FUTURE AMARA RAJA Directors Report

Dear Members,


The Directors have pleasure in presenting their report together with the audited financial statements for the financial year ended March 31, 2017.


Financial Results


Your Company has adopted Indian Accounting Standards (Ind AS) from April 1, 2016 and these are the Company''''s first annual financial statements prepared in accordance with Ind AS, with comparatives for the previous year restated as per Ind AS.


The Company''''s financial performance for the year ended March 31, 2017 is summarized below:


Rs, crores














































Parameters



2016-17



2015-16



Revenue from operations



5,981.39



5,184.34



Other income



49.24



45.88



Total income



6,030.63



5,230.22



Profit before tax



702.21



722.64



Profit for the year (A)



478.49



491.63



Total other comprehensive income (B)



(1.29)



1.12



Total comprehensive income for the year (A B)



477.20



492.75



Share Capital


The paid up equity share capital of the Company as at March 31, 2017 stood at Rs,17.08 crores, comprising of 17,08,12,500 equity shares of Rs,1 each. During the year under review, the Company has not issued shares with differential voting rights, employee stock options and sweat equity shares.


Dividend


In line with the dividend policy of the Company i.e. Dividend Payout (excluding corporate dividend tax) up to 15% of the profit after tax of the Company, your directors recommend a dividend of 425% i.e Rs,4.25 per equity share of Rs,1 each for the financial year 2016-17, subject to the approval of the shareholders. The dividend, if approved, would involve a cash outflow of Rs,72.60 crores (excluding corporate dividend tax).


Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations,


2015, the Board approved and adopted the Dividend Distribution Policy and the same is available on the Company''''s website viz. www.amararaia.co.in


Transfer to reserves


Your Directors propose to transfer an amount of Rs,47.85 crores to the general reserve. An amount of Rs,2,180.88 crore is retained in the retained earnings.


Material changes and commitments affecting the financial position of the company between the end of the financial year and the date of the report


There are no material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of this Report.


Automotive battery business


The Company''''s automotive battery business reported double digit revenue growth supported by good volume increase in both four-wheeler and two-wheeler batteries, over the previous financial year.


During the year, the Company fully utilized the first phase of expansion of the new four-wheeler battery plant, consolidating its position. In four-wheeler OEM space, the Company grew its share by growing beyond the 6% increase in automobile production. In the aftermarket segment, the Company''''s brands grew at a healthy double digit growth in four-wheelers and in two-wheeler batteries. The volume growth in both four-wheeler and two-wheeler aftermarket business continued during the year due to strong preference for Company''''s products, supported by complete product offering, strengthening of brands Amaron® and Power Zone™, expansion of channel and leveraging customer relationships.


The volume from export business grew significantly at 45% over previous year. The brand and products of the Company have started gaining recognition in overseas markets, resulting in increased business. The focused market strategy of the Company paid off leading to higher penetration and enhanced business.


The new four-wheeler battery plant at Nunegundlapalle Village, Chittoor District added a capacity of 2.25 million units p.a, taking the total installed capacity of this four-wheeler automotive battery plant to 4.50 million units p.a. During the year, the Company commenced supplies from the new tubular battery plant. The inverter battery segment saw a clear preference for tubular batteries.


In view of the anticipated growth in demand for two-wheeler battery, the Board approved expansion of two-wheeler battery capacity to be implemented in four phases, staggered over a period of five years, which would on completion take the capacity from existing 11 million units p.a to 25 million units p.a.


Industrial battery business


The recent developments in the telecom market, with the new entrant, had disrupted the revenue models of all Telcos and tower companies forcing to relook at their cost structures. This had impacted the volume off-take for replacement batteries in the industrial battery business during the last quarter. In addition, the increase in lead price presented challenging market conditions in both Telecom and UPS segments. Under this competitive environment, the Company''''s industrial battery business achieved a moderate growth in volume in industrial battery business during the year. The industrial battery business improved the overall performance by virtue of its "preferred supplier status” with all major customers, efficient after sales service, customer relationship management and consistent product performance of its flagship brands Power Stack®, Quanta® and QRS Series batteries.


