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મહિન્દ્રા સીઆઇઇ ઓટોમેટીવ ડિરેક્ટર્સ રિપોર્ટ, મહિન્દ્રા સીઆઇઇ ઓટોમેટીવ ડિરેક્ટર્સ દ્વારા રિપોર્ટ

મહિન્દ્રા સીઆઇઇ ઓટોમેટીવ

બીએસઈ: 532756  |  ઍનઍસઈ : MAHINDCIE  |  ISIN: INE536H01010  |  Castings & Forgings

શોધો મહિન્દ્રા સીઆઇઇ ઓટોમેટીવ કનેક્શન � Dec 17
ડિરેક્ટર્સ રિપોર્ટ વર્ષાન્ત : Dec '18

DIRECTORS’ REPORT

Dear Shareholders

The Directors present their Report together with the audited financial statements of your Company for the Financial Year (FY) ended 31st December, 2018.

A. FINANCIAL HIGHLIGHTS (STANDALONE)

('' in Million)

PARTICULARS

FY ended 31st December, 2018

FY ended 31st December, 2017

Total Revenue

25,591

20,760

Profit before Interest, Depreciation, Exceptional Items and Tax

3,340

2,084

Less: Depreciation

739

759

Profit before Interest, Exceptional Items and Tax

2,601

1,325

Less: Interest and Finance cost

82

108

Profit before Exceptional Items and Tax

2,519

1,217

Less: Exceptional items

1,286

69

Profit before tax

1,233

1,148

Profit after tax

355

693

Other Comprehensive income

(8)

(5)

Total Comprehensive income

347

688

Financials

During the Financial Year under review your Company registered a total Revenue of? 25,591 Million as against '' 20,760 Million for previous year and Profit before Interest, Depreciation, Exceptional items and Tax of? 3,340 Million as against'' 2,084 Million for the previous year. The Profit before exceptional items & Tax for the Financial Year doubled to '' 2,519 Million in Financial Year 2018 from '' 1,217 Million in Financial Year 2017. The net profit after tax for the current Financial Year stood at '' 355 Million (after Exceptional item of'' 1,286 Million towards the closure of Stokes Group in UK & transfer of holding from Mahindra Forgings Europe AG to CIE Gal for S.A.) as against a net profit of'' 693 Million for the previous financial year.

There have been no material changes and commitments, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this Report.

Dividend

The Company would need significant funds for its organic and inorganic growth. The present FDI regulations in India do notpermit acquisition of an Indian Company by Foreign Majority Owned Indian Companies through domestic borrowings. According to the FDI Regulations internal accruals are one of the permitted sources to fund domestic acquisitions. In view of this your Directors do not recommend any dividend for the Financial Year 2018.

Transfer to Reserves

The Company has not transferred any amount of profits to reserves.

B. OPERATIONAL REVIEW India

Your Company has pursued a strategy which is focused on increasing plant efficiency to improve margins through continuous improvements. We have endeavored to diversify our customer base by actively engaging with new customers and have seen some traction on this front. The integration between your Company and parent CIE means interventions are provided as required. The structured program to have MCIE employees go on plant visits to CIE plants to get first hand understanding of processes, has been received positively and the engagements are deepening.

Operations at Bill Forge Mexico Plant are ramping up; but have had some operational problems, which are being addressed by training, consolidation and rationalization of operations.

Thus, the approach has been to focus on improving plant operations, improving margins through continuous improvements and strive for growth.

Europe

The operations in Germany have been stable, but the management is focusing on improving the profitability in a sustainable manner. Also, during this year, your Company has decided to close down the UK operations and is exploring various options to shift machinery and customer orders to other locations.

Plants in Spain & Lithuania have been consistently profitable over the last few years and profit margins are in line with the margins of the CIE group worldwide. The strategic focus is to maintain profitability at these plants while growing with the market.

The Italian operations are showing positive results accruing from the successful ramp up of the key customer’s new orders.

C. Investor Relations (IR)

Your Company continuously strives for excellence in its Investor Relations (“IR”) engagement with International and Domestic investors through structured conference-calls and periodic investor/analyst interactions like individual Meetings, participation in investor conferences, quarterly earnings calls and analyst meet from time to time. Your Company participated

Scheme of Merger

During the year under review, the Board of the Company approved the Scheme of Merger between Bill Forge Private Limited (Billforge) and Mahindra CIE Automotive Limited (MCIE or Company) and their respective shareholders (the Scheme). In October 2016, the Company completed the strategic acquisition of Billforge. The acquisition was intended to significantly enhance the Company’s market position and to acquire various tangible and valuable intangible assets possessed by Billforge. The scheme of merger is expected to enable better realization of potential of the respective businesses and yield beneficial results and enhanced value for all the stakeholders. Since Billforge is a wholly owned subsidiary of the Company, no shares will be issued as consideration of the merger and shares held by the Company in Billforge shall stand cancelled. The shareholders of the Company will continue to remain beneficial owners of the Company in the same proportion in which they hold shares in the Company prior to the Merger.

The Company and Billforge had filed respective applications seeking necessary direction of Hon’ble National Company Law Tribunal, Mumbai and Bengaluru Bench. Hon’ble National Company Law Tribunal, Mumbai and Bengaluru Bench vide their respective orders dated 4th January, 2019 and 16th January, 2019 directed the companies to serve notices on statutory authorities and called meeting of unsecured creditors of Billforge. The effectiveness of the Scheme is conditional upon and subject to the approvals and / or sanctions as laid down in the respective Scheme.

