven by good performance of all products under the Mahindra and Swaraj Brands. The new product trio of Mahindra NOVO YUVO and JIVO have helped build the `technology leadership' image for the Company. For the year under review your Company launched Mahindra NOVO 65 and 75 HP tractors in the higher HP segment.
For the year under review your Company exported 13555 tractors which is a degrowth of 12.3% over the previous year. This degrowth is due to one-time trade stock correction in key export markets. Spare parts net sales for the year stood at Rs. 691.7 crores (including exports of Rs. 56.5 crores) as compared to Rs. 605.3 crores (including exports of Rs. 52.9 crores) in the previous year registering a growth of 14.3%.
Under the Mahindra Powerol Brand your Company has been a leader in providing power back-up solutions to the telecom industry for the past 12 years. To cater to changing customer needs your Company has expanded presence in tele infra management and in the energy management solutions space. In the retail genset business your Company is the No. 2 brand by volume offering a wide range of solutions from Lower KVA range to mid to higher KVA range. With a focus to provide greener solutions your Company became first in the country to launch Gas Powered Gensets.
Construction Equipment Business
For the year under review your Company (under the Mahindra EarthMaster brand) sold 1286 Backhoe Loaders (BHLs) against 1229 in Financial Year 2018 which is a growth of 4.6%. With growth in the infrastructure sector the BHL market in India grew 24.5% over the previous year. Your Company continues to be at 4th position in the BHL industry.
Your Company has presence in the fast-growing road construction equipment business through motor graders (under the Mahindra RoadMaster brand). For the year under review your Company sold 319 motor graders as against 164 in the Financial Year 2018.
For the Financial Year 2018-19 your Company sold 10496 two-wheelers (including 6480 exports). In line with the revised strategy for the two-wheeler business your Company through its subsidiary Classic Legends Private Limited (CLPL) reintroduced the iconic brand `Jawa' to the Indian market with the launch of new range of JAWA motorcycles - Jawa and Jawa Forty Two.
Current Year's review
During the period 1st April 2019 to 28th May 2019 69280 vehicles were produced as against 72813 vehicles and 65200 vehicles were dispatched as against 67244 vehicles during the corresponding period in the last year. During the same period 53715 tractors were produced and 52016 tractors dispatched as against 56961 tractors produced and 57290 tractors dispatched during the corresponding period in the previous year.
Going forward economic activity is likely to be supported by several favourable factors. The India Meteorological Department has forecast `a near normal monsoon' for the coming season. Bank credit off-take has improved and is becoming increasingly broad-based and there has been an increase in financial flows to the commercial sector. Further the Reserve Bank of India has cut policy rates by 50 basis points in early 2019 and is expected to remain accommodative as inflation is projected to remain below its target level of 4% during the year. Importantly stability in crude oil and other commodity prices too may bode well for growth.
However there could be headwinds from greater than expected moderation in global growth and global trade as well as unanticipated volatility in global financial markets.
Financial Year 2018-19 started on a strong note however cracks began to appear towards the second half of the year as the global expansion - while persisting overall - became more divergent. Business activity softened on account of trade tensions between the United States and China ambiguity on Brexit and tightening of financial conditions amidst policy uncertainty. Global GDP which grew at a multi-year high of 3.8% in 2017 dropped to 3.6% in 2018 and is expected to taper down to 3.3% in 2019 as per IMF estimates. The growth momentum in US remained strong amid strong employment generation and consumption growth however the global headwinds have made the Federal Reserve pause on its interest rate hike path. Euro area economy lost more momentum than expected as consumer and business confidence weakened across all major economies causing the European Central Bank to remain accommodative for longer than expected. Crude oil prices saw huge volatility during the financial year reflecting supply influences including US policy on Iranian oil exports and fears of softening global demand.
Emerging market economies had a turbulent year as they contended with rising US interest rates strengthening dollar trade tensions and volatile crude prices. Countries with weaker fundamentals and homegrown problems such as Argentina and Turkey were the hardest hit. China's economic growth rate which has been in a secular decline was the most affected by trade uncertainties. To ease the pressure on the economy and prevent a dramatic slowdown Chinese officials steadily increased stimulus and also sought to control its burgeoning debt levels. On the domestic front while India remained one of the global outperformers in terms of growth the momentum showed moderation in the second half. Consumer Price inflation declined sharply since mid-2018 driven by the sustained fall in food inflation with the full year inflation printing at 3.4% against RBI's target of 4%. RBI which raised policy rates by 50 bps in the first half of the year in response to the impact of Fed rate hikes felt confident to give a 25 bps cut towards the end of the year supported by benign inflation and slowing growth. The Indian rupee too came under sustained pressure during the first half due to higher crude oil prices and foreign portfolio outflows touching an all-time high of 74.48 in October 2018. However in the later part of the financial year moderation in international crude oil prices a dovish US Fed policy stance buoyed appetite for emerging market assets led to an appreciation bias with Rupee closing the year at 69.20. The financial markets went through a challenging year as non-banking financial companies (NBFCs) suffered liquidity issues raising concerns of systemic risk and liquidity across the entire financial system. Systemic Liquidity was under pressure throughout the year leading the RBI to inject a total liquidity of Rs. 2.98 lakh crore in the market in 2018-19. Due to credit concerns coupled with tight liquidity the transmission of RBI rate cuts is yet to be seen.
Your Company continued to focus on managing cash efficiently and ensured that it had adequate liquidity and back up lines of credit. During the year your Company availed short term trade finance including factoring of receivables. As on 31st March 2019 Rs. 448.54 crores of short term trade finance including receivables factored was outstanding. During the year your Company repaid Rs. 151.54 crores of long term borrowings from internal accruals. The Company's Bankers continue to rate your Company as a prime customer and extend facilities/services at prime rates. Your Company follows a prudent financial policy and aims not to exceed an optimum financial gearing at any time. The Company's total Debt to Equity Ratio was 0.08 as at 31st March 2019.
Your Company has been rated by CRISIL Limited (CRISIL) ICRA Limited (ICRA) India Ratings and Research Private Limited (India Ratings) and CARE Ratings Limited (CARE) for its Banking facilities. All have re-affirmed the highest credit rating for your Company's Short Term facilities. For Long Term facilities and Non-Convertible Debenture (NCD) programme CRISIL ICRA and India Ratings have re-affirmed their credit ratings of CRISIL AAA/Stable [ICRA]AAA (stable) and IND AAA/Stable for the respective facilities rated by them. With the above rating affirmations your Company continues to enjoy the highest level of rating from all major rating agencies at the same time.
The AAA ratings indicate highest degree of safety regarding timely servicing of financial obligations and is also a vote of confidence reposed in your Company's Management by the rating agencies. It is an acknowledgement of the strong credit profile of your Company over the years resilience in earnings despite cyclical upturns/downturns robust financial flexibility arising from the significant market value of its holdings and prudent management.
Your Company has also been identified as a Large Corporate as per the criteria under SEBI Circular No. SEBI/HO/DDHS/CIR/P/2018/144 dated November 26 2018.