The Company has initiated necessary measures in all key customer segments to provide integrated solution offering for backup power requirements to its customers.


Subsidiaries, Associates and Joint Ventures


There are no subsidiaries, associates and joint venture companies.


Directors and Key Managerial Personnel


Mr. Nagarjun Valluripalli, Mr. N Sri Vishnu Raju, Mr. T R Narayanaswamy and Ms. Bhairavi Tushar Jani are the present Independent Directors of the Company appointed pursuant to the provisions of Section 149 of the Companies Act, 2013 (Act). They have submitted a declaration that each of them meet the criteria of independence as provided in Section 149(6) of the Act and there has been no change in the circumstances which may affect their status as an Independent Director during the year.


In accordance with the provisions of Section 152 of the Companies Act, 2013, Mr. Raphael John Shemanski, Director (DIN: 07462586) is liable to retire by rotation at the ensuing annual general meeting and being eligible offer himself for reappointment.


Mr. Raymond J Brown (DIN: 01916646) resigned from the Board with effect from November 6, 2016 and the Board of Directors wishes to place on record their sincere appreciation of the valuable services rendered by him during his tenure as a director of the Company.


Mr. Shu Qing Yang (DIN: 01916660) resigned from the Board with effect from January 22, 2017 and Mr. Trent Moore Nevill (DIN: 07699463) was appointed as an Additional Director on the Board with effect from January 22, 2017, who holds off i ce upto the date of the ensuing annual general meeting. The Board of Directors wishes to place on record their sincere appreciation of the valuable services rendered by Mr. Shu Qing Yang during his tenure as a Director of the Company.


The Company has received a notice in writing under Section 160 of the Act proposing the appointment of Mr. Trent Moore Nevill as a Director. The resolutions seeking your approval for the re-appointment of Mr. Raphael J Shemanski, Director and appointment of Mr. Trent Moore Nevill as a Director are included in the notice of the ensuing annual general meeting along with brief details about them.


The Board of Directors appointed Mr. S Vijayanand as Chief Executive Officer of the Company with effect from April 1, 2017. Pursuant to the provisions of Section 203 of the Act, Mr. Jayadev Galla, Vice Chairman and Managing Director, Mr. S Vijayanand, Chief Executive Off i cer, Mr. S V Raghavendra, Chief Financial Off i cer and Mr. M R Rajaram, Company Secretary are the key managerial personnel of the Company.


Auditors and Auditors'''' Report


M/s. Brahmayya & Co., Chartered Accountants and M/s. Deloitte Haskins & Sells LLP, Chartered Accountants were appointed as the joint statutory auditors at the Annual General Meeting held on August 14, 2015 for a term of five (5) years from the conclusion of the 30th annual general meeting till the conclusion of 35th annual general meeting. As required under the provisions of Section 139 of the Act, a resolution for the annual ratification of their appointment is being placed before the shareholders for their approval. In this regard, the Company has received a certificate from the auditors to the effect that if their appointment is ratified, it would be in accordance with the provisions of Section 141 of the Act. The Auditors'''' report does not contain any qualification, reservation or adverse remark.


As per Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules as amended from time to time, the cost records are required to be audited. Based on the recommendation of the Audit Committee, your Board has appointed M/s. Sagar & Associates, Cost Accountants, Hyderabad as cost auditors for the financial year 2017-18. Necessary resolution for ratification of their remuneration is being placed before the shareholders for their approval.


Pursuant to Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company had appointed M/s. R. Sridharan & Associates, Company Secretaries to undertake the secretarial audit of the Company for the financial year 2016-17. The Secretarial Audit Report in Form MR-3 received from them is annexed herewith as Annexure I. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.


