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CG Power and Industrial Solutions Ltd.

BSE: 500093 | NSE: CGPOWER |

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Series: BE | ISIN: INE067A01029 | SECTOR: Electric Equipment

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Annual Report

For Year :
2018 2017 2016 2015 2014 2013 2012 2011 2010

Director’s Report

To,

The Members

The Directors are pleased to present their Eighty-first Annual Report on the business and operations of the Company along with the Audited Financial Statements, both Stand-alone and Consolidated, for the financial year ended 31 March 2018.

THE YEAR IN RETROSPECT

The stand-alone and consolidated financial statements of the Company represent the continuing operations for the year ended 31 March 2018. The discontinued operations have been presented under a separate head.

The Company achieved a stand-alone net turnover from continued operations of Rs.4,981 crore, during the year under review, compared to Rs.4,356 crore during the previous year, recording a growth of 14.3%. The consolidated net turnover of the Company during FY2018 from continued operations grew by 12.1% and stood at Rs.6,189 crore, compared with Rs.5,517 crore in the previous year.

Details of net Sales and Profit before Interest and Tax of the respective Business Units in comparison with the previous financial year are given in Table 1. Further the Financial Performance of the Company for the continuing operations for the year ended 31 March 2018 is given in Table 2.

net sales and profit before interest and tax(PBIT)

in Rs. crore

BUSINESS UNIT

SALES

PBIT

2017-18

2016-17

2017-18

2016-17

Power Systems

Stand-alone

2,700

2,505

185

208

Consolidated

3,633

3,417

312

344

Industrial Systems

Stand-alone

2,282

1,852

187

190

Consolidated

2,541

2,082

166

175


A detailed review of the operations and financial performance of the Company and each of the Businesses is contained in the section titled ‘Management Discussion and Analysis’ of this Annual Report.

DIVESTMENTS AND OTHER DEVELOPMENTS

The Company’s overall strategy is to focus its synergies to core operations and markets including India and Indonesia which provides a significant growth opportunity. In line with this, during the year the Company successfully completed divestment of its power business in USA comprising its overseas step down subsidiary—CG Power USA Inc. on 31 July 2017 to WEG Electric Corp for an enterprise value of US$31 million. WEG Electric Corp is a nominee of WEG S.A., a Brazilian publicly listed company. Consequently, CG Power USA Inc. ceased to be a wholly owned step-down subsidiary of the Company and has been renamed as WEG Transformers USA Inc.

Further with respect to the Company’s business in Hungary, CG Electric Systems Hungary Zrt. (ESHU), the Company’s step-down subsidiary and CG International BV, the Company’s subsidiary have inter-alia entered into a Business Transfer Agreement and Share Sale and Purchase Agreement with Ganz Villamossagi Zrt. and Alester Holdings Limited (‘the Purchasers’) for sale of Assets (excluding switchgear business) and Shares of ESHU respectively for an enterprise value of Euro 38 Million with expected completion by 31 March 2018 subject to requisite approvals. Upon request of the Purchasers, the completion date has been extended pending the receipt of the requisite approvals. Thereafter, the necessary documents for effecting transfer of all the shares of ESHU to the Purchasers have been executed. Considering certain conditions subsequent to be performed between the parties, the shares have been held in escrow and will be handed over to the Purchasers upon completion of such conditions. Consequent to this, ESHU will cease to be a step-down subsidiary of the Company.

During the year CG Power Systems Belgium NV (PSBE), divested its 49% stake in its Joint Venture in Saudi Arabia, Saudi Power Transformer Co. Limited. CG Power Solutions Saudi Arabia Co. in which CG Holdings Belgium NV, a step down overseas subsidiary of the Company, holds 51 % equity shareholding shall be liquidated upon completion of its open orders. During the year the Solutions businesses in US and UK and the Switchgear business in Hungary have been phased out.

The above divestments are in line with the Company’s strategy to exit from identified geographies / products of its international businesses and focus its synergies on the retained ones including India and Indonesia with the objective of improving the overall operational efficiency, reducing debt and for enhancing shareholders’ value.

