Your Directors have pleasure in presenting the Forty Fifth Annual Report of the Companytogether with Audited Accounts for the year ended 31st March 2019.
With profound grief Your Directors note the sad & sudden demise of Shri.K MaheshChairman of the Company on 2nd February 2019 in Chennai.
Your Directors place on record invaluable services rendered by the late Chairman. TheBoard pays rich tributes to the Late Chairman and recalls his simplicity humanityhumility and his invaluable contribution and dedication in establishing the Company 44years ago and leading it ever since. Amongst his many accomplishments a few notable onesinclude leading the company to the first Deming ever awarded to a friction materialmanufacturer pioneering and establishing asbestos-free friction as the automotiveindustry standard in India and transforming the auto-ancillary space to focus on qualityand innovation. His care for the nation the automotive industry the workers of thecompany and its stake holders his courage and his guidance will be sorely missed by allof us.
|FINANCIAL RESULTS: || ||( र in lakhs) |
|Details ||Year ended 31.03.2019 ||Year ended 31.03.2018 |
|Revenue from Operations ||28625.86 ||25049.81 |
|Profit before interest depreciation and tax ||1308.73 ||995.24 |
|Less : Interest ||164.93 ||189.11 |
|Profit before depreciation and tax ||1143.80 ||806.13 |
|Less : Depreciation ||494.50 ||430.61 |
|Profit before tax and exceptional items ||649.30 ||375.52 |
|Add : Exceptional item ||- ||- |
|Profit before tax ||649.30 ||375.52 |
|Less : Provision for Taxation || || |
|Current Tax ||133.67 ||66.25 |
|Deferred Tax Liability / (Asset) (net) ||(189.79) ||(67.22) |
|Profit after tax ||705.42 ||376.49 |
|Add : Surplus / (Deficit) brought forward ||530.68 ||177.34 |
|Less: Transfer to Other Comprehensive Income ||- ||(23.15) |
|Surplus Carried over ||1236.10 ||530.68 |
India's GDP is estimated to have grown by 7.0 % in the fiscal year 2018-19 but hasshown signs of weakness in the later part of the year. While the widening adoption andincreasing simplification of GST lays a potentially strong foundation for sustainabledomestic growth political uncertainty clouds the economic policy direction in the yearsahead. Additionally trade wars between USA & China potential conflict with Iran withits attendant global dislocations and potential unpredictable unilateral tariff actionsby the US against India have potential to cause turbulence in our economic growth.
AUTOMOBILE INDUSTRY SCENARIO
The automotive industry growth varied significantly by both segment and chronology.While record growth was seen in the CV segments in the first half of the year significantdeceleration has been recorded in the second half. Sales growth has been muted in the 2Wand non-existent for the passenger vehicle segment.
|VEHICLE SALES DATA FOR FY 2017-18 & 2018-19 || || ||( र in Lakhs) |
|Vehicle ||2W ||3W ||M & HCV ||LCV ||Passenger ||Total |
|Sales || || || || || || |
|2017-18 ||230.08 ||10.17 ||3.84 ||5.69 ||40.37 ||290.15 |
|2018-19 ||244.62 ||12.69 ||4.39 ||6.68 ||40.59 ||308.97 |
|% Growth ||6.3 % ||24.8 % ||14.4 % ||17.4 % ||0.5 % ||6.5 % |
Your company's significant presence in Light Medium and Heavy Commercial Vehiclessegments enabled Company's growth during the year.
While there is significant concern about vehicle sales in the first half of the comingyear the expected pull forward effect from pre- BS VI implementation sales provides somehope for the full year ahead.
SBL'S SALES PERFORMANCE
The Net sales for the year 2018-19 were at $ 281.29 crores as against $ 241.34 croresin the previous year a growth of 17%. Your company's OE sales growth of 13% is mainlyfrom increased CV block sales. This resulted from increased CV production and enhancedshare of business-especially in the bus CV segment.
Aftermarket sales growth of 13% was mainly due to stable marketing policies with goodsupport of Club dealers. SBL will continue to focus on growth in the Domestic After marketin the years ahead.
Export sales growth of 22% has come from North American market followed by AfricaSAARC and Middle East. In addition to robust market conditions in North America SBL hasbeen focusing on revival of markets in geographies lost earlier due to economic /political conditions.
Net Foreign Exchange earned by your company in the year under review was $ 84.02 croresas against
$ 69.51 crores in 2017-18.
Your Company was accredited with Two Star Export House status in accordance with theprovisions of Foreign Trade Policy 2015-2020 with a certificate issued by the DirectorGeneral of Foreign Trade Chennai for a period of five years from 9th March2018 to 8th March 2023.
EFFORTS & INITIATIVES TAKEN
Measures taken to reduce Raw material loss in production and energy conservationcontinue to yield benefits.