Investor Relations (IR)
Your Company continuously strives for excellence in its IR engagement with International and Domestic investors and has set up feedback mechanism to measure IR effectiveness. Structured conference calls and periodic investor/analyst interactions including one-on-one meetings participation in investor conferences quarterly earnings calls Video Conferencing across various key geographies and annual analyst meet with the Chairman Managing Director and Business Heads were organised during the year. Your Company interacted with around 685 Indian and overseas investors and analysts (excluding quarterly earnings calls and specific event related calls) during the year. Your Company always believes in leading from the front with emerging best practices in IR and building a relationship of mutual understanding with investor/analysts. As a key milestone in this continuing endeavour your Company created a digital interactive annual review of the Company's performance on the Corporate website to provide an interactive experience beyond what is available in the Annual Report. The Company had created its first Integrated Annual Report (for Financial Year 2018). Your Company also continues to organise con-call on Environment Social and Corporate Governance (ESG) for analysts and investors which has received excellent feedback from investors and ESG analysts for this pioneering initiative. Your Company ensures that critical information about the Company is available to all the investors by uploading all such information at the Company's website. Your Company has created a `Group Investor Relations Council' to share best practices across all the listed Group Companies and learn from each other. Your Company has also been nominated for the IR Magazine Awards - India 2019 in 3 categories namely Best financial reporting (large cap) Best use of media and technology and Best investor meetings (large cap).
Your Directors are pleased to recommend a dividend of Rs. 8.50 per Ordinary (Equity) Share of the face value of Rs. 5 each on the Share Capital payable to those Shareholders whose names appear in the Register of Members as on the Book Closure Date. The equity dividend outgo for the Financial Year 2018-19 inclusive of tax on distributed profits (after reducing the tax on distributed profits of Rs. 86.58 crores on the dividends declared by subsidiaries as of the date of this report and receivable during the current Financial Year 2019-20) would absorb a sum of Rs. 1187.35 crores [as against Rs. 1054.53 crores comprising the dividend of Rs. 7.50 per Ordinary (Equity) Share of the face value of Rs. 5 each on the enhanced share capital and tax thereon paid for the previous year]. Further the Board of your Company decided not to transfer any amount to the General Reserve for the year under review.
The dividend pay-out is in accordance with the Company's Dividend Distribution Policy.
Dividend Distribution Policy
The Dividend Distribution Policy containing the requirements mentioned in Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 is attached as Annexure I and forms part of this Annual Report.
B. CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements of the Company its subsidiaries associates and joint ventures prepared in accordance with the Companies Act 2013 and applicable Indian Accounting Standards along with all relevant documents and the Auditors' Report form part of this Annual Report. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies associates and joint ventures.
The Financial Statements as stated above are also available on the website of the Company and can be accessed at the Web-link: http://www.mahindra.com/ resources/FY19/AnnualReport.zip
Subsidiary Joint Venture and Associate Companies
The Mahindra Group Companies continue to contribute to the overall growth in revenues and overall performance of your Company.
Tech Mahindra Limited Flagship Company in the IT Sector has reported a consolidated operating revenue of Rs. 34742 crores in the current year as compared to Rs. 30773 crores in the previous year an increase of 13%. Its consolidated profit after tax after non-controlling interests is Rs. 4298 crores as compared to Rs. 3800 crores in the previous year an increase of 13%. The Group's finance company Mahindra & Mahindra Financial Services Limited (Mahindra Finance) reported a consolidated operating income of Rs. 10372 crores during the current year as compared to Rs. 7884 crores in the previous year a growth of 32%. The consolidated profit after tax after non-controlling interests for the year is Rs. 1827 crores as compared to Rs. 1185 crores in the previous year a growth of 54%.
Mahindra Lifespace Developers Limited the subsidiary in the business of real estate and infrastructure registered a consolidated operating income of Rs. 593 crores as compared to Rs. 566 crores in the previous year. The consolidated profit after tax after non-controlling interests for the year is Rs. 120 crores as compared to Rs. 101 crores in the previous year.
Mahindra Holidays & Resorts India Limited the subsidiary in the business of timeshare registered a consolidated operating income of Rs. 2239 crores as compared to Rs. 2317 crores in the previous year. The consolidated profit after tax after non-controlling interests for the year is Rs. 60 crores as compared to Rs. 132 crores in the previous year.
Mahindra Logistics Limited a listed subsidiary in the logistics business has registered a consolidated operating income of Rs. 3851 crores as compared to Rs. 3416 crores in the previous year an increase of 13%. The consolidated profit after tax after non-controlling interests for the year is Rs. 86 crores as compared to Rs. 64 crores in the previous year an increase of 34%. Ssyangyong Motor Company the Korean subsidiary of the Company has reported revenues of Rs. 24184 crores in the current fiscal year as compared to Rs. 20410 crores in the previous year. The loss for the year is Rs. 345 crores as compared to loss of Rs. 498 crores in the previous year.
The consolidated group profit before exceptional item and tax for the year is Rs. 7280 crores as against Rs. 6590 crores in the previous year - a growth of 10.47%. The consolidated profit after tax after non-controlling interest and exceptional items for the year is Rs. 5315 crores as against Rs. 7510 crores in the previous year. During the year under review Mahindra Susten Bangladesh Private Limited Mahindra Knowledge Park Mohali Limited Blitz 18-371 GmbH Ssangyong Australia Pty Limited Mahindra Summit Agriscience Limited Mahindra Automotive Mauritius Limited Mahindra Top Greenhouses Private Limited Passeport Sante SL PT Mahindra Accelo Steel Indonesia Harkey Acquisition L.L.C. USA MSPE Urja S.R.L. and Mahindra Armored Vehicles Jordan LLC. became subsidiaries of your Company.
Subsequent to the year end Mahindra Finance CSR Foundation (Section 8 company) became subsidiary of your Company. During the year under review Merakisan Private Limited Gipp Aero Investments Pty Ltd Aerostaff Australia Pty. Ltd Mahindra Sanyo Special Steel Private Limited and Kiinteist Oy Himoksen Thti 2 Finland ceased to be subsidiaries of your Company.
Subsequent to the year end Orizonte Business Solutions Limited ceased to be a subsidiary of your Company. During the year under review Mahindra Retail Private Limited was converted into a Public Limited Company and accordingly changed its name to Mahindra Retail Limited. Further Blitz 18-371 GmbH changed its name to Automobili Pininfarina GmbH Industrial Cluster Private Limited changed its name to Mahindra Industrial Park Private Limited Mahindra Racing SpA changed its name to PMTC Engineering SpA Mahindra Bebanco Developers Limited changed its name to Mahindra Bloomdale Developers Limited Harkey Acquisition L.L.C. USA changed its name to Automobili Pininfarina Americas Inc. and EPC Industri Limited changed its name to Mahindra EPC Irrigation Limited.
Subsequent to the year end Machinepulse Tech Private Limited changed its name to Mahindra Teqo Private Limited and Passeport Sante SL changed its name to Holiday Club Canarias Vacation Club SLU.
During the year under review Mahindra Ideal Lanka (Private) Limited and Mahindra Sanyo Special Steel Private Limited became Associates of your Company. A Report on the performance and financial position of each of the subsidiaries associates and joint venture companies included in the Consolidated Financial Statement and their contribution to the overall performance of the Company is provided in Form AOC-1 and forms part of this Annual Report.
The Policy for determining material subsidiaries as approved by the Board is uploaded on the Company's website and can be accessed at the Web-link: http:// www.mahindra.com/resources/FY19/AnnualReport.zip
C. JOINT VENTURES ACQUISITIONS AND OTHER MATTERS
Your Company acquired a 10% equity stake on a fully diluted basis in Resson Aerospace Corporation a start-up based in Canada and focussed on precision agriculture solutions by subscribing to 800402 Series C Preferred Shares. Resson uses imagery analytics to develop artificial intelligence based solutions to assist farmers in predicting anomalies in crops and to take preventive action. This investment is a step in your Company's aim to bring pioneering technology to Indian farming.
During the year your Company increased its shareholding in Sampo Rosenlew OY from 35% to 49% by investing approximately Euro 4.66 million. Sampo Rosenlew based in Finland makes combine harvesters with markets in Europe Africa and CIS.