Financial highlights in Rs. crore

PARTICULARS

STAND-ALONE

CONSOLIDATED

2017-18

2016-17

2017-18

2016-17

Gross Revenue from Operations

5,079

4,761

6,288

5,924

Less: Excise Duty

98

405

99

407

Net Revenue from Operations

4,981

4,356

6,189

5,517

EBIDTA

543

512

494

510

Less: Finance Cost

214

164

219

186

Less: Depreciation

102

91

149

143

Profit Before Exceptional Items & Tax

227

257

126

181

Exceptional Items

(453)

(100)

(443)

(73)

Profit / (loss) Before Tax

(226)

157

(317)

108

Less: Tax expense / (Credit)

47

11

75

28

Profit / (loss) from continuing operations

(273)

146

(392)

80

Less: Minority Interest

-

-

2

-

Share of profit / (loss) in Associates / Joint Ventures

-

-

(2)

(1)

Profit / (loss) after minority interest and share of Associates and Joint Venture

(273)

146

(392)

79

Profit / (loss) before tax from discontinued operations

(79)

(33)

(799)

(592)

Tax expense/ (Credit) from discontinued operations

(27)

(12)

(27)

(22)

Net profit / (loss) on discontinued operations

(52)

(21)

(772)

(570)

Total profit / (loss) for the year

(325)

125

(1,164)

(491)

DIRECTORS AND KEY MANAGERIAL PERSONNEL BOARD OF DIRECTORS COMPOSITION

As on the date of this report, the Company’s Board of Directors consists of nine Directors comprising of one Executive Director and eight Non-Executive Directors of which five are Independent Directors. The Chairman, Mr Gautam Thapar is a Non-Executive Director and represents the Promoter Group. Mr K N Neelkant is the CEO and Managing Director. Five other Non-Executive Directors—

Mr Sanjay Labroo, Dr Valentin von Massow,

Ms Ramni Nirula, Mr Jitender Balakrishnan and Mr Ashish Kumar Guha are Independent in terms of Regulation 16 of the Listing Regulations and Section 149 of the Act.

Two other Directors

Mr B Hariharan and Dr Omkar Goswami are Non-Executive Directors. The Board consists of reputed professionals with diverse functional expertise, industry experience, educational qualifications, ethnicity and gender mix relevant to fulfilling the Company’s objectives and strategic goals.

CHANGE IN COMPOSITION OF THE BOARD

On recommendation of the Nomination and Remuneration Committee of the Company, Mr Ashish Kumar Guha was appointed as an Additional Director (Non-Executive Independent) on the Board of Directors of the Company with effect from 9 November 2017. In accordance with Section 161 of the Act, Mr Guha holds office up to the date of the ensuing Annual General Meeting. The Company has received a notice from a member proposing candidature of Mr Guha for appointment as Director. Accordingly, your Directors recommend his appointment as Non-Executive Independent Director in the ensuing Annual General Meeting. Attention of Members is invited to relevant disclosures made in the Notice of the ensuing Annual General Meeting and explanatory statement thereto with respect to his appointment.

Mr Madhav Acharya, Executive Director, Finance and Chief Financial Officer of the Company was re-designated as Non-Executive Director w.e.f. close of business hours on 11 August 2017. Thereafter, he ceased to be a Director of the Company w.e.f. close of business hours on 30 September 2017.

The Board places on record its gratitude and appreciation for the valuable contributions made by Mr Acharya during his tenure.

RETIREMENT BY ROTATION

In terms of the provisions of Section 152 of the Act and the Rules made thereunder and Article 114 of the Articles of Association of the Company, Mr K N Neelkant and Mr B Hariharan retire by rotation at the ensuing Annual General Meeting of the Company and being eligible, seek reappointment. As per Regulation 36 of the Listing Regulations and Secretarial Standard-2 on General Meetings issued by the Institute of Company Secretaries of India (SS-2), the brief profile and other relevant details regarding re-appointment of Mr K N Neelkant and Mr B Hariharan are contained in the Annexure accompanying the explanatory statement to the Notice of the ensuing Annual General Meeting.

The Board recommends their re-appointment as Directors of the Company, liable to retire by rotation.

INDEPENDENT DIRECTORS’ DECLARATION

The Company has received declarations from all its Independent Directors confirming that they meet the criteria of independence as laid down under Section 149 of the Act and Regulation 16 of the Listing Regulations.