Transfer of investment held in Mahindra Forgings Europe AG (MFE) to CIE Galfor S. A.

As a result of the past losses, the equity of MFE was fully eroded. Under the German laws, there was a requirement of capital infusion into MFE. MFE and its subsidiaries also required significant funding for their expansion plans. It was therefore proposed that this infusion be done by CIE Galfor S.A., another wholly owned subsidiary of the Company in Spain. To simplify the structure, the Company transferred its 100% stake in MFE to CIE Galfor S.A. at a consideration of Euro 82.6 Million (equivalent in '' 6,849 Million) being the fair value of MFE’s equity as per the valuation report issued by independent valuer. The transfer of shares of MFE to CIE Galfor S.A. consolidated all businesses and legal entities in Europe under CIE Galfor S.A.

Closure of Stokes Group Limited

The Board of Directors of the Company at its meeting held on 16th October, 2018, reviewed the business situation and the requirement of infusion of additional equity in Stokes Group Limited (Stokes). Sales and profit of Stokes has ramped down considerably and old projects are close to end of life. The business of Stokes is reliant on the British market which does not have significant growth opportunities in the short term. The few long term projects the Company are not sufficient to maintain sustained profitability. The last sales forecast of Stokes clearly suggest that the long term viability of its business is suspect. Hence the Board agreed with the proposed closure of Stokes in a number of investor meets organized by reputed Global and Domestic Broking Houses, during the year.

Your Company always believes in building a relationship of mutual understanding with investor/analysts. Your Company ensures that critical information about the Company is available to all the investors, by uploading all such information on the Company’s website.

D. CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of the Company and its subsidiary companies prepared in accordance with the Companies Act, 2013 (the Act) and applicable Accounting Standards along with all relevant documents and the Auditors’ Report forms a part of this Annual Report.

In accordance with section 136 of the Act, separate accounts in respect of each of the Subsidiaries are uploaded on the website of the Company at Web-link: http://www.mahindracie.com/ investors/investor-relations/annual-report.html#subsidiaries-annual-report and copies of the same shall be provided to shareholders of the Company on request for such copies.

Subsidiary Companies

The subsidiary companies also continue to contribute to the overall growth of the Company.

CIE Galfor S.A. which is the holding company of Mahindra Forgings Europe AG and Metalcastello, Italy registered consolidated revenue of '' 47,522 Million (includes MFE & Metalcastello revenue) during the financial year ended 31st December, 2018 as compared to '' 37,030 Million in the previous year. The consolidated net profit after tax for the financial year under review was '' 3,239 Million (including MFE & Metalcastello) as compared to '' 2,266 Million in the previous year.

Bill Forge Private Limited registered consolidated revenue from operations of '' 8,713 Million during the financial year ended 31st December 2018 against'' 7,381 Million in the previous year. The consolidated net profit after tax for the Financial Year 2018 stood at '' 656 Million against'' 604 Million in the previous year.

The Company’s consolidated total revenue from the continuing operations was '' 80,315 Million in the financial year ended 31st December, 2018, of which about 68% was derived from the subsidiaries whereas about 32% was derived from operations of the Company.

The Company has 15 subsidiaries namely Stokes Group Limited (U.K.), CIE Galfor S.A. (Spain), Mahindra Forgings Europe AG (Germany), Jeco Jellinghaus GmbH (Germany), Stokes Forgings Ltd. (U.K.), Stokes Forgings Dudley Ltd. (U.K.), Gesenkschmiede Schneider GmbH (Germany), Falkenroth Umformtechnik GmbH (Germany), Schoneweiss & Co. GmbH (Germany), Metalcastello S.p.A. (Italy), CIE Legazpi S.A. (Spain), UAB CIE LT Forge (Lithuania), Bill Forge Private Limited (India) [Billforge], BF Precision Private Limited (India) and Bill Forge de Mexico S de RL de CV (Mexico).

are reviewed by the management. These systems and controls are audited by the Internal Auditors and their findings and recommendations are reviewed by the Audit Committee which ensures its implementation.

Your Company has in place adequate internal financial controls commensurate with the size, scale and complexity of its operations. 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 the management, no reportable or significant deficiencies, no material weakness in the design or operation of any control was observed. Nonetheless your Company recognizes that any internal control framework, no matter how well designed, has inherent limitations and accordingly, regular audits and review processes ensure that such system are re-enforced on an ongoing basis. The internal financial controls with reference to the Financial Statements are commensurate with the size and nature of business of the Company.

G. MANAGEMENT DISCUSSION AND ANALYSIS

Management discussion and analysis of financial condition and results of operations of the Company along-with the performance and financial position of each of the subsidiaries is provided in the Management Discussion and Analysis which forms part of this Annual Report.

H. CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All Related Party Transactions entered during the year were in the Ordinary Course of Business and at arm''s 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 of the Company with Mahindra & Mahindra Limited. These transactions were in the Ordinary Course of Business of your Company and were at arm''s length basis. The details of these transactions, as required to be provided under section 134(3)(h) of the Companies Act, 2013 are disclosed in Form AOC-2 as Annexure I and forms part of this Report.