Joint Venture between EPC Industri Limited and Top Greenhouses Ltd
During the year Mahindra EPC Irrigation Limited (formerly known as EPC Industri Limited) a subsidiary of the Company formed a Joint Venture with Top Greenhouses Ltd an Israeli company wherein Mahindra EPC Irrigation Limited holds a 60% equity stake. Top Greenhouses is a leading player in Israel for protected cultivation and the Joint Venture is expected to bring world-class greenhouse technology to Indian farmers.
OFD sold 40% stake in its subsidiary ODA to Advantage Group
During the year Origin Fruit Direct B.V. (OFD) based out of Netherlands an indirectly owned subsidiary of your Company sold 40% stake in its subsidiary named Origin Direct Asia Ltd. Hong Kong (ODA) to Advantage Group Holdings Ltd. (Advantage). Advantage is an affiliate to Zest Fruit Pty Ltd. (Zest) based out of South Africa which is a large grower/distributor of fruits. Prior to the transaction Zest was a supplier of fruits to OFD and intended to expand its operations in China through an investment in ODA. As part of the overall transaction there is a long-term supply agreement that has been executed between ODA and Zest. By entering into this relationship it is envisaged that ODA's market position would strengthen due to its direct linkage to Zest a major grower resulting in security of stable fruit supply for ODA.
Mahindra Agri enters into Crop Care JV with Sumitomo Corporation
In October 2018 Mahindra Agri Solutions Limited (MASL) a subsidiary of your Company entered into a definitive agreement with Sumitomo Corporation Japan (SC) to form a joint venture company named Mahindra Summit Agriscience Limited (MSAL) to be held 60% by MASL and 40% by SC. As a first step MASL spun-off its existing Crop Care business into MSAL pursuant to which in April 2019 SC along with its affiliates purchased a 40% stake in MSAL from MASL. The combined strength of both the shareholders will leapfrog MSAL into the next orbit of growth. The partnership envisages a pipeline of specialty new generation products with unique and latest molecules to effectively manage pest and insect related challenges faced by farmers. With this MASL became the first Indian company to have a JV partner that has deep relationships with large Japanese R&D houses.
Automobili Pininfarina the World's Newest Sustainable Luxury Car Brand
During the year your Company incorporated a new step down subsidiary named Automobili Pininfarina GmbH (AP) based out of Munich Germany. Currently AP is 100% owned by a newly incorporated Mauritian holding company named Mahindra Automotive Mauritius Ltd. AP will design engineer and manufacture high technology extreme performance and luxury electric vehicles. The intention is to launch an electric hypercar in 2020 offering extreme performance.
In May 2016 your Company's Joint Venture entity (held 40% by the Company and 60% by Tech Mahindra) had acquired a majority stake in Pininfarina SpA. AP will leverage Pininfarina's legendary automotive design expertise.
Capital Raising by Ssangyong Motor Company a South Korean listed subsidiary of your Company through a Third Party Allotment Process
During the year under review Ssangyong Motor Company (SYMC) a South Korean listed subsidiary of your Company received approval of its Shareholders in October 2018 for raising KRW 50 billion through equity issuance at a minimum price of KRW 4200 per share to meet future capex requirement for new product development and to strengthen its Balance Sheet.
Pursuant to this and as approved by SYMC's Board of Directors in January 2019 SYMC issued 11890606 shares at a price of KRW 4205 per share by way of Third Party Allotment process in accordance with Korean Regulations. Your Company was the sole subscriber to this issuance and invested KRW 50 billion (approximately Rs. 316.5 crores). Consequently your Company's equity stake in SYMC increased from 72.46% to 74.65%.
Consolidation of Smartshift and Porter
Orizonte Business Solutions Limited (Smartshift) was a step down subsidiary of your Company which owned and operated a technology enabled load exchange marketplace platform for matching the needs of cargo owners with transporters. Resfeber Labs Private Limited (Porter) is in a similar business. As mentioned in the last Annual Report of your Company in order to leverage synergies and obtain greater economies of scale for both businesses your Company agreed to a Scheme to merge Smartshift and Porter and make additional investments into both these entities.
The National Company Law Tribunal approved the Scheme and the Scheme has been made effective from 25th April 2019. Pursuant to the merger being effective Smartshift ceased to be a subsidiary of the Company. Post-merger the shareholding of your Company and its subsidiaries in Porter (the combined entity) taken on a fully diluted basis is 30.8% for the Company 2.5% for Mahindra & Mahindra Financial Services Limited and 6.9% for Mahindra Trucks and Buses Limited.
Mahindra and Ford strengthen ongoing strategic collaboration
In the Financial Year 2017-18 your Company had announced its intent to explore a strategic alliance with Ford Motor Company (Ford) to leverage Ford's global reach and expertise and your Company's scale in India and its successful operational model during a period of unprecedented transformation in the global automotive industry. To that end the Company had signed several MoUs with Ford which included specific areas of connected vehicle projects battery electric vehicle powertrains and product development of mid-size and compact SUVs.
In pursuance of the above your Company and Ford signed definitive agreements for:
Powertrain sharing: As part of this arrangement your Company would supply Bharat Stage VI (BS-VI) compliant gasoline engines to Ford for product programs in India.
Connected car: As per this agreement your Company and Ford would jointly develop connected vehicle solutions to be deployed across your Company's and Ford products.
Development and supply of SUVs: This arrangement entails development manufacturing and supply of a new mid-size SUV on a Mahindra product platform by your Company for Ford.
The above agreements are significant steps towards strengthening the ongoing strategic collaboration between your Company and Ford.
Mahindra First Choice Services Limited acquires key assets of Carnation Auto (India) Private Limited
During this year Mahindra First Choice Services Limited (MFCS) a subsidiary of your Company had acquired key assets of Carnation Auto (India) Private Limited (CAPL or Carnation). This was an asset acquisition under IBC liquidation process (Insolvency & Bankruptcy Code) run by the Official Liquidator of CAPL appointed by an order of National Company Law Tribunal (NCLT). MFCS acquired key assets of Carnation's car servicing business including the trademark 'Carnation' its website software licenses and Carnation's franchisee workshop network. The asset acquisition does not include the liabilities and past dues. This strategic move will strengthen the MFCS business and further consolidate its leadership position in the Indian Automotive Aftermarket Segment.
Divestment in Mahindra Sanyo Special Steel Private Limited
During this year your Company has sold 2636401 Equity Shares (22% of the share capital) of Rs. 10 each in Mahindra Sanyo Special Steel Private Limited (MSSSPL) a subsidiary of your Company. Pursuant to this transaction the shareholding of the Company in MSSSPL has come down from 51% to 29% of its share capital. Consequently MSSSPL ceased to be a subsidiary of the Company. Consideration received from such sale was Rs. 1463202555. Subsequently MSSSPL has further raised capital from its existing shareholders and due to non-subscription to the capital issue of MSSSPL by your Company the stake of your Company in MSSSPL has further diluted to 22.81%.
Scheme of Merger by Absorption of Mahindra Vehicle Manufacturers Limited a wholly owned subsidiary of the Company (MVML) with the Company
Subsequent to the year end the Board of Directors of the Company at its Meeting held on 29th May 2019 subject to requisite approvals/consents approved the Scheme of Merger by Absorption of Mahindra Vehicle Manufacturers Limited a wholly owned subsidiary of the Company (MVML) with the Company and their respective Shareholders (Scheme) under the provisions of sections 230 to 232 of the Companies Act 2013. The Appointed Date of the Scheme would be 1st April 2019 and the entire assets and liabilities of MVML would be transferred to and recorded by the Company at book values. The entire share capital of MVML is held by the Company. Upon the Scheme being effective all shares (preference and equity) held by the Company in MVML as on the Effective Date shall stand cancelled without any further act or deed.