Your Company continues to take steps for adding new customers and new products both inDomestic and Export markets.
While the company's performance has been improving in the last few years YourDirectors consider it prudent to skip dividend for the year in order to conserveresources.
OUTLOOK FOR 2019-20
Your Directors view the outlook for 2019-20 with cautious optimism as the fundamentalsof the Indian economy remain strong.
However the following concerns need mention:
1. Domestic demand slow down and political/economic uncertainty.
2. Growing and intensifying market competition with competitor entry.
3. Increasing fuel prices impacting both customer demand and RM prices.
4. Continued availability of low cost but dangerous asbestos linings from competitors.
5. Rising and volatile key RM prices.
6. Demand volatility with possible vehicle production interruptions due to BS VI normsimplementation from April 2020.
RESEARCH AND DEVELOPMENT
Your Company's R&D facility located in Padi has been recognized as an approvedR&D unit by the Department of Scientific & Industrial Research (DSIR) Ministry ofScience & Technology Government of India New Delhi and the recognition is valid upto 31st March 2021.
During the year under review thrust was given for development of new products viz.Commercial Vehicle Linings & Clutch Facings both for new and existing customers.Efforts for achieving reduction in energy costs were continued in the year under review.
The total expenditure for R&D incurred in 2018-19 was $ 9.96 crores as against $10.01 crores in the previous year.
Your Company does not hold any deposit from the public.
The Board of Directors of the Company met four times during the financial year.
Audit Committee and Stakeholders' Relationship Committee of the Board of Directors metfour times during the year.
Nomination and Remuneration Committee and Corporate Social Responsibility Committee ofthe Board of Directors met once during the year.
As required under amended Regulation 17 of the SEBI (Listing Obligations and DisclosureRequirements) ('LODR') Regulations 2015 Mr. K Ramesh Director Mr. K S RanganathanDirector were approved for continuation of their Directorships on attainment of 75 yearsor more at the Board meeting held on 3rd November 2018 and their appointmentswere approved by the shareholders by way of Special resolution through postal ballotvoting on 24th December 2018.
Mr. Krishna Mahesh was appointed as Managing Director at the Board meeting held on 3rdNovember 2018 for a term of 3 years from 06th February 2019 and his appointmentwas approved by the shareholders by way of Ordinary resolution through postal ballotvoting on 24th December 2018 and he holds office till 5th February2022.
Mr. Krishna Mahesh Director of the Company who retires by rotation and being eligiblefor re-appointment offers himself for re-appointment as Director of the Company subject tothe approval by the Shareholders of the Company by an Ordinary Resolution.
Mr.T Kannan Mr.P S Raman Mr.Ashok V Chowgule Mr.K S Ranganathan and Mr.K S DSambasivam Independent Directors hold office till 01-08-2019. The Board of Directors inthe meeting held on 25th May 2019 have recommended their reappointment foranother term of 5 years from 01-08-2019 and the approval of Shareholders for theirreappointment is being sought through Postal Ballot Process scheduled to be completed byJuly 2019.
DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS
The Company has received necessary declaration from all Independent Directors of theCompany under Section 149(7) of the Companies Act 2013 that the Independent Directors ofthe Company meet with the criteria of their Independence laid down in Section 149 (6) ofthe Act. The format of the Disclosure is given as Annexure I.
The Company adopted a Whistle Blower Policy establishing vigil mechanism to provide aformal mechanism to the Directors and employees to report their concerns about unethicalbehavior actual or suspected fraud or violation of the Company's Code of Conduct orethics policy. The Policy provides for adequate safeguards against victimization ofemployees who avail the mechanism and also provides for direct access to the Chairman ofthe Audit Committee. It is affirmed that no personnel of the Company has been deniedaccess to the Audit Committee. The policy of Vigil mechanism is available on the Company'swebsite www.tvsbrakelinings.com.
No complaint has been received from any employee since inception of the vigilmechanism.
MATERIAL CHANGES & COMMITMENTS
There are no material changes and commitments affecting the financial position of thecompany which have occurred between the end of the financial year (FY 2018-19) of thecompany to which the financial statements relate and date of the report.
DIRECTORS' RESPONSIBILITY STATEMENT
In pursuance of Section 134(5) of the Companies Act 2013 your Directors confirm:
1. that in the preparation of the Annual Accounts the applicable Indian AccountingStandards (Ind-AS) have been followed; 2. that they have selected such accounting policiesand applied them consistently and made judgments and estimates that are reasonable andprudent so as to give true and fair view of the state of affairs of the Company at the endof the financial year and of the profit and loss of the Company for that period; 3. thatthey have taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of this Act for safeguarding the assets of theCompany and for preventing and detecting frauds and other irregularities;
4. that they had prepared the annual accounts on a going concern basis;
5. they had laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively; and
6. the Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
INFORMATION ABOUT THE FINANCIAL PERFORMANCE / FINANCIAL POSITION OF THE SUBSIDIARIES /ASSOCIATES / JV AND INFORMATION ABOUT SUBSIDIARY / JV / ASSOCIATE COMPANY
There is no Subsidiary or Associate Company or JV and hence these are not applicable.
