DIRECTORS' REPORT Dear Shareholders, Your Directors have pleasure in presenting the 25th Annual Report and Audited Accounts of the Company for the year ended 31st March 2015. FINANCIAL HIGHLIGHTS The financial summary /highlights for the last five years is furnished vide Annexure A to this Report OPERATIONS The net turnover (exclusive of taxes and duties) increased by 34.63 % from Rs.7,443.56 lakhs to Rs.10,021.20 lakhs. This is the first time in the history of the Company, the turnover has crossed the Rs. 100 Crores mark. The export turnover increased by 44.65 % from Rs.4,461.05 lakhs to Rs. 6,453.21 lakhs, and the domestic turnover increased by 19.64 % from Rs.2,982.50 lakhs to Rs. 3,568.25 lakhs. The Company was able to achieve this turnover in spite of subdued market conditions, especially in the domestic market. The Wind Energy Division of the Company recorded lower revenue again during the current financial year because of non evacuation of energy for administrative reasons, as in the previous year. The Profit before tax at Rs. 836.96 lakhs shows an increase of 46.56 % over the previous year's profit of Rs.571.06 lakhs. The Company has provided depreciation on fixed assets based on the useful lives in accordance with the Companies Act, 2013. Consequently the depreciation charge is lower by Rs.253.97 lakhs when compared to the amount arrived at in the previous year. There has been no change in the nature of business of the Company. OUTLOOK FOR CURRENT YEAR There seems to be a marginal improvement in business volumes during the financial year 2015-2016 when compared with the previous year, as the market sentiments improved and it is hoped that the market will pick up momentum gradually during the course of the year. PROJECTS IMPLEMENTED The Company has installed during the year under review a new Energy efficient Melting Induction Furnace, replacing the old and worn out furnaces. Apart from substantial savings in the power costs, this installation with the latest technology, will improve the overall productivity and efficiency at the shop level. FUTURE EXPANSION PLANS The Company will be installing during the financial year 2015-16 the Thermal Reclamation and Green Sand Reclamation Plants. Apart from meeting the requirements of the pollution norms, these installations will enable the Company to use the reclaimed sand, thereby conserving precious natural resources. QUALITY RECOGNITIONS: The Company continues to be recognized for its sustained quality and technological innovations, meeting the customers' requirements to their satisfaction. During the year, the Company received "Best in Continuous Improvement" Award for technical involvement in new product processes to meet customer specific requirements and "Best Supplier Award for Commitment and Dedication to Excellence" from two of its customers. FINANCE The Company's long term debt stands at Rs. 565 lakhs out of which Rs.85 lakhs pertains to the Wind Energy Division and the balance Rs.480 lakhs pertains to the Foundry Division. The debt-equity ratio remains at a healthy level of 0.20. TRANSFER TO RESERVES An amount of Rs.200 lakhs has been transferred to General Reserve and an amount of Rs.1017.98 lakhs is retained in the Statement of Profit & Loss DIVIDEND The Directors, after taking into consideration the results for the year ended under review, have recommended a dividend of Rs.1.80 per share (i.e. @18%) as against Rs.1.60 per share (16%) paid last year. The dividend, if approved, will absorb an amount of Rs.99.26 lakhs, inclusive of Corporate tax on Distribution of dividends. SHARE CAPITAL The paid-up capital of the Company as at 31.03.2015 stood at Rs.4,58,22,000. During the year under review the Company has not made any fresh issue of shares. EXTRACT OF ANNUAL RETURN The extract of Annual Return pursuant to the provisions of Section 92 of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014, in Form MGT-9 is furnished in Annexure B and is attached to this report. BOARD MEETINGS CONDUCTED DURING THE PERIOD UNDER REVIEW The Company had conducted Four (4) Board meetings during the period under review. Further details of the same have been enumerated in the Corporate Governance Report annexed herewith. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the provisions of Section 134(3)(c) of the Companies Act 2013, with respect to Directors' Responsibility Statement, the Directors confirm that - a) In the preparation of the annual accounts, the applicable accounting standards have been followed; b) they have 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 and of the profit of the company for that period; c) they have taken Proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; d) they have prepared the annual accounts on a going concern basis; e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and f) they had devised proper system to ensure compliance with the provisions of all the applicable laws and such systems were adequate and operating effectively; DECLARATION OF INDEPENDENT DIRECTORS The Independent Directors have submitted their disclosures to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules and Clause 49 of the Listing Agreement entered with the Stock Exchanges. COMPANY'S POLICY RELATING TO DIRECTORS APPOINTMENT, PAYMENT OF REMUNERATION AND OTHER MATTERS PROVIDED UNDER SECTION 178(3) OF THE COMPANIES ACT, 2013 The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a policy for fixing and revising remuneration of Directors, Key Managerial Personnel, Senior Management Personnel and employees of the Company. The Remuneration policy of the Company is annexed herewith as Annexure C and can also be accessed on the Company's website at the link <http://www.magnacast.com/financial/229.pdf> COMMENTS ON AUDITORS' REPORT: There are no qualifications, reservations or adverse remarks or disclaimers made by M/s.S.Krishnamoorthy & Co, Statutory Auditors and Sri. M.D. Selvaraj, Secretarial Auditor in their respective reports. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013 There were no loans, guarantees or investments made by the Company under Section 186 of the Companies Act, 2013 during the year under review and hence the said provisions are not applicable. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES All related party transactions that were entered into during the financial year 2014-15 were on an arms' length basis and in the ordinary course of business. Earlier, the approval of the Regional Director, Chennai DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the provisions of Section 134(3)(c) of the Companies Act 2013, with respect to Directors' Responsibility Statement, the Directors confirm that - a) In the preparation of the annual accounts, the applicable accounting standards have been followed; b) they have 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 and of the profit of the company for that period; c) they have taken Proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; d) they have prepared the annual accounts on a going concern basis; e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and f) they had devised proper system to ensure compliance with the provisions of all the applicable laws and such systems were adequate and operating effectively; DECLARATION OF INDEPENDENT DIRECTORS The Independent Directors have submitted their disclosures to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules and Clause 49 of the Listing Agreement entered with the Stock Exchanges. COMPANY'S POLICY RELATING TO DIRECTORS APPOINTMENT, PAYMENT OF REMUNERATION AND OTHER MATTERS PROVIDED UNDER SECTION 178(3) OF THE COMPANIES ACT, 2013 The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a policy for fixing and revising remuneration of Directors, Key Managerial Personnel, Senior Management Personnel and employees of the Company. The Remuneration policy of the Company is annexed herewith as Annexure C and can also be accessed on the Company's website at the link <http://www.magnacast.com/financial/229.pdf> COMMENTS ON AUDITORS' REPORT: There are no qualifications, reservations or adverse remarks or disclaimers made by M/s.S.Krishnamoorthy & Co, Statutory Auditors and Sri. M.D. Selvaraj, Secretarial Auditor in their respective reports. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013 There were no loans, guarantees or investments made by the Company under Section 186 of the Companies Act, 2013 during the year under review and hence the said provisions are not applicable. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES All related party transactions that were entered into during the financial year 2014-15 were on an arms' length basis and in the ordinary course of business. Earlier, the approval of the Regional Director, Chennai had been obtained for such transactions entered into with the companies falling within the purview of Section 297 of the Companies Act, 1956. The policy with regard to Related Party transactions can be accessed on the Company's website at <http://www.magnacast.com/financial/224.pdf> The particulars of contracts or arrangements entered into by the Company with related parties are furnished in Form AOC-2, (Annexure D) forming part of this Report. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY: There have been no material changes and commitments, if any, 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 the report. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, 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 furnished in Annexure E and is attached to this report. STATEMENT CONCERNING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY OF THE COMPANY The Company identifies and evaluates business risks and opportunities at periodic intervals. The Company is aware that these risks need to be managed and mitigated to protect the interest of various stakeholders in order to achieve the business objects and goals. The risk management framework provides not only identify the business risks but also provides effective control measures. DETAILS OF POLICY DEVELOPED AND IMPLEMENTED BY THE COMPANY ON ITS CORPORATE SOCIAL RESPONSIBILITY INITIATIVES The Board has constituted a Corporate Social Responsibility Committee comprising of the following directors as its Members: 1. Sri.C.R.Swaminathan (Chairman) 2. Smt.R.Nandini (Member) 3. Sri.N.Krishna Samaraj (Member) The Committee met on 30th October 2014 and laid out the policy for undertaking CSR activities by the Company. As per the policy, the Committee laid emphasis for undertaking activities in healthcare and medical facilities, promoting education and undertaking activities for improvement of schools, especially government run primary schools, ensuring environmental sustainability and ecological balance. During the year under review, the Company has incurred an expenditure of Rs.12.56 lakhs towards CSR activities covering the above areas. The details of CSR activities are furnished separately vide Annexure F to this Report. The policy relating to CSR has been displayed on the Company's website and can be accessed at <http://www.magnacast.com/financial/223.pdf> ANNUAL EVALUATION OF THE BOARD ON ITS OWN PERFORMANCE AND OF THE INDIVIDUAL DIRECTORS Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing agreement, the Board of Directors evaluated the annual performance of the members of the Board and its Committees vis a vis the nature of business of the Company, its performance during the year and the contribution of each of the Directors based on the criteria laid down by the Nomination and Remuneration Committee. The Independent Directors held a meeting during the year and inter-alia, reviewed the performance of the non-independent Directors and the Board as a whole and assessed the quality, quantity and timeliness of flow of information between the Company and the Board. DIRECTORS & KEY MANAGERIAL PERSONNEL During the year under review, the Members at their Meeting held on 25th September 2014 have approved the appointment of Sri.C.R.Swaminathan, Smt.R.Nandini, Dr.Jairam Varadaraj and Sri.K.Gnanasekaran as Independent Directors of the Company for a period of five years. As per the provisions of the Companies Act, 2013, Sri.V.Rajendran, Director, retires at this Annual General Meeting and being eligible, offers himself for reappointment. The Board recommends his re-appointment. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES The Company does not have any Subsidiaries, Joint ventures or Associate Companies. FIXED DEPOSITS The Company has not accepted any fixed deposits and hence there are no unclaimed deposits as on 31st March 2015. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATION IN FUTURE There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operation in future. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has an adequate Internal Control System, commensurate with the size, scale and complexity of its operations. The Audit Committee of the Board periodically reviews the internal financial control systems and their adequacy and recommends corrective action as and when necessary to ensure that an effective internal control mechanism is in place. AUDITORS STATUTORY AUDITORS M/s. S. Krishnamoorthy & Co, Chartered Accountants, Auditors, retire at the ensuing Annual General Meeting and are eligible for re-appointment. The Certificate required under Section 139 read with Section 141 of the Companies Act, 2013 informing their eligibility to act as the Statutory Auditors of the Company has been furnished by them. The re-appointment proposed is within the time frame for transition under Section 139 of the Companies Act, 2013. SECRETARIAL AUDITORS The Board has appointed Sri.M.D.Selvaraj, FCS of M/s.MDS & Associates, Coimbatore, based on the recommendation of the Audit Committee, as the Secretarial Auditors of the Company for the year 2014-15 to carry out the Secretarial Audit, pursuant to the provisions of Section 204 of the Companies Act, 2013. The report of the Auditors is annexed as Annexure G to this Report. COST AUDITORS Pursuant to the provisions of Section 148 of the Companies Act, 2013 read with Companies (Cost Records and audits) Rules, 2014, the products manufactured by the Company, viz., Iron Castings falling under the specified Central Excise Tariff heading are covered under the mandatory cost audit from the financial year commencing from 1st April, 2015. The Board, based on the recommendations of the Audit Committee has appointed M/s. SBK & Associates, Chennai as the Cost Auditors. Necessary consent has been received from M/s. SBK & Associates for their appointment. Pursuant to Rule 14 of the Companies (Accounts) Rules, 2014, the remuneration payable to the cost Auditors of the Company is subject to the approval of the shareholders at the Annual General Meeting. The Cost Audit Report for the year ended 31.03.2014 has been filed on 27.09.2014 HUMAN RESOURCES AND INDUSTRIAL RELATIONS The Company has been continuously focusing its attention on nurturing the talent of its employees by recognizing their performance and creating enough opportunities for their growth in the Company. This has ensured to retain talent within the organization. The relationship between the management and the employees at all levels during the year under review has been cordial and productive. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 The Company has in place a policy on Sexual Harassment of Women at Workplace in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) are covered under this policy. There were no complaints received from any employee during the financial year 2014-15. PARTICULARS OF EMPLOYEES Statement pursuant to Section 134 of the Companies Act, 2013, read with the Companies (Particulars of Employees) Rules, 1975 and Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed to Annexure H attached to this report. CORPORATE GOVERNANCE As required under Clause 49 of the Listing Agreement with the Stock Exchanges, the report on Management Discussion and Analysis, Corporate Governance as well as Auditor's Certificate regarding compliance of conditions of Corporate Governance forms part of this Annual Report. CEO/CFO CERTIFICATION As required under Clause 49 of the Listing Agreement with the Stock Exchanges, the Managing Director and the Chief Financial Officer have furnished necessary certificate to the Board on the financial statements presented. VIGIL MECHANISM AND WHISTLE BLOWER POLICY The Company has provided for adequate safeguards to deal with instances of fraud and mismanagement and to report concerns about unethical behavior or any violation of the Company's code of conduct. The policy can be accessed on the Company's website at <http://www.magnacast.com/financial/226.pdf> ACKNOWLEDGEMENT Your Directors thank the shareholders, customers and suppliers for their continued support during the year. The Directors wish to place on record their appreciation of the support and co-operation extended by the Company's Bankers M/s. Corporation Bank and M/s. Indian Bank, the various Government Agencies and in particular the Tamil Nadu Electricity Board and the employees of the Company at all levels. We pray for the grace of the Almighty for further growth of the Company. By order of the Board For MAGNA ELECTRO CASTINGS LIMITED C.R. Swaminathan Chairman of the Meeting DIN : 00002169 N. Krishna Samaraj Managing Director DIN : 00048547 Coimbatore 28th May 2015 |