D. INTERNAL FINANCIAL CONTROLS
The Corporate Governance Policies guide the conduct of affairs of your Company and clearly delineates the roles responsibilities and authorities at each level of its governance structure and key functionaries involved in governance. The Code of Conduct for Senior Management and Employees of your Company (the Code of Conduct) commits Management to financial and accounting policies systems and processes. The Corporate Governance Policies and the Code of Conduct stand widely communicated across your Company at all times.
Your Company's Financial Statements are prepared on the basis of the Significant Accounting Policies that are carefully selected by Management and approved by the Audit Committee and the Board. These Accounting policies are reviewed and updated from time to time.
Your Company uses SAP ERP Systems as a business enabler and to maintain its Books of Account. The transactional controls built into the SAP ERP systems ensure appropriate segregation of duties appropriate level of approval mechanisms and maintenance of supporting records. The Information Management Policy reinforces the control environment. The systems Standard Operating Procedures and controls are reviewed by Management. These systems and controls are audited by Internal Audit and their findings and recommendations are reviewed by the Audit Committee which ensures the implementation.
Your Company has in place adequate internal financial controls with reference to the Financial Statements commensurate with the size scale and complexity of its operations. Your Company's Internal Financial Controls were deployed through Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) that addresses material risks in your Company's operations and financial reporting objectives.
Such controls have been assessed during the year under review taking into consideration the essential components of internal controls stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by The Institute of Chartered Accountants of India. Based on the results of such assessments carried out by Management no reportable material weakness or significant deficiencies in the design or operation of internal financial controls was observed.
Your Company recognises Internal Financial Controls cannot provide absolute assurance of achieving financial operational and compliance reporting objectives because of its inherent limitations. Also projections of any evaluation of the Internal Financial Controls to future periods are subject to the risk that the Internal Financial Control may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Accordingly regular audits and review processes ensure that such systems are reinforced on an ongoing basis.
E. MANAGEMENT DISCUSSION AND
A detailed analysis of your Company's performance is discussed in the Management Discussion and Analysis Report which forms part of this Annual Report.
F. CONTRACTS OR ARRANGEMENTS WITH
All Related Party Transactions entered during the year were in the ordinary course of business and on arms length basis. During the year under review your Company had entered into Material Related Party Transactions i.e. transactions exceeding ten percent of the annual consolidated turnover as per the last audited financial statements with Mahindra Vehicle Manufacturers Limited a wholly owned subsidiary of your Company. These transactions too were in the ordinary course of business of your Company and were on arms length basis details of which as required to be provided under section 134(3)(h) of the Companies Act 2013 are disclosed in Form AOC-2 as Annexure II and forms part of this Annual Report.
The Policy on Materiality of and Dealing with Related Party Transactions as approved by the Board is uploaded on the Company's website and can be accessed at the Web-link: http://www.mahindra.com/resources/FY19/ AnnualReport.zip
Statutory Auditors and Auditors' Report
Messrs B S R & Co. LLP Chartered Accountants (ICAI Firm Registration Number 101248W/W-100022) were appointed as the Statutory Auditors of the Company to hold office for a term of 5 years from the conclusion of the 71st Annual General Meeting (AGM) held on 4th August 2017 until the conclusion of the 76th AGM of the Company to be held in the year 2022.
The Auditors' Report is unmodified i.e. it does not contain any qualification reservation or adverse remark or disclaimer.
Pursuant to the provisions of section 204 of the Companies Act 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company has appointed Mr. Sachin Bhagwat Practicing Company Secretary (Certificate of Practice Number: 6029) to undertake the Secretarial Audit of the Company.
The Company has annexed to this Board's Report as Annexure III a Secretarial Audit Report given by the Secretarial Auditor.
The Secretarial Audit Report does not contain any qualification reservation or adverse remark or disclaimer.
Secretarial Audit of Material Unlisted Indian Subsidiary
Mahindra Vehicle Manufacturers Limited (MVML) a material subsidiary of the Company undertakes Secretarial Audit every year under Section 204 of the Companies Act 2013. The Secretarial Audit of MVML for the Financial Year 2018-19 was carried out pursuant to Section 204 of the Companies Act 2013 and Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. The Secretarial Audit Report of MVML submitted by Mr. Sachin Bhagwat Practicing Company Secretary does not contain any qualification reservation or adverse remark or disclaimer.
Annual Secretarial Compliance Report
The Company has undertaken an audit for the Financial Year 2018-19 for all applicable compliances as per Securities and Exchange Board of India Regulations and Circulars/Guidelines issued thereunder. The Annual Secretarial Compliance Report duly signed by Mr. Sachin Bhagwat has been submitted to the Stock Exchanges within 60 days of the end of the Financial Year and is annexed at Annexure IV to this Board's Report.
The Board had appointed Messrs D. C. Dave & Co. Cost Accountants (Firm Registration Number 000611) as Cost Auditor for conducting the audit of cost records of the Company for the Financial Year 2018-19.
The Board of Directors on the recommendation of the Audit Committee appointed Messrs D. C. Dave & Co. Cost Accountants (Firm Registration Number 000611) as the Cost Auditors of the Company for the Financial Year 2019-20 under section 148 of the Companies Act 2013. Messrs D. C. Dave & Co. have confirmed that their appointment is within the limits of section 141(3)(g) of the Companies Act 2013 and have also certified that they are free from any disqualifications specified under section 141(3) and proviso to section 148(3) read with section 141(4) of the Companies Act 2013.
The Audit Committee has also received a Certificate from the Cost Auditors certifying their independence and arm's length relationship with the Company.
As per the provisions of the Companies Act 2013 the remuneration payable to the Cost Auditor is required to be placed before the Members in a General Meeting for their ratification. Accordingly a Resolution seeking Members' ratification for the remuneration payable to Messrs D. C. Dave & Co. Cost Auditors is included in the Notice convening the Annual General Meeting.
As per Section 148 of the Companies Act 2013 read with the Companies (Cost Records and Audit) Rules 2014 your Company is required to maintain cost records and accordingly such accounts and records are maintained.
Reporting of Frauds by Auditors
During the year under review the Statutory Auditors Cost Auditors and Secretarial Auditor have not reported any instances of frauds committed in the Company by its Officers or Employees to the Audit Committee under section 143(12) of the Companies Act 2013 details of which needs to be mentioned in this Report.
H. PARTICULARS OF LOANS GUARANTEES INVESTMENTS AND SECURITIES
Particulars of the loans given investment made or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient of the loan or guarantee or security are provided in Note Nos. 6 and 35 to the Financial Statements.
I. PUBLIC DEPOSITS AND LOANS/ ADVANCES
Your Company had discontinued its Fixed Deposit Scheme for 36 months with effect from the close of office hours on 31st January 2014 and has also discontinued acceptance of Fixed Deposits with effect from 1st April 2014. All the deposits from public and Shareholders had already matured as at 31st March 2017. Out of the total outstanding of 41 deposits of Rs. 17.24 lakhs from the public and shareholders as at 31st March 2019 all deposits amounting to Rs. 17.24 lakhs had matured and had not been claimed as at the end of the Financial Year. Since then 1 of these deposits of the value of Rs. 0.45 lakhs have been claimed.
There was no default in repayment of deposits or payment of interest thereon during the year under review. There are no deposits which are not in compliance with the requirements of Chapter V of the Companies Act 2013. The particulars of loans/advances/investments etc. required to be disclosed pursuant to Para A of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 are furnished separately. The transaction(s) of the Company with a company belonging to the promoter/promoter group which hold(s) more than 10% shareholding in the Company as required pursuant to para A of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 is disclosed separately in the Financial Statements of the Company.