EXTRACT OF ANNUAL RETURN
As required pursuant to Section 92(3) of the Companies Act 2013 and Rule 12 of theCompanies (Management and Administration) Rules 2014 an extract of Annual Return in FormNo. MGT 9 as a part of this Annual Report is given in Annexure II.
M/s. Brahmayya & Co. Chartered Accountants Chennai having registration number000511S were appointed as Statutory Auditors of the Company for a period of 5 years in the43rd AGM held on 4th August 2017.
SECRETARIAL STANDARDS & SECRETARIAL AUDIT
Your Directors confirm that Your Company has complied with the Secretarial Standardsof Board Meeting (SS-1) and General Meetings (SS-2) during the year 2018-19.
Pursuant to the provisions of Section 204 of the Companies Act 2013 read with Rule 9 ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 theCompany appointed Mr. V Suresh Practising Company Secretary to undertake the SecretarialAudit. The Secretarial Audit Report for the Financial Year 2018-19 is annexed to thisreport as Annexure III.
QUALIFICATIONS IN AUDIT REPORTS
Explanations or comments by the Board on every qualification reservation or adverseremark or disclaimer made -
(a) by the Statutory auditor in his report; and
(b) by the Company Secretary in practice in his Secretarial audit report.
Not applicable as there are no qualifications in Statutory Auditors' Report and inSecretarial Auditors' report.
Cost Audit is not applicable to the Company from the Financial Year 2014-15 based onthe amended Companies (Cost Audit & Record) Rules 2014 dated 31st December 2014 issuedby the Ministry of Corporate Affairs Govt. of India.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
A. CONSERVATION OF ENERGY
(a) Energy conservation measures taken during 2018-19:
Optimization of motor power to reduce the electrical energy consumption forPresses.
Horizontal replication of heating method being carried out for optimization ofheating and to reduce cost of energy.
Redesign of layout / regrouping of machines / redesign resizing of machinesbeing carried out to reduce the usage of power.
(b) Impact of the above measures:
The measures taken above have helped in reducing electrical energy and Fuel costand would continue to help in reducing the energy cost in the months to come.
B. TECHNOLOGY ABSORPTION
RESEARCH & DEVELOPMENT (R&D)
(1) Specific areas in which R&D carried out by the Company
1. Developed and obtained approval from domestic OEMs for Drum Brake Lining for Heavycommercial vehicle and defence vehicle applications with enhanced axle loads.
2. Developed and obtained approval from domestic OEMs for Drum Brake Lining for Lightcommercial vehicle applications.
3. Developed and added new features to android based vehicle data acquisition system -DEFCON (Driver Experience of Friction CONditions) and collected actual field duty cycledata for understanding and improving the performance of the new and existing products.
(2) Benefits derived as a result of the above
1. Continued recognition of in-house R&D by Department of Scientific and IndustrialResearch (DSIR) Government of India valid up to 31.03.2020.
2. Reduction in Raw material costs through upgradation in quality and yieldimprovement.
3. Obtained approval and commercialised LCV disc pads for domestic OEM applications.
4. Commerialised liner for Export market "Reduced Stopping Distance"applications.
5. Commercialised liner for Export market "Transit Bus" applications.
(3) Future plan of action
1. Development of Disc pads and Drum brake linings for various new vehicle applicationsfor Domestic OEM & Export Market.
2. Development of Woven Clutch Facings for medium and heavy commercial vehicle OEMapplications.
3. Development of friction lined shoes for new generation two wheelers.
|(4) Expenditure on R&D || ||( र in lakhs) |
|Particulars || ||Financial Year |
| ||2018-19 ||2017-18 |
|a Capital ||60.26 ||1.08 |
|b Revenue ||935.38 ||999.53 |
|c Total ||995.64 ||1000.61 |
|d Total R & D expenses as % of total turnover ||3.4% ||4.2% |
C. TECHNOLOGY ABSORPTION ADAPTATION AND INNOVATION
1. Efforts in brief made towards technology absorption adaptation and innovation
a) SBL developed high damping composite matrix technology for meeting end user NVHrequirements without compromising performance and life.
b) Process optimisation for Quality Improvement.
c) Product and Process improvement by bench marking the product against global leaders.
2. Benefits derived as a result of the above efforts a) Development of superior andcompetitive products for export and domestic markets. b) Quality upgradation and optimaluse of resources leading to substantial savings.