Corporate Governance


The report on corporate governance for the year ended March 31, 2017 pursuant to Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed hereto as Annexure II. The certificate from practicing company secretary regarding the compliance of conditions of corporate governance is attached to the report on corporate governance.


Management discussion and analysis


Management discussion and analysis report, highlighting the performance and prospects of the Company''''s business is provided in a separate section and forms an integral part of this report.


Business Responsibility Report


Pursuant to Regulation 34(2)(f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Business Responsibility Report (BRR) initiatives taken from an environmental, social and governance perspective, is annexed hereto as "Annexure III."


Directors'''' responsibility statement


Pursuant to Section 134(3)(c) and 134(5) of the Companies Act, 2013(''''Act''''), the Board of Directors of the Company confirm, to the best of their knowledge and belief, that in the preparation of Annual financial statements:


i) applicable accounting standards and Schedule III of the Act have been followed;


ii) appropriate accounting policies have been selected and applied consistently and such judgments and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for that period;


iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. To ensure this, the Company has established internal control systems, consistent with its size and nature of operations, subject to the inherent limitations that should be recognized in weighing the assurance provided by any such system of internal controls. These systems are reviewed and updated on an on-going basis. Periodic internal audits are conducted to provide reasonable assurance of compliance with these systems. The audit committee meets at regular intervals to review the internal audit function;


iv) financial statements have been prepared on a going concern basis;


v) proper internal financial controls are in place and that such internal financial controls were adequate and were operating effectively;


vi) systems to ensure compliance with the provisions of all applicable laws are in place and were adequate and operating effectively.


Information and Disclosures under the Companies Act, 2013 Extract of the Annual Return


The extract of Annual Return pursuant to Section 134(3)(a) and Section 92(3) of the Companies Act, 2013 (''''Act'''') in the prescribed form MGT-9 is annexed herewith as Annexure IV.


Number of Meetings of the Board


During the year five meetings of the Board of the Directors of the Company were convened and held in accordance with the provisions of the Act. The date(s) of the Board Meeting, attendance by the directors are given in the Corporate Governance Report forming an integral part of this report.


Committees of the Board


In compliance with the provisions of Sections 135, 177, 178 of the Companies Act, 2013, the Board constituted Corporate Social Responsibility Committee, Audit Committee, Nomination and Remuneration Committee and Share Transfer and Stakeholders Relationship Committee (Committees). The details of composition of the Committees, their meeting and attendance of the members are given in the Corporate Governance Report forming an integral part of this report.


Corporate Social Responsibility (CSR)


The brief outline of the CSR Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are given in Annexure V to this report in the format prescribed in Companies (Corporate Social Responsibility Policy) Rules, 2014. The said policy is available on the Company''''s website at http://www.amararaja.co.in/policies/ARBL-Corporate-Social-Responsibility-Policy.pdf


Nomination and Remuneration Policy


The Board has on the recommendation of Nomination and Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management Personnel and their remuneration. The Nomination and Remuneration Policy adopted by the Board is available on the Company''''s website at https://www.amararaja.co.in/policies/ARBL%20-%20 Nomination%20and%20Remuneration%20Policy.pdf


Evaluation of the Board


Pursuant to the provisions of the Companies Act, 2013 and Regulation 17 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board had carried out an annual evaluation of its own performance, the Directors individually and of the committees of the Board.


A structured questionnaire was prepared after taking into consideration inputs received from the Directors, covering aspects of the Board''''s functioning such as adequacy of the composition of the Board and its committees, execution and performance of specific duties, obligations and governance.


A separate exercise was carried out to evaluate the performance of Individual Directors including the Chairman of the Board. The Directors performance was evaluated on parameters such as level of engagement and contribution in safeguarding the interest of the Company etc.


The performance of every Director was evaluated by the Nomination and Remuneration Committee. The performance evaluation of the Independent Directors was carried out by the entire Board. Further, the performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors


Mr. Trent Moore Nevill, additional director did not participate in the evaluation process or being evaluated, as he was appointed at the end of the financial year 2016-17.