Key Managerial Personnel (KMP)
The following have been designated as the Key Managerial Personnel of the Company pursuant to sections 2(51) and 203 of the Companies Act 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014:
(a) Mr. Anand G. Mahindra - Executive Chairman
(b) Dr. Pawan Goenka - Managing Director
(c) Mr. V S Parthasarathy - Group CFO & Group CIO
(d) Mr. Narayan Shankar - Company Secretary There has been no change in the KMPs during the year under review.
Employees' Stock Option Scheme
During the year under review on the recommendation of the Governance Nomination and Remuneration Committee of your Company the Trustees of Mahindra & Mahindra Employees' Stock Option Trust have granted Stock Options to employees under the Mahindra & Mahindra Limited Employees Stock Option Scheme 2010. No Stock Options have been granted to employees under the Mahindra & Mahindra Limited Employees Stock Option Scheme 2000.
The Company has in force the following Schemes which get covered under the provisions of SEBI (Share Based Employee Benefits) Regulations 2014 (SBEB Regulations):
1. Mahindra & Mahindra Limited Employees Stock Option Scheme - 2000 (2000 Scheme)
2. Mahindra & Mahindra Limited Employees Stock Option Scheme - 2010 (2010 Scheme)
3. M&M Employees Welfare Fund No. 1
4. M&M Employees Welfare Fund No. 2
5. M&M Employees Welfare Fund No. 3
There are no material changes made to the above Schemes and these Schemes are in compliance with the SBEB Regulations. Your Company's Auditors Messrs B S R & Co. LLP have certified that the Company's above-mentioned Schemes have been implemented in accordance with the SBEB Regulations and the Resolutions passed by the Members for the 2000 Scheme and the 2010 Scheme.
Information as required under the SBEB Regulations read with SEBI Circular CIR/CFD/POLICY CELL/2/2015 dated 16th June 2015 have been uploaded on the Company's website and can be accessed at the Web-link: http:// www.mahindra.com/resources/FY19/AnnualReport.zip
Particulars of Employees and related disclosures
The Company had 258 employees who were in receipt of remuneration of not less than Rs. 10200000 during the year ended 31st March 2019 or not less than Rs. 850000 per month during any part of the year.
Details of employee remuneration as required under provisions of section 197(12) of the Companies Act 2013 read with Rule 5(2) & 5(3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are available at the Registered Office of the Company during working hours 21 days before the Annual General Meeting and shall be made available to any Shareholder on request. Such details are also available on your Company's website and can be accessed at the Web-link: http://www.mahindra.com/resources/FY19/ AnnualReport.zip Disclosures with respect to the remuneration of Directors KMPs and employees as required under section 197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are given in Annexure V to this Report.
The year under review witnessed a very positive Industrial Relations Scenario across all manufacturing locations for the Automotive and Farm Equipment Sectors. Your Company's focus continues towards propagating proactive and employee centric practices. The transformational work culture initiative that aims to create an engaged workforce with an innovative productive and a competitive shop-floor ecosystem continues to grow in strength. Some examples of the programs put in place include `Rise for Associates' industrial relations skills for frontline officers cultural diagnostics projects transformational work culture projects e-compliance e-portal for reward and recognition of associates and Code of Conduct for associates. The Transformational Work Culture Committee (TWCC) leads the design and implementation of these programs.
With the objective of developing skills and fostering togetherness at the workplace your Company implements multiple training and engagement programs on an ongoing basis. These include positive attitude stress management creativity team effectiveness safety and environment quality tools TPM skill building programs customer focus and a program for union leadership development.
The Mahindra Skill Excellence initiative is a holistic approach to enhance the skill and capabilities of shop floor associates and has received good participation across manufacturing facilities. As a result of this effort associates from your Company have participated at various international skill competitions which include Beijing Arc Cup and Euroskills 2018. At the Beijing Arc Cup a female associate from your Company was awarded as `Outstanding Female Welder'.
In an endeavor to improve quality reduce cost ensure safety and improve productivity your Company's shop floor associates generated on an average 18 ideas per person.
Significant emphasis was also laid towards raising awareness on health and wellness of employees through annual medical check-ups health awareness activities. Diet food has become a way of life over the past three years. Your Company maintains an `Employee Health Index' at an individual level and this has been a useful tool in identifying employees who require focused counselling and monitoring.
Proactive and employee-centric shop floor practices a focus on transparent communication of business goals an effective concern resolution mechanism and a firm belief that employees are the most valuable assets of the Company are the cornerstone of your Company's employee relations approach. An `open door policy' with constant dialogue to create win-win situations have helped your Company build trust and harmony.
The industrial relations scenario continued to be largely positive across all the manufacturing locations. Bonus settlements were amicably agreed upon at all locations.
In a span of 16 months (September 2017 to March 2019) nine wage settlements with various Unions were amicably concluded with an overall productivity rise ranging from 10% to 15%. The sustained efforts towards building a transformational work culture resulted in zero production loss in the Financial Year 2018-19 and helped create a collaborative healthy and productive work environment.
Safety Occupational Health and Environment
During the year under review your Company revised its Safety Occupational Health & Environment (SOH&E) Policy. The leadership's commitment towards SOH&E is demonstrated through inclusion of many new compliances along with its voluntary commitments. Implementation of various initiatives under the policy and achievement to set objectives were assessed through management reviews.
At each Plant location annual events were organised and commemorated like Road Safety Week National Safety Day/ Month Fire Service Week. Awareness programs were conducted for all stakeholders through classroom sessions and e-learning modules. To strengthen the safety culture Behaviour Based Safety (BBS) - Level 2 is being implemented at all Plants.
Your Company carried out statutory safety audits Fire Equipment Audit Risk Assessment of Licensed premises as per the amended legal requirements. For the year under review your Company achieved substantial reduction in the fire load by way of installation of modern equipment in critical areas and relocation of flammable material as appropriate.
In line with the `Go Green' philosophy your Company is continuously adopting new techniques to eliminate and minimize the environmental impact. Various projects have been implemented by your Company in air water-waste water management and solid waste management. These initiatives are also extended to the supplier community of your Company.
During the year under review your Company signed agreements with Extended Producer Responsibility Organizations (EPRO) recognized by Pollution Control Boards for 100% integral Plastic Waste Management. These agreements include the plastic waste generated at premises of suppliers and dealers of your Company.
Your Company continued the commitment to improve the wellbeing of employees and contract associates through various activities under project `Parivartan'. This includes activities like fitness improvement challenge (MRise) Mindfulness Walkathon Yoga Zumba medical check-ups health consultation and counselling. As a result of many initiatives the average Health index of its employees has improved as compared to the previous year. Further all locations observed World Health Day World Heart Day World Kidney Day and World Diabetes Day. All associates of your Company were trained in First Aid. To create awareness among society at large your Company has installed a display screen that displays real time readings for all parameters of Air Quality. This screen is installed just outside the manufacturing plant in Mumbai which is located on the Western Express highway with high density vehicular traffic. Your Company has adopted the standard on Global Reporting Initiative (GRI) and has undertaken various projects aimed at climate change mitigation sustainable source use and protection of bio-diversity. Some examples of successful initiatives are Waste Heat Recovery Green Platinum rated Buildings in Existing Building Category Projects for Carbon Neutrality and Solar power installation.
In addition to above World Ozone Day World Environment Day No Print Day World Earth Day World Water Day and Energy Conservation Week and Water Conservation Week are observed on an annual basis.
All Plants of your Company have been recertified under standard ISO 14001: 2015 and OHSAS 18001: 2007. Further all Plants are in the process of implementing integrated management system along with adopting the revised standard ISO 45001:2018.