The Policy on materiality of and dealing with Related Party Transactions as approved by the Board is uploaded on the website of the Company at http://www.mahindracie.com/ imaaes/pdf/resources/Governance/Policv on Related Party Transaction.pdf

I. AUDITORS

Statutory Auditors and Auditor’s report

The members of the Company at the 18th Annual General Meeting (AGM) had appointed Price Waterhouse Chartered Accountants LLP (Firm Registration No. 012754N/N500016) as the Statutory Auditors of the Company to hold office from the conclusion of 18th within a period of next two years. The Company had already provided for impairment of all the investments it had in Stokes and its goodwill is fully impaired in previous years. Further, to facilitate closure the Company also infused Euro 14 Million in equity of Stokes during the financial year.

Stokes Forgings Limited and Stokes Forgings Dudley Limited are dormant companies and Jeco Jellinghaus GmbH has been operationally closed.

All other subsidiaries are operational.

Associate Company

Gescrap India Private Limited (Gescrap India) was incorporated on 27th March, 2018 which is engaged in metal recycling and total waste management in India. The Company has subscribed 30% of the capital of Gescrap India, thus it is an associate of the Company. Scrap is the main raw material of the Company''s Foundry division. Further, more than 10% revenue of the Stampings division comes from scrap sale. Gescrap India will add transparency and best practices to scrap management within the group.

Galfor Eolica SL is an associate Company of CIE Galfor S.A.

As required under section 129(3) of the Companies Act, 2013 read with the Rules, a statement containing the salient features of the financial statement of the subsidiaries in prescribed form AOC-1 is attached to the financial statements. This statement reports the performance and financial position of each of the subsidiaries included in the consolidated financial statement.

The Company has formulated a Policy for determining Material Subsidiaries and the same has been uploaded on the website of the Company at http://www.mahindracie.com/imaaes/pdf/ resources/Governance/Policv on Material Subsidiarv.pdf

E. CHANGE IN SHAREHOLDING OF PROMOTER AND PROMOTER GROUP

During the year under review, Participations Internationals Auto metal, Dos S.L, one of the Promoters acquired 18,926,895 equity shares of the Company, increasing its holding from 51.34% to 56.28%.

Shareholding of Mahindra Vehicle Manufacturers Limited, one of the Promoters of the Company has reduced its holding from 17.25% to 11.44% and Prudential Management and Services Private Limited, a member of Promoter Group, liquidated its entire holding.

As a result, as on 31st December, 2018 the aggregate promoter and promoter group holding of the Company was at 67.73%.

F. INTERNAL FINANCIAL CONTROLS

Your Company uses SAP ERP System as a business enabler and also to maintain its books of accounts. The transactional controls built in SAP ERP System provide segregation of duties, appropriate level of approval mechanism and maintenance of supporting records. The System, Standard Operating Procedures

Number 000030) as Cost Auditor for conducting the audit of Cost Accounting Records of the Company for Financial year ended 31st December, 2018.

In accordance with Section 148 of the Companies Act, 2013, the Board of Directors of the Company, on recommendation of the Audit Committee, re-appointed Messrs. Dhananjay V. Joshi & Associates, Cost Accountants, Pune (Firm Registration Number 000030) as the Cost Auditors of the Company to conduct the Audit of the Cost Accounting Records maintained by the Company for the current Financial Year ending 31st December, 2019. Messrs. Dhananjay V. Joshi & Associates 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 Auditor 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. Dhananjay V. Joshi & Associates, Cost Auditors is included in the Notice convening the 20th Annual General Meeting.

Reporting of Frauds by Auditors

During the year under review, the Statutory Auditors, Cost Auditors and the Secretarial Auditor have not reported any instance of fraud 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.

J. PARTICULARS OF LOANS, GUARANTEES, INVESTMENTS AND SECURITIES

Particulars of loans given, investments made, guarantees given or securities provided and the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient of the loan or guarantee or security are provided in the Note No. 8 of the Notes to the Standalone Financial Statements.

The Company has not made any loans and advances in the nature of loans to subsidiaries or to firms/companies in which directors are interested. Hence disclosure pursuant to Regulation 34(3) read with Part A of Schedule V of the Listing Regulations is not required.

K. PUBLIC DEPOSITS AND LOANS/ADVANCES

Your Company has not accepted any deposits from the public or its employees during the year under review.

L. TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

The Company has not declared any dividend so far however, pursuant to the Integrated scheme and the Composites scheme AGM until the conclusion of the 23rd AGM of the Company to be held in the year 2022.

The Securities and Exchange Board of India (SEBI) vide its order number WTM/GM/DRA1/ 83 /2017-18dated 10th January, 2018 banned the firms practicing as Chartered Accountants in India under the brand and banner of Price Waterhouse (PW), from directly or indirectly issuing, any certificate of audit to listed companies, compliance of obligations to listed companies for the period of two years. Against the said order PW has filed an appeal before the Hon’ble Securities Appellate Tribunal (Tribunal). By the order dated 15th February, 2018 passed by the Securities Appellate Tribunal (SAT), PW firms were allowed to continue with the auditing assignments of their existing clients till 31st March, 2019 or a newly constituted Bench takes an appropriate final decision in the matter, whichever is earlier. PW had filed a miscellaneous application seeking extension of the period of interim relief granted by SAT till 31st march, 2020. However, vide its Order dated 17th October, 2018 SAT dismissed the said application without granting any additional relief against the said order. PW firms filed an appeal before the Supreme Court of India for extension of the period of interim relief on the SEBI order on 7th December, 2018. The Hon’ble Supreme Court heard the PW firms’ petition for extension of the period of interim relief and allowed PW firms to continue statutory audits and other related certification work for existing listed clients till at least 31stMarch, 2019 or final disposal of the matter by a properly constituted SAT. The Court has also allowed the PW firms to seek extension beyond 31st March, 2019, ifrequired.