D. FOREIGN EXCHANGE EARNINGS AND OUTGO ( र in lakhs)
| || |
|Particulars ||2018-19 ||2017-18 |
|a Foreign Exchange earned ||12096.28 ||9975.63 |
|b Foreign Exchange used ||3694.03 ||3025.08 |
|c Net Foreign Exchange earned (a-b) ||8402.25 ||6950.55 |
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS / COURTS / TRIBUNALS
During the year 2018-19 no significant and material orders were passed by theRegulators or Courts or Tribunals impacting the going concern status and company'soperations in future.
INTERNAL FINANCIAL CONTROLS
The Board and the Audit Committee have been reviewing the Internal Financial controlsand strengthening the same. Further Audit Committee periodically reviews the InternalAudit Reports and suggestions and corrective actions are implemented.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
During the year the Company has not given any loan (Secured or Unsecured) and had notgiven any guarantee or provided any security to any person.
The Risk Management policy adopted by the Board formalizes the Company's approach tooverview and manage material business risks.
All the risks associated with the business of the Company have been taken care of bytaking adequate measures by the Company which have been reviewed by the Audit committeeand the Board in their meetings held from time to time.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Company has undertaken activities as per the CSR Policy (available on the Company'swebsite (http:// tvsbrakelinings.com/images/assets/pdf/CSR%20Policy.pdf) and the Annualreport on CSR activities is enclosed vide Annexure - IV forming part of this report.
RELATED PARTY TRANSACTIONS
All the related party transactions entered by the Company are normal businesstransactions entered in the ordinary course of business and are on arm's length basis. Thecompany has been following a policy of getting omnibus approval for the Related PartyTransactions (RPTs) from the Audit Committee.
The actual RPTs entered were approved by the Audit Committee and by the Board at thequarterly meetings during the Financial Year 2018-19. The policy on Related PartyTransactions as approved by the Board is uploaded on the Company's website.
Particulars of Contracts or Arrangements with Related parties referred to in Section188(1) in form AOC-2 are furnished as Annexure V.
JUSTIFICATION FOR ENTERING INTO RELATED PARTY TRANSACTIONS
The Company's Related Party Transactions have been made to meet the requirements ofoperations and at an arm's length basis and have been entered in the ordinary course ofbusiness.
In terms of Section 134 (3) (p) of the Companies Act 2013 and Regulation 4(2)(f) ofthe SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Boardreviewed and evaluated its own performance from the following perspectives: (a) CompanyPerformance; (b) Risk management; (c) Corporate Ethics; (d) Performance of the IndividualDirectors; and (e) Performance of the Committees viz. Audit Committee Nomination andRemuneration Committee (NRC) and Corporate Social Responsibility Committee &Stakeholders' Relationship Committee (SRC).
The Board upon evaluation considered that the Board is well balanced and diverse and iscommensurate with the business profile and size of the Company.
The Board after discussion and review noted with satisfaction of its own performanceand that of its Committees and individual Directors.
RATIO OF REMUNERATION OF DIRECTOR
As per Section 197 (12) of the Companies Act 2013 read with Rule 5 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the details of Ratio ofRemuneration to each Director to the median employee's remuneration is furnished asAnnexure VI.
PARTICULARS OF EMPLOYEES
No employee of the Company was in receipt of remuneration of not less than $ 1.02crores during the year or $ 8.50 lakhs per month during any part of the said year as perSection 197 of the Companies Act 2013 read with Rule 5 (2) of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014.
LISTING WITH STOCK EXCHANGES
The Company confirms that it has paid the Annual Listing Fees for the year 2018-19 toNational Stock Exchange where the company's shares are listed.
Your company has taken adequate steps to adhere to all the conditions laid down in SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 with respect toCorporate Governance. A report on Corporate Governance is included as a part of thisannual report as Annexure VII.
A Certificate from the Statutory Auditors of the Company confirming the compliance ofconditions of Corporate Governance as stipulated in SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 forms part of this Annual report.
The Managing Director and the Chief Financial officer of the Company have certified tothe Board the financial statements and other matters in accordance with the Regulation17(8) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015pertaining to CEO / CFO certification for the financial year ended 31st March2019.
SHIFTING OF REGISTERED OFFICE OF THE COMPANY
Your Directors in the meeting held on 25th May 2019 have approved Shiftingof Registered office of the Company from 180 Anna salai Chennai- 600 006 to PadiChennai - 600 050 effective 20th June 2019.
Members are requested to take note of the above change.
Your Directors wish to thank State Bank of India for their continued support andassistance.
Your Directors wish to thank all the Customers the Wholesalers both in India andworldwide for their continued support.
Your Directors wish to place on record their sincere appreciation for the good work ofall the employees.
For and on behalf of the Board
K RAMESH KRISHNA MAHESH
Director Managing Director
Date : May 25 2019