As a result of efforts over the last few years nine plants of your Company are certified `Zero Waste to Landfill' by Intertek USA. The Company revises its targets under SOH&E year on year and the performance against these targets are reviewed periodically by Senior Management. Focused initiatives involving all stakeholders coupled with management reviews have helped to improve the SOH&E performance of your Company in the period 2018-19.
K. BOARD & COMMITTEES
As mentioned in the previous Annual Report Mr. S. B. Mainak resigned from the Board of the Company and ceased to be a Director of the Company with effect from 11th May 2018.
Mr. M. M. Murugappan and Mr. Nadir B. Godrej were re-appointed at the 72nd Annual General Meeting held on 7th August 2018 as Independent and Non-Executive Directors of the Company for a second term of two consecutive years each commencing from 8th August 2018 to 7th August 2020.
Appointment of Mr. Vijay Kumar Sharma
Pursuant to the recommendation of the Governance Nomination and Remuneration Committee the Board at its Meeting held on 14th November 2018 appointed Mr. Vijay Kumar Sharma as an Additional Non-Executive Non-Independent Director of the Company representing Life Insurance Corporation of India liable to retire by rotation with effect from 14th November 2018. He shall hold office as an Additional Director upto the date of the Annual General Meeting of the Company to be held on 7th August 2019.
Mr. Vijay Kumar Sharma is a Post-Graduate and superannuated as Chairman Life Insurance Corporation of India on 31st December 2018. From December 2010 to November 2013 he served as Managing Director & Chief Executive Officer LIC Housing Finance Limited (LICHFL) a premier housing finance company in the country. He is also on the Boards of various companies. The Company has received the requisite Notice from a Member in writing proposing his appointment as a Non-Executive Non-Independent Director of the Company.
Retirement by rotation
Dr. Pawan Goenka retires by rotation and being eligible offers himself for re-appointment at the 73rd Annual General Meeting (AGM) of the Company scheduled to be held on 7th August 2019.
Re-appointment of Independent Directors for a Second Term
The Governance Nomination and Remuneration Committee on the basis of performance evaluation of Independent Directors and taking into account the external business environment the business knowledge acumen experience and the substantial contribution made by Dr. Vishakha N. Desai and Mr. Vikram Singh Mehta during their tenure has recommended to the Board that continued association of Dr. Vishakha N. Desai and Mr. Vikram Singh Mehta as Independent Directors would be beneficial to the Company. Based on the above and the performance evaluation of Independent Directors the Board recommends re-appointment of: (i) Dr. Vishakha N. Desai for a further period from 8th August 2019 to 30th April 2024; and (ii) Mr. Vikram Singh Mehta for a further period of five consecutive years commencing from 8th August 2019 to 7th August 2024 to hold office as Independent Directors of the Company not liable to retire by rotation on the Board of the Company. The Company has received the requisite Notices from a Member in writing proposing their appointment as Independent Directors.
The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Companies Act 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
Completion of Tenure of Independent Directors
Mr. R. K. Kulkarni and Mr. Anupam Puri would cease to hold office as Independent Directors of the Company from 8th August 2019 upon completion of their tenure as approved by the Shareholders at the 68th AGM of the Company.
Mr. R. K. Kulkarni has been on the Board of the Company for around 22 years and has enriched the Board with his immense experience in all aspects of corporate law M&A litigations strategy and management financial reporting and processes. His vast experience in advising large Indian and multinational clients in various business sectors and expertise in legal and fiscal management was pivotal in steering the growth & diversification initiatives of the Company over a period of time. He has been the Chairman of the Stakeholders Relationship Committee Member of Audit Committee Governance Nomination and Remuneration Committee and other committees of the Board.
Quote from Executive Chairman
Mr. R. K. Kulkarni joined the Board of the Company in 1997 and played a key role in nurturing the Legal Compliance and Governance culture of your Company. Apart from being a leading proponent of governance ethics and values he also brought a commercial mindset while framing evaluating and executing strategies of your Company. This rare combination of qualities added a valuable perspective and dimension to the deliberations and decision making of the Board.
He has always brought a solution based approach to issues while remaining committed to the highest standards of governance and excellence. He has made significant contributions as a Director of the Company and as a member of several of its committees and his inputs have greatly benefited the Board and the Company.
I am grateful for Mr. Kulkarni's counsel and friendship. Even though his term as a Director is ending he has assured the Management of his continuous availability and support which the Management will certainly draw upon. I wish him many years of good health and happiness.
Mr. Anupam Puri has been on the Board of the Company for around 18 years. He brought with him a global mindset and experience in driving business success in markets around the world with an understanding of diverse business environments economic conditions sensitivity to cultural diversity and adaptability. He provided thought leadership in business strategy and handling various organizational issues with his immense international knowledge financial expertise and experience. He has been a Member of the Strategic Investment Committee and has contributed in evaluating various proposals which has enabled the Company build a strong and diversified portfolio of investments with sustainable growth.
Quote from Executive Chairman
Mr. Anupam Puri fondly known as Tino joined the Board of your Company in 2001.
With his extensive experience in business strategy and financial structuring he critically and constructively challenged management on various business and growth proposals put forth at the Strategic Investment Committee and the Board and his concurrence provided valuable validation to the Management and Board in pursuing such opportunities.
Tino's expertise in striking a delicate balance between maintaining independence and governance oversight and providing constructive support to Management (especially on matters of strategy and M&A) has been particularly valuable. He championed the cause of fostering a culture that promotes long-term thinking discipline and accountability. Tino has been on your Company's Board for a long time. The baseline model he has helped to create will continue to guide your Company in its pursuit of organic and inorganic growth opportunities. I wish Tino many years of good health and happiness.
The Board placed on record its deep appreciation of the valuable services rendered by Mr. R. K. Kulkarni and Mr. Anupam Puri during their tenure as Directors of the Company.
Pursuant to the provisions of the Companies Act 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Board has carried out an annual evaluation of its own performance and that of its Committees as well as performance of the Directors individually. Feedback was sought by way of a structured questionnaire covering various aspects of the Board's functioning such as adequacy of the composition of the Board and its Committees Board culture execution and performance of specific duties obligations and governance and the evaluation was carried out based on responses received from the Directors.
The performance evaluation of Committees was based on criteria such as structure and composition of Committees attendance and participation of member of the Committees fulfilment of the functions assigned to Committees by the Board and applicable regulatory framework frequency and adequacy of time allocated at the Committee meetings to fulfil duties assigned to it adequacy and timeliness of the Agenda and Minutes circulated comprehensiveness of the discussions and constructive functioning of the Committees effectiveness of the Committee's recommendation for the decisions of the Board etc.
A separate exercise was carried out by the Governance Nomination and Remuneration Committee of the Board to evaluate the performance of individual Directors. The performance evaluation of the Non-Independent Directors and the Board as a whole was carried out by the Independent Directors. The performance evaluation of the Executive Chairman of the Company was also carried out by the Independent Directors taking into account the views of the Managing Director and Non-Executive Directors. The Directors expressed their satisfaction with the evaluation process. The Independent Directors and Executive Chairman also carried out performance evaluation of the Managing Director of the Company.
Your Company has adopted the following Policies which inter alia include criteria for determining qualifications positive attributes and independence of a Director:
(a) Policy on Appointment of Directors and Senior Management and succession planning for orderly succession to the Board and the Senior Management;
(b) Policy for remuneration of the Directors Key Managerial Personnel and other employees.
Policy (a) mentioned above includes the criteria for determining qualifications positive attributes and independence of a Director identification of persons who are qualified to become Directors and who may be appointed in the Senior Management Team in accordance with the criteria laid down in the said Policy succession planning for Directors and Senior Management and Policy statement for Talent Management framework of the Company.
Policy (b) mentioned above sets out the approach to Compensation of Directors Key Managerial Personnel and other employees in the Company.