Price Waterhouse Chartered Accountants LLP, Chartered Accountants have, under Section 139(1) of the Act and the Rules framed thereunder furnished a certificate of their eligibility and has confirmed that they are eligible to act as statutory auditor of the Company for financial year 2019.

The Auditors’ Report on the Financial Statement for the year ended 31st December, 2018, is unmodified i.e. it does not contain any qualification, reservation or adverse remark and notes thereto are self-explanatory and do not require any explanations.

Secretarial Auditor

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 had appointed Mr. Sachin Bhagwat, Practicing Company Secretary (Certificate of Practice No. 6029), Secretarial Auditor to undertake the Secretarial Audit of the Company for the Financial Year ended 31st December, 2018. The Secretarial Audit Report for the Financial Year ended 31st December, 2018 is appended to this Report as Annexure II.

The Secretarial Audit Report does not contain any qualification, reservation or adverse remark or disclaimer.

Cost Auditors

The Board had appointed Messrs. Dhananjay V. Joshi & Associates, Cost Accountants, Pune, (Firm Registration

CEO, Mr. Luthra volunteered to demit executive responsibilities and he ceased to be a Key Managerial Personnel with effect from 31st March, 2018.

Further, on the recommendation of the Nomination and Remuneration Committee the Board of Directors of the Company at its meeting held on 16th October, 2018 appointed Mr. Romesh Kaul as Executive Directorwith effectfrom 17th October, 2018.

There has been no other change in the KMPs during the year under review.

Employees’ Stock Option Scheme

The Company has in force the following Schemes which are covered under the provisions of SEBI (Share Based Employee Benefits) Regulations, 2014 (“SBEB Regulations”):

a) Mahindra CIE Automotive Limited - Employees’ Stock Option Scheme (ESOS-2007)

b) Mahindra CIE Automotive Limited - Employees’ Stock Options Scheme 2015 (ESOS-2015)

Voting rights on the shares issued to employees under above ESOS are either exercised by the employees directly or through their appointed proxies.

During the year, there have been no material changes to these schemes. No stock options have been granted to the employees under ESOS-2007 and ESOS-2015.

Both the schemes are in compliance with the SBEB Regulations. The Certificate issued by the Statutory Auditors of the Company to the effect that the Schemes have been implemented in accordance with the said Regulations and the resolution passed by the members will be placed before the shareholders at the ensuing Annual General Meeting.

The information as required to be disclosed, in relation to ESOS under the Companies Act, 2013, and the details of the ESOS being implemented, as specified by SEBI under Clause 14 of SBEB Regulations, 2014 is uploaded on the website of the Company at http://www.mahindracie.com/investors/investor-relations/aovernance.html

The said information is also provided in the Note No. 14 of the Notes to Financial Statements.

Particulars of Employees and related disclosures

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 III to this Report.

Further, 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, as amended, a statement including the names and other details of the top ten employees in terms of remuneration drawn and the name of every employee, who were in receipt of remuneration not less than '' 10,200,000/per annum during the year ended 31st December, 2018 or of Amalgamation Mahindra Ugine Steel Company Limited (MUSCO) and Mahindra Composites Limited (MCL) merged with the Company, both MUSCO and MCL had unclaimed dividends which were transferred in the Books of the Company.

During the year, pursuant to the provisions of section 124 of the Companies Act, 2013 and Companies (Declaration and Payment of Dividend) Rules, 2014, the Company has transferred '' 269,170/- to Investor Education and Protection Fund (IEPF) in respect of the dividend declared by MCL (Transferor Company amalgamated with MCIE) for Financial Year ended on 31st March, 2011. With this the Company has transferred the entire unclaimed dividend pertaining to MUSCO and MCL which was transferred in the books of the Company to IEPF. No claim lies against the Company in respect of these dividends. The Company has uploaded the details of said unpaid and unclaimed amounts transferred to IEPF by the Company on its website at http://www.mahindracie.com/investors/downloads/documents. html#unclaimed-amounts and also on the website of IEPF viz. www.iepf.aov.in.