Familiarization Programme for Directors


In addition to giving a formal appointment letter to newly appointed Directors on the Board, a handbook covering the role, function, duties and responsibilities and the details of the compliance requirements expected from the Directors under the Companies Act, 2013 and relevant Regulations of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 were given and explained to the new Directors.


The newly appointed Directors are given induction and orientation with respect to Company''''s Vision, Core purpose, Core Values and business operations. In addition detailed presentations are made by Senior Management Personnel on business environment, performance of the Company at every Board Meeting.


The above initiatives help the Directors to understand the Company, its business and the regulatory framework in which the Company operates and enables the Directors to fulfill their role/responsibility. The details of the familiarization programme are available on the Company''''s website www.amararaja.co.in.


Particulars of loans, guarantees and investments


The Company has not given any loans, guarantees or security in connection with loans or made any investments falling within the ambit of Section 186 of the Companies Act, 2013.


Transactions with the Related Parties


All related party transactions that were entered into during the financial year were on arm''''s length basis and were in the ordinary course of business.


During the financial year 2016-17, there were no materially significant transactions with the related parties which might be deemed to have had a potential material conflict with the interest of the Company at large.


In line with the provisions of Section 177 of the Companies Act, 2013 read with the Companies (Meetings of the Board and its Powers) Rules, 2014, omnibus approval for the estimated value of transactions with the related parties for the financial year ahead is obtained from the Audit Committee. The transactions with the related parties are routine and repetitive in nature.


The summary statement of transactions entered into with the related parties pursuant to the omnibus approval so granted are reviewed and approved by the Audit Committee and the Board of Directors on a quarterly basis. The summary statements are supported by an independent audit report certifying that the transactions are at an arm''''s length basis and in the ordinary course of business.


The members at the annual general meeting held on August 14, 2015 approved and authorized the Board to enter into transactions with Mangal Industries Limited (MIL) up to a cumulative value of transactions of Rs,600 crores in each financial year. During the financial year 2016-17, the transactions with MIL amounted to Rs,645.86 crores, a material transaction and necessary resolution for approval of the members for additional transaction value of Rs,45.86 crores is being included in the notice of ensuing annual general meeting as required under the Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Regulations”) and the policy adopted by the Company under the said Regulations.


The Form AOC- 2 pursuant to Section 134 (3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014 is annexed hereto as Annexure VI.


Internal Controls


The Company has put in place adequate system of internal controls commensurate with its size and the nature of its operations. The Company''''s internal control system covers the following aspects:


- Financial propriety of business transactions.


- Safeguarding the assets of the Company.


- Compliance with prevalent statues, regulations, management authorization, policies and procedures.


The Audit Committee of the Board periodically reviews audit plans, observations and recommendations of the internal and external auditors, with reference to the significant risk areas and adequacy of internal controls and keeps the Board of Directors informed of its observations, if any, from time to time.


Risk Management


During the year, the risk assessment parameters were reviewed and modified. The audit committee reviewed the element of risks and the steps taken to mitigate the risks. In the opinion of the Board, there are no major elements of risk which has the potential of threatening the existence of the Company.


Whistle Blower Policy /Vigil Mechanism


The Company has established a whistle blower policy/vigil mechanism to provide an avenue to raise concerns. The mechanism provides for adequate safeguards against victimization of employees who avail of it and also for appointment of an Ombudsperson who will deal with the complaints received. The policy also lays down the process to be followed for dealing with the complaints and in exceptional cases, also provides for direct appeal to the Chairperson of the Audit Committee. The Whistle Blower Policy established by the Board is available on the Company''''s website at https://www.amararaja.co.in/ policies/ARBL-Whistle-Blower-Policy.pdf


Deposits from Public


The Company has not accepted any deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposit) Rules, 2014 during the year under review. There are no outstanding deposits as on March 31, 2017.