During the year under review your Company made changes in the Policies mentioned at (a) and (b) above to align with the amendments made pursuant to the Companies Act 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
Policies mentioned at (a) and (b) above are available on the website at the following link: http://www.mahindra. com/resources/FY19/AnnualReport.zip
Familiarisation Programme for Independent Directors/Non-Executive Directors
The Members of the Board of the Company are afforded many opportunities to familiarise themselves with the Company its Management and its operations. The Directors are provided with all the documents to enable them to have a better understanding of the Company its various operations and the industry in which it operates.
All the Independent Directors of the Company are made aware of their roles and responsibilities at the time of their appointment through a formal letter of appointment which also stipulates various terms and conditions of their engagement.
Executive Directors and Senior Management provide an overview of the operations and familiarize the new Non-Executive Directors on matters related to the Company's values and commitments. They are also introduced to the organization structure constitution of various committees board procedures risk management strategies etc.
Strategic Presentations are made to the Board where Directors get an opportunity to interact with Senior Management. Directors are also informed of the various developments in the Company through Press Releases emails etc.
The Company has a web based portal i.e. Board portal accessible to all the Directors which inter alia contains the following information:
Roles responsibilities and liabilities of Independent Directors under the Companies Act 2013 and the SEBI Listing Regulations.
Board Minutes Agenda and Presentations.
Code of Conduct for Directors.
Terms and conditions of appointment of Independent Directors.
Pursuant to Regulation 25(7) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (the Listing Regulations) the Company imparted various familiarisation programmes for its Directors including review of Investments of the Company by Strategic Investment Committee Industry Outlook at the Board Meetings Regulatory updates at Board and Audit Committee Meetings covering changes with respect to the Companies Act the Listing Regulations Taxation and other matters Presentations on Internal Control over Financial Reporting Operational Control over Financial Reporting Prevention of Insider Trading Regulations SEBI Listing Regulations Framework for Related Party Transactions Plant Visit Meeting with Senior Executive(s) of your Company etc. Pursuant to Regulation 46 the details required are available on the website of your Company at the web link: http://www. mahindra.com/resources/FY19/AnnualReport.zip
Directors' Responsibility Statement
Pursuant to section 134(5) of the Companies Act 2013 your Directors based on the representations received from the Operating Management and after due enquiry confirm that:
(a) in the preparation of the annual accounts for the Financial Year ended 31st March 2019 the applicable accounting standards have been followed;
(b) they had in consultation with Statutory Auditors selected accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2019 and of the profit of the Company for the year ended on that date;
(c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and irregularities;
(d) they have prepared the annual accounts on a going concern basis;
(e) they have laid down adequate Internal Financial Controls to be followed by the Company and such Internal Financial Controls were operating effectively during the Financial Year ended 31st March 2019;
(f) they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively throughout the Financial Year ended 31st March 2019.
Board Meetings and Annual General Meeting
A calendar of Meetings is prepared and circulated in advance to the Directors.
During the year 1st April 2018 to 31st March 2019 five Board Meetings were held on: 29th May 2018 7th August 2018 14th November 2018 7th & 8th February 2019 and 25th March 2019. The 72nd Annual General Meeting (AGM) of the Company was held on 7th August 2018.
Meetings of Independent Directors
The Independent Directors of your Company meet before the Board Meetings without the presence of the Executive Chairman or the Managing Director or other Non-Independent Director or Chief Financial Officer or any other Management Personnel.
These Meetings are conducted in an informal and flexible manner to enable the Independent Directors to discuss matters pertaining to inter alia review of performance of Non-Independent Directors and the Board as a whole review the performance of the Executive Chairman of the Company (taking into account the views of the Executive and Non-Executive Directors) review the performance of the Company assess the quality quantity and timeliness of flow of information between the Company Management and the Board that is necessary for the Board to effectively and reasonably perform their duties.
Five Meetings of Independent Directors were held during the year and these meetings were well attended.
The Committee comprises of four Directors viz. Mr. T. N. Manoharan (Chairman of the Committee)
Mr. Nadir B. Godrej Mr. M. M. Murugappan and Mr. R. K. Kulkarni. All the Members of the Committee are Independent Directors and possess strong accounting and financial management knowledge. The Company Secretary of the Company is the Secretary of the Committee.
All the recommendations of the Audit Committee were accepted by the Board.
Your Company has a rich legacy of ethical governance practices many of which were implemented by the Company even before they were mandated by law. Your Company is committed to transparency in all its dealings and places high emphasis on business ethics. A Report on Corporate Governance along with a Certificate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance as stipulated under Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 forms part of the Annual Report.
The Vigil Mechanism as envisaged in the Companies Act 2013 the Rules prescribed thereunder and the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 is implemented through the Company's Whistle Blower Policy to enable the Directors employees and all stakeholders of the Company to report genuine concerns to provide for adequate safeguards against victimisation of persons who use such mechanism and make provision for direct access to the Chairman of the Audit Committee.
Whistle Blower Policy of your Company is available on the Company's website and can be accessed at the Web-link: http://www.mahindra.com/resources/FY19/ AnnualReport.zip Further details are available in the Report on Corporate Governance that forms part of this Annual Report.
The Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013
The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment and the Company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013. All employees (permanent contractual temporary trainees) are covered under this Policy. The Policy is gender neutral. During the year under review 4 complaints with allegations of sexual harassment were filed which were disposed-off as per the provisions of The Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013 and as of 31st March 2019 no complaint was pending.
Business Responsibility Report
The `Business Responsibility Report' (BRR) of your Company for the year 2018-19 forms part of this Annual Report as required under Regulation 34(2)(f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
Your Company strongly believes that sustainable and inclusive growth is possible by using the levers of environmental and social responsibility while setting aspirational targets and improving economic performance to ensure business continuity and rapid growth. Your Company is committed to leverage `Alternative Thinking' to build competitive advantage in achieving high shareholder returns through customer centricity innovation good governance and inclusive human development while being sensitive to the environment.
Your Company has a well-defined risk management framework in place. The risk management framework works at various levels across the enterprise. These levels form the strategic defence cover of the Company's risk management. The Company has a robust organisational structure for managing and reporting on risks.
Your Company has constituted a Risk Management Committee of the Board which is authorised to monitor and review risk management plan and risk certificate. The Committee is also empowered inter alia to review and recommend to the Board the modifications to the Risk Management Policy. Further the Board has constituted a Corporate Risk Council comprising the Senior Executives of the Company. The terms of reference of the Council comprises review of risks and Risk Management Policy on periodic intervals.
Your Company has developed and implemented a Risk Management Policy which is approved by the Board. The Risk Management Policy inter alia includes identification of risks including cyber security and related risks and also those which in the opinion of the Board may threaten the existence of the Company. Risk management process has been established across the Company and is designed to identify assess and frame a response to threats that affect the achievement of its objectives. Further it is embedded across all the major functions and revolves around the goals and objectives of the organisation.
M. CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY
Corporate Social Responsibility (CSR)
With a Core Purpose which states that we will challenge conventional thinking and innovatively use all our resources to drive positive change in the lives of our stakeholders and communities across the world to enable them to Rise it is amply evident that Corporate Social Responsibility is integral to and at the core of whatever is done at Mahindra. With a deeper understanding of societal issues your Company has built the `Rise for Good' mission around the four pillars of Community People Governance and Environment. With its focus on driving positive change to enable communities to Rise your Company's CSR initiatives are designed to support the constituencies of girls youth and farmers through the domains of education health and environment. The impact of some of the flagship CSR initiatives that your Company undertook in the last financial year are given below: -
- Project Nanhi Kali supported the education of over 165291 underprivileged girls across 10 States of India. While the Company supported 18974 Nanhi Kalis the Mahindra Group supported the education of 66348 Nanhi Kalis and the balance were supported by other donors. In Financial Year 2019 71394 girls at secondary school level were provided access to digital tablets preloaded with smart audio visual educational content.