Further, pursuant to the Integrated scheme and the Composites scheme, the fractional entitlement of the Shareholder(s) of the Transferor Companies were consolidated and equity shares arising out of such consolidation were allotted to an Trustee who in turn had sold said shares in the open market at the prevailing market prices and transferred the net sale proceeds thereof to the Company and the Company had inturn distributed the said proceeds to respective shareholders in the ratio of their fractional entitlements by permitted mode. The details of the shareholders whose fractional entitlements are lying unclaimed with the Company is uploaded on the website of the Company at http://www.mahindracie.com/investors/downloads/documents. html#unclaimed-amounts and also on the website of IEPF viz. www.iepf.aov.in

M. EMPLOYEES

Key Managerial Personnel (KMP)

The following have been designated as the Key Managerial Personnel of the Company in accordance with Section 2(51) and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014:

1) Mr. Ander Arenaza - Executive Director

2) Mr. Romesh Kaul - Executive Director (with effect from 17th October, 2018)

3) Mr. Manoj Menon, Chief Executive Officer - Foundry, Magnetics and Gears Divisions

4) Mr. K. Jayaprakash - Chief Financial Officer

5) Mr. Krishnan Shankar - Company Secretary and Head-Legal

Mr. Hemant Luthra was appointed as Executive Director of the Company fora period of 3 years from 1st April, 2015. The term of his appointment expired on 31st March, 2018 in consonance with the spirit of separating the role of Chairman from the executive function which has been assumed by Mr. Ander Arenaza, the informed that, he assumed the role of Non-Executive Chairman of CIE Automotive S.A. and as part of the process of separating executive and non-executive functions, he was stepping down as a Director from the subsidiaries of CIE and his resignation from the Board of the Company was in line with the said process.

Mr. Ander Arenaza Alvarez (DIN: 07591785) and Mr. Jesus Maria Herrera Barandiaran (DIN: 06705854), Directors on the Board, are liable to retire by rotation at the 20th Annual General Meeting (AGM), pursuant to provisions of section 152 of the Act and the Articles of Association of the Company and offered themselves for re-appointment. Further, Section 149, 152 and all other applicable provisions of the Companies Act, 2013, the appointment of Mr. Kaul as Director of the Company is proposed to be regularized at the ensuing Annual General Meeting.

Detailed profile of the Directors seeking re-appointment and appointment along with other details as may be required are provided in the Corporate Governance Report which forms part of this Annual Report and in the Notice of 20th Annual General Meeting.

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.

Directors’ Responsibility Statement

Pursuant to Section 134(5) of the Companies Act, 2013, your Directors, based on the representation 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 December, 2018, the applicable accounting standards had been followed;

b) the directors had selected such 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 at the end of the Financial Year ended 31st December, 2018 and of the profit of the Company for the year ended on that date;

c) the directors had 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 other irregularities;

d) the directors had prepared the annual accounts on a going concern basis;

e) the directors had laid down adequate Internal Financial Controls to be followed by the Company and that such Internal Financial Controls were operating effectively during the Financial Year ended 31st December2018;

f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and employee who were employed for a part of the Financial Year and were in receipt of remuneration of not less than '' 850,000/- per month during any part of the said year is annexed as Annexure IV to this report.

The Company do not have any employee who was employed throughout the Financial Year or part thereof and was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of remuneration drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the Company.

Industrial Relations

Employee Relations in the Pune region in general have been challenging, however relationship between the Management and Worker’s Union continued to remain cordial.

The Management Discussion and Analysis gives an overview of the developments in Human Resources/Industrial Relations during the year.

N. BOARD AND COMMITTEES Directors

Mr. Hemant Luthra ceased to be Executive Director of the Company with effect from 31st March, 2018. Mr. Luthra had played a key role in the inorganic and organic growth the Company and the Company wished to have continued advice and guidance of Mr. Luthra and accordingly requested for his continued support. The Board of Directors, on recommendation of Nomination and Remuneration Committee, decided to take advantage of the continued advice and guidance of Mr. Luthra, for another two years starting from 1st April, 2018 to 31st March, 2020, in Company’s growth strategy which will inter-alia include managing stakeholders relationship, identifying mergers, acquisition and investment opportunities and leveraging these investments to facilitate the maximization value of the Brand and the Company. Accordingly, Mr. Luthra has been Non-Executive Chairman of the Company with effect from 1st April, 2018.

Further, on the recommendation of the Nomination and Remuneration Committee the Board of Directors of the Company at its meeting held on 16th October, 2018 appointed Mr. Romesh Kaul as an Additional Director of the Company who holds office till the date of ensuing Annual General Meeting. Further, Mr. Kaul was also appointed as an Executive Director of the Company for a period of one year with effect from 17th October, 2018.

Mr. Jose Sabino Velasco Ibanez resigned as an Independent Director of the Company with effect from 20thFebruary, 2018 owing to his other professional commitments which did not allow him to devote the time required for carry out the responsibilities of Independent Director of the Company. Mr. Antonio Maria Pradera Jauregui resigned as Director of the Company with effect from 16th October, 2018. Mr. Pradera in his communication to the Board

Familiarization Programme for Independent Directors

The details of programmes for familiarization of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are given in the Report on Corporate Governance. The familiarization programme and other disclosures as specified under regulation 46 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is available on the website of the Company at the link: http://www.mahindracie.com/investors/investor-relations/aovernance.html

Policy on Appointment and Remuneration

In line with the principles of transparency and consistency, your Company has adopted the following Policies which, inter alia includes criteria for determining qualifications, positive attributes and independence of a Director.

i) Policy on Appointment of Directors and Senior Management and succession planning for orderly succession to the Board and the Senior Management;

ii) Policy for the remuneration of Directors, Key Managerial Personnel and other employees of the Company.

During the year under review, no changes were made in the above policies. Salient features of these policies are enumerated in the Corporate Governance Report which forms part of the Annual Report.