BOARD MEETINGS

During FY2018, the Board of Directors met five times to discuss and decide the business strategies and performance in addition to the items reported to the Board in accordance with the provisions of the Act, Listing Regulations and other statutory provisions. The intervening gap between the meetings was within the period prescribed under the Act, Listing Regulations and Secretarial Standard-1 on Board Meetings issued by the Institute of Company Secretaries of India (SS-1). Details of the Board Meetings held and the attendance of the Directors are given in the section titled ‘Report on Corporate Governance’ which forms part of this Annual Report.

BOARD COMMITTEES

The Board has established statutory and non-statutory Committees in compliance with the requirements of the Act and Listing Regulations. These are Risk and Audit Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee, Stakeholders’ Relationship Committee and Securities Transfer Committee. Details of composition of the statutory Committees, their terms of reference, number of meetings held and attendance of the Committee Members thereof during the financial year is given in the section titled ‘Report on Corporate Governance’ forming part of this Annual Report.

All recommendations made by the Risk and Audit Committee were accepted by the Board of Directors.

During the year under review, the Board constituted a US Business Divestment Committee, a Hungary Business Divestment Committee and a Business Divestment Committee to evaluate, determine and review the proposals for divestment of identified business of the Company.

The US Business Divestment Committee consists of Mr Jitender Balakrishnan, Ms Ramni Nirula, and Mr K N Neelkant, held one meeting during the year under review on 20 June 2017. On completion of divestment of power business in USA, this Committee was dissolved.

The Hungary Business Divestment Committee consists of Mr Sanjay Labroo, Ms Ramni Nirula, Mr B Hariharan and Mr K N Neelkant. The Committee held two meetings during the year under review on 13 July 2017 and 6 February 2018.

The Business Divestment Committee consists of Mr Gautam Thapar, Mr K N Neelkant and Mr B Hariharan. No meetings were held during the year for this Committee.

KEY MANAGERIAL PERSONNEL

Pursuant to Section 203 of the Act, the Key Managerial Personnel of the Company as on the date of this report are:

- Mr K N Neelkant, CEO and Managing Director

- Mr V R Venkatesh, Chief Financial Officer

- Ms Shikha Kapadia, Company Secretary

During the year under review, Mr Madhav Acharya resigned as Chief Financial Officer of the Company w.e.f. close of business hours on 11 August 2017 and Mr V R Venkatesh was appointed as Chief Financial Officer of the Company w.e.f. 12 August 2017. Mr Manoj Koul resigned as Company Secretary w.e.f. the close of business hours on 23 August 2017 and Ms Shikha Kapadia was appointed as Company Secretary w.e.f. 12 February 2018.

REMUNERATION POLICY AND CRITERIA FOR DETERMINING ATTRIBUTES, QUALIFICATION, INDEPENDENCE AND APPOINTMENT OF DIRECTORS

The Company has formulated a Remuneration Policy governing the appointment and remuneration of Directors, Key Managerial Personnel, Senior Management and other employees of the Company. This Policy also contains criteria for determining qualifications, positive attributes, independence of Directors, provisions relating to loans and advances to the employees of the Company. It also aims to attract and retain high caliber personnel from diverse educational fields and varied experience to serve on the Board of the Company. The Remuneration Policy of the Company is provided as Annexure 6 to this Report.

The Company believes that diversity at Board level is a critical ingredient to maintain competitive advantage, to understand customers and stakeholders from different perspectives and to reap the benefits of a broader experience in decision making. With these in mind, the Company has adopted the Board Diversity Policy which sets out the approach for diversity on the Board of Directors of the Company.

PERFORMANCE EVALUATION OF THE BOARD OF DIRECTORS

In line with the requirements of the Act and the Listing Regulations, the annual evaluation of performance of the Board, as well as the evaluation of the working of its Committees and individual Directors including Chairman of the Board was carried out during the year under review. A detailed questionnaire on various facets such as role and composition of the Board, effectiveness of Board processes, relationships with external stakeholders, strategy and risk management, ethics and compliance of the Board, Committees and individual Directors, including self assessment forms were circulated to all the Directors of the Company. Evaluation of Committees was carried out based on its composition, adequacy of information / material for effective discussion, mandate of the Committees, adequate time allocation for fulfilling its mandate and recommendations to the Board.