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


The information on conservation of energy, technology absorption, foreign exchange earnings and outgo as per Section 134(3)(m) of the Act read with Rule 8 of The Companies (Accounts) Rules 2014, are annexed hereto as Annexure VII and forms an integral part of this report.


Particulars of Remuneration


The information required pursuant to Section 197(12) of the Act read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed hereto as Annexure VIII.


A statement showing names and other particulars of the top ten employees and employees drawing remuneration in excess of the limits prescribed under Rule 5(2) of the said rules is also annexed to the Directors'''' Report as Annexure IX. However, as per the provisions of Section 136(1) of Companies Act, 2013, the annual report is being sent to all the members excluding the aforesaid statement. The statement is available for inspection at the registered office of the Company during working hours.


Reporting of Frauds


There was no instance of fraud during the year under review, which required the Statutory Auditors to report to the Audit Committee and / or Board under Section 143(12) of the Act and the rules made there under.


Regulatory Orders


There are no significant material orders passed by the Regulators/Courts which would impact the going concern status of the Company and its future operations.


Investor Education and Protection Fund (IEPF)


In terms of Section 124 (5) of the Companies Act, 2013 (erstwhile Section 205A of the Companies Act, 1956), an amount of Rs,7,76,953 being unclaimed dividend pertaining to the financial year 2008-09 was transferred to IEPF on September 26,


2016.


Health, Safety and Environmental protection (HSE)


The Company has complied with all applicable environmental and labour laws. The Company continues to be certified under ISO-14001 and OHSAS 18001-2007 for its environment management systems and occupational health and safety management systems respectively.


Prevention of Sexual Harassment at workplace policy


The Company has in place prevention of Sexual Harassment Policy in line with the requirements of the Sexual Harassment of women at the workplace (Prevention, Prohibition and Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All women employees are covered under this policy. During the year 2016-17, no complaints were received by the ICC.


Awards and Recognitions


Your Company continues to get accolades and awards from its customers and other prestigious domestic/international forums. Some of the awards and recognitions your Company received during the year under review:


- Received "India''''s most promising Company of the year 2016-17" at 12th CNBC TV18 India Business Leader Awards event.


- Received "Plaque" award in ''''ICAI Awards for Excellence in Financial Reporting'''' for the financial year 2015-16 from Institute of Chartered Accountants of India.


- Received "Telecom Infra Leader" in the Power Solutions Category for the year 2016 at the 24th Annual Cyber Media ICT Awards event.


- Bestowed with prestigious ABK AOTS awards in following three different categories


i. Model 5S Company award for Automotive Battery Plant, Tirupati


ii. 5S sustenance award for MVRLA Battery plant, Chittoor


iii. Gold award under Excellence category Automotive Battery plant II , Chittoor


- Six teams won Gold awards in ICQCC (International Convention of Quality Control Circles) 2016 competition held in Bangkok, Thailand


- Received "Significant Achievement in HR Excellence" - CII National HR Excellence Award from Confederation of Indian Industry.


- Received Global HR Excellence for companies with ''''Best Practices in Employee Relations'''' and ''''Best Talent Management Practices'''' from Employer Branding Institute India.


Industrial relations


During the year under review, industrial relations remained cordial and stable. The directors wish to place on record their sincere appreciation for the co-operation received from employees at all levels.


Acknowledgement


The Board of Directors takes this opportunity to place on record their appreciation for the unstinted co-operation, commitment and dedication of all the employees of the Company, and the support extended by the channel partners, customers, vendors, business associates, banks, government authorities and all concerned without which it would not have been possible to achieve all round growth of the Company.


Your Directors also take this opportunity to thank the joint venture partner Johnson Controls for their valuable assistance and support. The Directors are thankful to the shareholders for their continued patronage.


On behalf of the Board


Place: Hyderabad Dr. Ramachandra N Galla


Date: May 24, 2017 Chairman

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