- Financial Year 2019 was a milestone year for the Mahindra Pride Programme with the Mahindra Pride Classrooms crossing the 100000 outreach mark. Through 2597 Mahindra Pride Classrooms 119349 youth from ITI's Polytechnics and Arts & Science colleges were trained in English Lifeskills and job preparedness across 14 States. Of these 79566 students were supported by the Company. The Mahindra Group also supported 9 Mahindra Pride Schools through which 6561 youth from socially and economically disadvantaged communities were trained in ITES Retail Hospitality & Auto Service and 100% of them were placed in lucrative jobs. The Company supported 5 Mahindra Pride Schools in Chandigarh Chennai Srinagar Hyderabad and Varanasi through which 3108 youth received livelihood training.
- Over 4300 students benefitted through a variety of Scholarship Programs which ranged from providing opportunities to youth from low income group families to undergo diploma courses at vocational education institutes to allowing meritorious students to pursue their post graduate studies at reputed universities overseas to allowing meritorious and deserving students to study at the Mahindra United World College in Pune.
- In the area of public health your Company sponsored its 20th Lifeline Express (hospital on a train) in Arrah Bihar through which medical care treatment and surgical intervention was provided to 11119 individuals.
- Through Mahindra Hariyali 0.95 million trees were planted which contributed to improving green cover and protecting bio-diversity in the country. Of these 0.83 million trees were planted in the Araku valley which besides greening the environment also provided livelihood support to tribal farmers growing coffee in this region. The Mahindra Group as a whole planted 1.45 million trees pan India.
- The Integrated Water Management Program (IWMP) in Hatta and Bhopal (Madhya Pradesh) led to increased water availability in 48 villages of Bhopal thereby directly improving agricultural productivity and increasing farmer income.
- Through the Wardha Farmer Family Project and Krishi Mitra Project your Company continued to support small and marginal farmers by training them in effective farming practices including soil health crop planning creating model farms with bio-dynamic farming practices and increasing the water table with a view to increasing crop productivity.
- Rise for Safe Roads: The first of its kind in India `Road Safety' project aims to make the Mumbai Pune Express way a near `Zero Fatality Corridor' by 2021. Interventions under 4E's are conducted i.e. Engineering Enforcement Education and Emergency Response. In addition long haul truck drivers went through the Anticipatory Driving and Action Prevention Training (ADAPTT) program.
- The unique ESOPs (Employee Social Options) platform provided 26126 employees a menu of volunteering opportunities enabling them to contribute 188833 - person hours towards giving back to society. During the last financial year your Company received a 4 Good rating from Economic Times for overall excellence in CSR as part of the `ET2Good4Good' CSR Rating. Further your Company was awarded the CII National Award for Excellence in Water Management and FICCI CSR Awards in Environment Sustainability Category for the Integrated Watershed Management Project in Bhopal.
The Corporate Social Responsibility Committee had formulated and recommended to the Board a Corporate Social Responsibility Policy (CSR Policy) which was subsequently adopted by it and is being implemented by the Company. The CSR Policy including a brief overview of the projects or programs undertaken can be accessed at the Company's website through the Web-link: http:// www.mahindra.com/resources/FY19/AnnualReport.zip
The CSR Committee comprises of Dr. Vishakha N. Desai (Chairperson) Mr. Anand G. Mahindra Mr. R. K. Kulkarni Dr. Pawan Goenka and Mr. Vikram Singh Mehta. The Committee inter alia reviews and monitors the CSR as well as Sustainability activities.
During the year under review your Company spent Rs. 93.50 crores on CSR activities. The amount equal to 2% of the average net profit for the past three financial years required to be spent on CSR activities was Rs. 93.37 crores. The detailed Annual Report on the CSR activities undertaken by your Company in Financial Year 2019 is annexed herewith marked as Annexure VI.
During the year under review the 11th Sustainability Report for the year 2017-18 was released. The report was externally assured by DNV-GL and prepared in accordance with the GRI Standards-Core option.
Your Company continued the focus on the Environmental Social and Governance (ESG) parameters in the year under review by implementing Mahindra Sustainability Framework ensuring common language for sustainability across the Group. This framework defines sustainability as Building enduring businesses by rejuvenating the environment and enabling stakeholders to rise. Under the three pillars People Planet and Profit of Sustainability Framework; various actions have been identified for implementation across the Group. Many of these actions are already underway as demonstrated by the Igatpuri Plant being certified as `Carbon Neutral'. Rudrapur Nagpur and Jaipur are certified as `Zero Waste to Landfill' plants.
Mr. Anand G. Mahindra Executive Chairman of your Company is on the Governing Board of United Nations Global Compact. He was a co-chair at the Global Climate Action Summit held in September 2018 in San Francisco California.
Your Company has committed to adopt Science Based Target to restrict average global temperature rise to 2 degree Celsius in alignment of Paris Climate Change Agreement.
The Sustainability performance for your Company for the Financial Year 2018-19 will be elaborated in detail in the GRI Report which is under preparation and will be ready for release shortly.
Your Company was recognized for its leadership position on the ESG dimensions during the year under review by way of:
Winning Asia Sustainability Reporting Award 2018 - Best Supply Chain Reporting.
Winning Asia Sustainability Reporting Award 2018 - Best Carbon Disclosure.
Indian Chamber of Commerce India Corporate Governance & Sustainability Vision Awards.
Retaining the status of getting listed on the Dow Jones Sustainability Index - 2018 under the `Emerging Market Index' for fifth year with improvement in percentile scores.
Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo
The information pertaining to conservation of energy technology absorption foreign exchange earnings and outgo as required under section 134(3)(m) of the Companies Act 2013 read with Rule 8(3) of the Companies (Accounts) Rules 2014 is attached as Annexure VII and forms part of this Report.
The issued subscribed and paid-up Share Capital of the Company stood at Rs. 621.60 crores as at 31st March 2019 comprising of 1243192544 Ordinary (Equity) Shares of Rs. 5 each fully paid-up. There was no change in Share Capital during the year under review.
Compliance with the provisions of Secretarial Standard 1 and Secretarial Standard 2
The applicable Secretarial Standards i.e. SS-1 and SS-2 relating to `Meetings of the Board of Directors' and `General Meetings' respectively have been duly complied by your Company.
Pursuant to section 134(3)(a) and section 92(3) of the Companies Act 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules 2014 an extract of the Annual Return as on 31st March 2019 in Form No. MGT-9 is attached as Annexure VIII and forms part of this Report.
The Annual Return of the Company has been placed on the website of the Company and can be accessed at http://www.mahindra.com/resources/FY19/ AnnualReport.zip
The details of the Key Policies adopted by the Company are mentioned at Annexure IX to the Board's Report.
Neither the Executive Chairman nor the Managing Director of the Company received any remuneration or commission from any of the subsidiary of your Company. Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions/events on these items during the year under review except as stated hereunder:
1. Issue of equity shares with differential rights as to dividend voting or otherwise.
2. Issue of Shares (Including Sweat Equity Shares) to employees of the Company under any Scheme save and except ESOS referred to in this Report.
3. Significant or material orders passed by the Regulators or Courts or Tribunals which impact the going concern status and the Company's operation in future.
4. Voting rights which are not directly exercised by the employees in respect of shares for the subscription/purchase of which loan was given by the Company (as there is no scheme pursuant to which such persons can beneficially hold shares as envisaged under section 67(3) (c) of the Companies Act 2013).
For and on behalf of the Board
ANAND G. MAHINDRA
29th May 2019