The individual and peer assessment of Directors contains facets such as relationship with Board and Senior Management, knowledge, competency and contribution to the Board. The Chairman provides feedback on the individual and peer assessment of Directors.

Based on the feedback received from each Director including the Chairman, the Nomination and Remuneration Committee and the Board of Directors of the Company discussed the outcome of the annual evaluation and indentified Board competencies, compliances, ethics, the Company’s Risk policies, the Board’s interaction with management and the Chairman’s leadership, as the key strengths. Pursuant to the provisions of Schedule IV of the Act and Regulation 25 of the Listing Regulations, the Independent Directors of the Company at their meeting held on 12 February 2018 carried out evaluation of the performance of Non-Independent Directors and the Board as a whole, performance of the Chairman and also assessed the quality, quantity and timeline of flow of information between the Management and the Board.

FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS

Pursuant to Regulation 25 of the Listing Regulations, the Company familiarizes its Independent Directors with their roles, rights, responsibilities as well as the Company’s business and operations. Moreover, the Directors are regularly updated on the business strategies and performance, management structure and key initiatives of businesses at every Board Meeting. The details of the programme can be viewed under the following link available on the Company’s website http://www. cgglobal. com/frontend1 finalnonproduct.aspxRs.cnRs.2=yrnPqECUvhk=

PROMOTER GROUP

The Company is a part of the Avantha Group, one of India’s leading business conglomerates. The Group has business interests in diverse areas, including pulp and paper, power transmission and distribution equipment and services, food processing, farm forestry, chemicals, energy, infrastructure, information technology (IT) and IT-enabled services. It is led by the Group’s Founder & Chairman Mr Gautam Thapar.

SUBSIDIARY, JOINT VENTURES AND ASSOCIATE COMPANIES

As on 31 March 2018, the Company has 3 Indian subsidiaries, 23 foreign subsidiaries, 1 joint venture and 2 associate companies. Details are provided in Annexure 5 to this Report in Form MGT-9 (Extract of Annual Return).

Pursuant to the Companies (Indian Accounting Standards) Rules, 2015 and Regulation 33 of Listing Regulations, the financial statements of the Company reflect the consolidation of accounts of the Company, its subsidiaries, associates and joint venture companies.

Pursuant to Section 136 of the Act, the audited annual accounts of each of the Company’s subsidiaries, associates and joint venture entities are placed on the website of the Company and not enclosed in this Annual Report. If any Member of the Company so desires, the Company will make available the said audited annual accounts, on written request. Physical copies of these documents are also available at the Company’s Registered Office for inspection during normal business hours on all working days, excluding Saturdays, up to the date of the ensuing Annual General Meeting and at the venue of the Annual General Meeting.

In terms of Section 129 of the Act, statement containing salient features of the financial statements of the Company’s subsidiaries / associates / joint venture companies in Form AOC-1 is given in the notes to the financial statements in this Annual Report.

Pursuant to Regulation 16 of the Listing Regulations, a Policy for determining Material Subsidiary of the Company as approved by the Board of Directors of the Company is available on the website of the Company under http:// www. cgglobal. com/frontend/finalnonproduct. aspxRs.cnRs.2=yrnPqECUvhk=

RELATED PARTY TRANSACTIONS

During the year, all related party transactions entered into by the Company, were at an arm’s length basis and in the ordinary course of business. In terms of the India Related Party Transactions Policy of the Company, there are no material related party contracts, arrangements or transactions undertaken by the Company during the year under review. Hence, disclosure of particulars of contracts / arrangements entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Act is not applicable to the Company for the year under review.

An omnibus approval has been granted by the Risk and Audit Committee of the Board, based on the criteria determined and approved by the Board of Directors of the Company as well as by the Risk and Audit Committee, for transactions which are of repetitive nature with related parties. Such omnibus approvals are subjected to renewal by the Risk and Audit Committee every year and are monitored by the Risk and Audit Committee on a quarterly basis. All related party transactions entered into by the Company are presented and reviewed by the Risk and Audit Committee every quarter.