The Policies mentioned above are also uploaded on the website of the Company at http://www.mahindracie.com/investors/ investor-relations/aovernance.html

Committees of the Board

Your Company has duly constituted the Committees required under the Companies Act, 2013 read with applicable Rules made thereunder and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Audit Committee

The Committee comprises of four directors viz:

1) Mr. Daljit Mirchandani - Chairman,

2) Mr. Juan Maria Bilbao Ugarriza

3) Mr. Manoj Maheshwari

4) Mr. Dhananjay Mungale

Mr. Jose Sabino Velasco Ibanez ceased to be member for Audit Committee upon his resignation from the Board with effect from 20th February, 2018.

All the Members of the Committee are Independent Directors and possess strong accounting and financial management knowledge. The Company Secretary is the Secretary to the Committee. All the recommendations of the Audit Committee were accepted by the Board during the financial year under review.

that such systems were adequate and operating effectively throughout the financial year ended 31st December, 2018;

Board, Committee and Annual General Meeting

A calendar of Meetings is prepared and circulated in advance to the Directors.

The Board of Directors of the Company met six times during the Financial Year ended 31st December, 2018, on 20th February, 2018, 19th April, 2018, 18th July, 2018, 25th September, 2018, 16th October, 2018 and 13thDecember, 2018.

Details of attendance of meetings of the Board, its Committees and the AGM are included in the Report on Corporate Governance, which forms part of this Annual Report.

Meeting of Independent Directors

The Independent Directors met once during the financial year under review. The Meeting was conducted in an informal manner without the presence of the Chairman, Executive Directors, other Non-Independent Directors, Chief Financial officer and any other Managerial Personnel.

Performance Evaluation of the Board

Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out an annual performance 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, based on criteria approved by the Nomination and Remuneration Committee, for evaluation of performance of Board, Committees of Board and Individual Directors. The feedback of all the Directors on the said Questionnaire was obtained through electronic platform provided by an Independent Agency a web link of the electronic platform along with username and passwords of the board members for accessing such platform was forwarded by the Independent Agency. The members were also able to give qualitative feedback apart from the standard questionnaire.

The Board Members provided their feedback through the electronic platform. The reports of feedback received from all Directors on performance evaluation of Individual Directors were shared with respective Directors and Chairman of the Nomination and Remuneration Committee. The Committee evaluated the performance of all individual directors based on the feedback so received.

The report of the feedback received from all the Directors on performance evaluation of Board and Committees of Board were shared with the Chairman of the Company. The Board on the basis of feedback so received evaluated performance of its own and Committees of Board. The Performance Evaluation of the Chairman of the Company was carried out by the Independent Directors of the Company, taking into account the views of all the Directors including the Executive and Non-Executive Directors.

Risk Management

Your Company has a well-defined risk management framework in place. The risk management framework works at various levels. The Company has a robust organizational structure for managing and reporting on risks. In terms of the requirement of the Act, the Company has developed and implemented the Risk Management Framework. Your Company has constituted a Risk Management council comprising of Senior Executives of the Company. The terms of reference of this counsel comprises review of risks and risk management policy on periodic intervals. The Audit Committee of the Board as well as the Board reviews the risks periodically. Your Company has also established procedures to periodically place before the Board, the risk assessment and minimization procedures being followed by the Company and steps taken by it to mitigate the Risks.

Brief of the Risk Management Framework is provided in corporate governance report. Important element of risk, including risk which may threaten the existence of the Company are provided in the Management Discussion and Analysis.

P. SUSTAINABILITY AND CORPORATE SOCIAL RESPONSIBILITY

Sustainability

Your Company’s vision on sustainability is to continuously improve our capability by integrating environmental, social and economic aspects in operations for creating better tomorrow than today. In line with its vision the Company has identified and implemented various projects for reduction in waste, energy and GHG emissions, to achieve the targets set under its Sustainability Roadmap.

Awareness on sustainability

Awareness about the need and the ways to drive sustainable business practices among all stakeholders is key to perpetual growth. The Company continues its initiatives to generate this awareness among employees who are the most important internal stakeholders of the organization. External stakeholders, suppliers, contractors and vendors were also made aware of this campaign.

Safety, Health and Environmental Performance

Your Company has a Safety, Occupational Health and Environmental (SH&E) policy through which every employee is made responsible for the observance of the measures designed to prevent accidents, damage to property, occupational ill-health and avoidable environmental pollutants.

Safety and Health

During year 2018, two of our plants upgraded the OHSMS certification from BS OHSAS 18001:2007 to ISO 45001:2018 version. Five of our plants upgraded their EMS certification from ISO 14001:2004 to ISO 14001:2015 version. The OHSAS system aims to eliminate or minimize risk to employees and other parties who may be exposed to Occupational Safety risks

O. GOVERNANCE Corporate Governance

Your Company’s philosophy on Corporate Governance sets the goal of achieving the highest level of transparency, accountability in all its dealings with the stakeholders, employees and the government. The practice of responsible governance has enabled your Company to achieve sustainable growth. 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 Mr. Sachin Bhagwat, Practicing Company Secretary (ACS Number - 10189, CP Number - 6029) and Secretarial Auditor of the Company regarding the 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.

Vigil Mechanism

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 victimization of persons who use such mechanism and make provision for direct access to the Chairman of the Audit Committee. The detail of the Policy is explained in the Corporate Governance Report and has been uploaded on the website of the Company at http://www. mahindracie.com/investors/investor-relations/aovernance.html

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. All employees (permanent, contractual, temporary, trainees) are covered under this Policy. The Policy is gender neutral.