The Company’s India Related Party Transactions Policy can be downloaded from the website of the Company under http://www.cgglobal.com/ pdfs/policies/lndia%20Related%20Party%20 Transactions%20Policy.pdf

PARTICULARS OF LOANS,

GUARANTEES AND INVESTMENTS

Particulars of loans, guarantees given and investments made by the Company during FY2018, pursuant to the provisions of Section 186 of the Act and Schedule V of the Listing Regulations are given in the notes to the financial statements in this Annual Report.

BUSINESS RESPONSIBILITY REPORT

Pursuant to Regulation 34 of the Listing Regulations, the Business Responsibility Report highlighting the initiatives taken by the Company in the areas of environment, social, economic and governance, is available on the website of the Company under http://www.cgglobal.com/ frontend/finalnonproduct.aspxRs.cnRs.2=Nu/tTrrPIMI=

ENTERPRISE RISK MANAGEMENT FRAMEWORK

Integrating the process for managing risks across the Company’s business and operations is the Company’s philosophy for Enterprise Risk Management (ERM). In this regard, the Company has developed a comprehensive ERM framework to identifiy risk, conduct risk assessment and suggest mitigation procedure to the Board of Directors of the Company to ensure that management controls the risks through a properly defined framework.

ERM framework aims to imbibe a ‘risk culture’ throughout the organization, facilitate risk based decision making, improve governance and accountability, protect and enhance stakeholders’ value.

The Company’s ERM framework helps to identify elements of risk based on the risk identification techniques, analyze and comprehend the nature of risk, escalate and consolidate risks at Unit level to the overall Business Unit, monitor and review risks and implement action plans to mitigate risk. These risks cover business strategy, technology, financial, operations, systems, IT, legal, regulatory and human resources. The Risk and Audit Committee reviews the key risks associated with the businesses of the Company and their mitigation measures.

During the year under review, none of the risks identified threaten the existence of the Company.

INTERNAL FINANCIAL CONTROLS

The Company has in place an effective and efficient internal controls testing and monitoring system which enables the Company to ensure that these controls are operating effectively.

Such systems have been designed to provide reasonable assurance with regard to maintaining of proper internal controls, monitoring of operations, protecting assets from unauthorised use or losses, compliances with regulations, and the reliability of financial reporting.

RESEARCH AND DEVELOPMENT (R&D)

During the year under review, the Company’s R&D activities continued to focus on development of indigenous and energy efficient products.

One of the significant achievements was the indigenous development and manufacture of 6 MW 6.6 kV vertical motor for Nuclear Power Corporation of India Limited (NPCIL) for use in its nuclear reactor. At present, the Company is the sole Indian manufacturer to develop this motor for NPCIL. It has undergone and passed inspection by NPCIL at every stage of development.

The Company’s Transformers Division has developed ester oil filled transformers. The Division also developed 2 MVA 33 kV transformers with synthetic ester oil, and 8 MVA 33 kV transformers with natural ester oil. The Division also designed traction transformers of 30.24 MVA 132 / 27.5 kV for the Nagpur Metro.

The Switchgear Division indigenously designed and developed resin impregnated paper (RIP) bushings. RIP bushings are of a dry type without oil, encapsulated with composite insulators. In RIP bushings, the major insulation consists of a core wound from paper which is subsequently impregnated with epoxy resin. RIP bushings are becoming popular worldwide because of its advantages regarding safety. For this indigenous development we received the runner-up Award at Elecrama 2018 for the ‘Best Product Category by an Indian Exhibitor’.

CG has been front runner in offering customized solutions and customer oriented approach. In line with this legacy, the Company has developed a 420 kV polymeric lightning arrestor with a cantilever load of 350 kgF—the highest ever load in the history of this product segment. Designed according to customer requirements, the development included designing and manufacturing of hollow core composite insulators and other critical components. The highlight of this product is that it weighs less compared to porcelain, has an explosion-proof design and enhanced reliability in extreme climates and polluted environments.

In line with CG’s objective of offering customer centric and smart products, the Company developed a Digital Surge Counter to monitor the health of zinc oxide surge arresters. The product shakes hand with digital technology to measure vital parameters such as total leakage current and total surge counts. Overcoming the use of conventional analog circuits, this product offers real time data acquisition with reliable accuracy and performance.