During the year, there was no complaint of discrimination and harassment including sexual harassment received by the committee.

Business Responsibility Report

The Business Responsibility Report (BRR) of your Company for the Financial year 2018 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.

Magnetic products division have taken good initiatives. Due to such initiatives our Company has recycled about 100,109 cubic meters of water and used in process and also has re-used about 66,913 cubic meters of water for alternative applications like Gardening I Die washing. Rain water harvesting is done at Foundry, Urse and Forgings Chakan which resulted in saving 6,165 Cubic meters of fresh water.

2) Energy: Each plant continued their focused programs for energy conservation like Use of battery-operated vehicles, VFD installations, LED lighting, Arresting air leakages, use of calendar timers, use of servo motor. These projects have helped achieving specific energy consumption targets in most of the plants. In absolute terms, we have saved about 14.05 Lakh units of electricity & 40,536 liters of diesel. This has resulted in reduction of GHG emissions by 4.58% compared to CY17. We are also exploring possibilities for using solar energy on a large scale.

During the year, your Company used 13.2% of its total energy consumption as renewable energy, mainly wind and solar.

3) Waste Management: Waste reduction efforts have been continued across all the plants. Commendable efforts have been made by Forgings, Foundry and Stampings for waste reduction. One of the projects for hazardous waste reduction at Stampings, Rudrapur (Having mechanical arrangement at sludge pit collection area to reduce the water contents of the wet sludge (putting weight on the wet sludge) has resulted in reduction of about 3.9% waste). All the plants are now looking at waste management as waste to wealth opportunities. Next year Stampings, Rudrapur and Foundry are planning to reduce paint sludge reduction.

4) Green Supply Chain Management (GSCM): The

Company continued its interactions with the suppliers, transporters and contractors on GSCM primarily to ensure EHS legal compliance, safety, occupational health, human rights and resource conservation. This initiative is being further utilized to relook at our logistics, packaging and milk run systems so that overall waste in supply chain is minimized and the scope of 3 GHG emissions are reduced.

5) EHS Legal Compliances: All the plants have robust systems for ongoing EHS legal compliance monitoring, evaluation and corrective actions. The fire NOC, fire hydrant systems development projects have been undertaken at Stampings, Kanhe and Foundry divisions. The legal requirements for fire NOC at Composites Mangaon plant are being re-examined through fire safety and legal experts and adequate alternative arrangements are being ensured.

Corporate Social Responsibility (CSR)

Your Company has constituted a CSR Committee in accordance with section 135 of the Companies Act, 2013; it has developed in the Company. At the end of CY 2018, Composites-Pimpri plant has been relocated to Kanhe. After one complete year of operations at this new location, the plant will establish and get the EHSMS certified as per relevant international standards like ISO 14001:2015 and ISO 45001:2018.

All the Stampings division plants including Zaheerabad location and Gears-Rajkot are in the process of completing their EMS and OHSMS re-certifications by February 2019. The renowned certification bodies who are associated with this process are Bureau Veritas, TUVNord, TUVSUD and DNV.

For further enhancement in the performance, near miss incident reporting system, property damage incident investigations and behavioral based safety systems are being launched in each site in a phased manner. The TMSW guidelines are being used for ensuring that our safety culture is more pro-active, preventive and high performing.

The ESG council reviews and each division’s monthly Operation reviews are focused on total employee involvement in safety, sustainability and social responsibility.

The Safety Committee of each plant meets periodically to review the status of safety issues and reporting of accidents, if any. Your Company’s plant continues to improve their wellbeing of all its personnel by organizing Occupational Health Examination Camps, Periodic Health Check-ups etc.

Environmental Initiatives

Since the last few years, your Company has been focusing external certifications for achieving world class environmental standards. All the plants will be upgrading their EMS to include the requirements of the revised international standard by February 2019.

Sustainable development is promoted through sharing of best practices in the fields of Safety, Occupational Health & Environment.

Your Company considers safety as a value and not just a priority. The Company has taken all possible safety measures to prevent injuries. In CY 2018, your Company had 8 reportable accidents. The Company has investigated all these accidents thoroughly and has taken comprehensive corrective and preventive actions. All legal and social responsibilities with respect to these accidents have been fulfilled and the injured persons have been provided all needed medical and financial assistance. During this year, an increased focus has been given on reporting of near miss incidents and taking preventive measures. All first aid injuries are also analysed and improvements done for preventing recurrence. More emphasis is being given on increasing awareness and use of personal protective equipment.

The highlights of different initiatives taken by your Company at its various plants for environment and sustainability are as under:

1) Water: On the whole, all plants have continued their efforts for water conservation. The major water consuming plants like Forging, Paint shop in Stampings, Rudrapur and onwards. This will help Company in addressing the community specific needs by directing its resources towards CSR Projects which will provide practical and sustainable solutions to the identified issues.

With this, the Company will have enough opportunities to spend the money carried forward, for the chosen Projects in areas more efficiently and effectively.

The CSR Policy of the Company is hosted on the Company’s website at http://www.mahindracie.com/imaaes/pdf/resources/ Governance/csr-policv-mcie.pdf and a brief outline of the CSR Policy and the CSR initiatives undertaken by the Company during the year as prescribed under the Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed herewith as Annexure V.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The information pertaining to energy conservation, technology absorption and foreign exchange earnings and outgo, as required under section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 are provided in Annexure VI to this Report.

Q. SECRETARIAL

Issue of Shares

During the year under review, the Company has issued and allotted 413,690 equity shares of face value of'' 10/- each, the same were issued and allotted due to exercise of options by the employees under the Company’s Employee Stock Option Scheme - 2007 and Employee Stock Option Scheme - 2015.

Pursuant to the above, as on 31st December, 2018 the issued capital of the Company was increased to '' 3,787,818,770/and subscribed and paid-up equity capital increased to '' 3,787,809,320/-.

Compliance with the provisions of Secretarial Standard 1 and Secretarial Standard 2

The Company have devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards issued by the Institute of Company Secretaries of India and that such systems are adequate and operating effectively. During the year under review the Company was in compliance with the Secretarial Standards, i.e., SS-1 and SS-

2, relating to “Meetings of the Board of Directors” and “General Meetings” respectively.

Pursuant to Section 92(3) of the Companies Act, 2013, the Company have placed a copy of the Annual Return of the Company on its website at: http://www.mahindracie.com/ investors/downloads/documents.html

Other Policies under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

In accordance with the provisions of Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has framed a Policy for determination of Materiality for disclosure of events or information. The same has been hosted on the website of the Company at: http://www. mahindracie.com/imaaes/pdf/resources/Governance/policv-on-criteria-for-determinina-materialitv-of-events.pdf

Dividend Distribution Policy

Pursuant to regulation 43A of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated a dividend distribution policy which became effective from 1st January, 2018 stipulating factors to be considered in case of Dividend declaration which forms part of this report as Annexure VII.

The same has also been hosted on the website of the Company at: http://www.mahindracie.com/imaaes/pdf/resources/Governance/ dividend-distribution-policv.pdf

Further the Company has also framed

i) Policy for preservation of documents

ii) Archival Policy for disclosures hosted on the website, beyond five years.

R. GENERAL

None of the Executive Directors (Whole-time Director or Managing Director) were in receipt of any commission from the Company or any remuneration from the Subsidiaries of the Company.

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions/ events relating to these items during the year under review:

Compliance with Downstream Investment conditionality’s

The Company is a Foreign Owned and Controlled Company within the meaning of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017 (“FDI Regulations”). All the Downstream Investments made by the Company are in compliance with the FDI Regulations.

and implemented the policy on Corporate Social Responsibility. The CSR Committee comprises of Mr. Daljit Mirchandani (Chairman), Mr. Dhananjay Mungale and Mr. Hemant Luthra. The Committee, inter alia, monitors the CSR activities. The CSR thrust areas have been identified where the Company wishes to create equity and also lay down guiding criteria for selecting projects which includes sustainability, social impact etc.

The Company was required to spend an amount of Rs, 34.28 Million (including Rs, 16.57 Million unspent amount of last year carried forward). The Company could spend an amount of Rs, 16.13 Million during the year.

During the year the Company had approved to undertake various CSR projects including in the areas of Education and Skill Development, Rural Development, Sanitation and Social Need Assessment Survey. The Budgeted Expenditure of these projects is Rs, 55.79 Million over three years.

The unspent amount in CY18 of? 18.15 Million is primarily for two reasons

1. In year CY18 at Rajkot the Company undertook the major project (Project Vidya) to impart social skills, life skills and on job technical skilling opportunity to young students from ITI Gondal and Women, ITI Rajkot. While we could complete the Soft Skills imparting program, on job technical skilling portion could not be sufficiently covered due to Students getting engaged with their academic and examination schedules. In CY19 we will use this learning and re-adjust the program to fulfill the originally planned objectives.

2. The Company CSR Board reviewed the Swachh Bharat -Community Toilet Block project at Village Urse in mid CY18 and advised CSR implementation committee to focus more on long term strategic initiatives of developing technically qualified youth for the Automobile and Auto ancillaries industry. The Company is in the process of developing a technical skilling centre in Pune and the ground work including identification of strategic partner and development of Syllabi, course material etc. is in progress. In CY19 this project will be driven as one of the top priorities.

Given the challenges and associated learnings seen during the implementation, including obtaining certain legal clearances, changes in members of CSR teams, the implementation of the projects was delayed and related expenditure is deferred to the next year. The implementation of these approved projects is now on track, although with some delays, the Company is confident ofachieving its social objective.

The Company, in order to a boost efforts and pinpoint those to the needs of the Society, engaged an NGO for carrying out ‘Social Need Assessment Survey’ to identify the needs of the communities around the plant locations of the Company, from social, economic and environmental aspect. We have obtained the report and Plant execution committees are studying the same for identifying Projects and initiatives to be focused in year CY19

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).

Acknowledgement

Your Directors wish to place on record their sincere appreciation to the Company’s Customers, Investors, Vendors and to the Bankers for their continued support during the year.

The Directors also wish to place on record their appreciation for the dedication and contribution made by employees at all levels and look forward to their support in future as well.

For and on behalf of the Board

Hemant Luthra

Chairman DIN:00231420

Date: 20th February, 2019

Place: Mumbai

સ્તોત્ર: રેલીગેર ટેકનોવા


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