There was also the development of 170 kV and 362 kV Externally Gapped Line Arresters which protect transmission lines from lightning and, thus, improve performance and reliability. The design is such that it can deal with insulation coordination in worst conditions.

The Company’s Switchgear division has also developed sectionalisers, auto-reclosers, compact frame vacuum interrupters and a cost efficient range of instrument transformers.

The Low Tension Motors division of the Company developed the entire range of IE3 motors (80-355 frame, 0.37 kW to 250 kW) with an enclosure capable of withstanding the pressure of explosive gas and prevent transfer of flames. This division also developed under slung mounted 500 kVA DG sets for Indian Railways in order to utilize the coach onboard space for transporting goods as additional space.

CG Traction Electronics division, designs and develops Electric Multiple Unit / Mainline Electric Multiple Unit in collaboration with partners. Further CG has also tied up with Centre for Design & Advanced Computing (CDAC) for the project of Control & Monitoring System for locomotives. Recently CG has tied up with Indian Railways to supply Under Slung Electrics for Diesel Electric Tower Car (DETC). Large quantities of DETCs are required for massive track electrification drive taken up by Indian Railways across the country.

----; CG’s R&D efforts enables the Company to manufacture cost competitive products, offer improved and integrated product portfolio, increase its market share, shorten lead time, import substitution and offer high specification products as per requirements of international markets.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Details as required under Section 134 of the Act read with the Companies (Accounts) Rules, 2014, are given in the prescribed format as Annexure 1 to this Report.

ENVIRONMENT, HEALTH & SAFETY (EHS)

CG is committed in conducting its business in a responsible manner that creates a sustained positive impact on society, improves the quality of life of the underserved communities and preserve the ecosystem that supports the communities and the Company.

The Company propagates ‘Zero Harm Culture’ towards employees, environment and other stakeholders as reflected in our Corporate EHS policy and Cardinal Rules. Through our Corporate EHS Policy, we aim at not only complying with legal requisites of safeguarding our employees, environment and the society at large but also to set high internal standards for compliance.

All CG units in India are certified for quality systems with ISO 9001:2015 Certification / ISO 14001:2015 Environmental Management System Certification and OHSAS 18001:2007 Certification. We are in process of upgrading to ISO 45001.

The Company business at Indonesia was certified for Integration Management System (IMS) for ISO 9001:2015, ISO 14001:2015 and OHSAS 18001:2007. All Units in India have clearance to operate from State Pollution Control Board Authorities and are complying over and above the conditions laid down in consent to operate.

Regular trainings on EHS awareness and sustainable growth are conducted at all manufacturing locations. National Safety Week and World Environment Day campaign is conducted under guidance of Directorate of Industrial Safety and Health and State Pollution Control Board. Fire safety week are also observed in India under the guidance of the Fire Adviser, Ministry of Home Affairs, Government of India.

EHS Key Performance Indicators (KPIs) are linked with SMART goals of all units and individuals for their Annual Performance Management process. Quarterly audits are conducted to review the EHS implementation and process compliances across all locations of the Company. Corrective actions generated from these audits and various EHS events are captured and tracked for closure in an online Event Reporting System portal.

As a part of our continued efforts and commitment towards the environment, the Company has also initiated rooftop solar system installations across all locations of the Company.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company believes in inclusive growth, diversity and equitable development of society. That being so, it has undertaken various CSR projects during the year under review in the areas of education, skill development and upliftment of underserved communities.

The details of the composition of CSR Committee, CSR Policy and projects undertaken by the Company during FY2018 are given in the section titled ‘Annual Report on CSR initiatives’ in Annexure 2 of this Report.

MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THE COMPANY

There are 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 i.e. 31 March 2018 and the date of this Report.

MATERIAL ORDERS OF REGULATORS / COURTS / TRIBUNALS

During the year under review, no significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company’s operations in future.

REGISTRAR & SHARE TRANSFER AGENT

The Company has appointed Datamatics Business Solutions Limited (Formerly Datamatics Financial Services Ltd), (DBSL) as its Registrar & Share Transfer Agent who is registered with SEBI. The contact details of DBSL are mentioned in section titled ‘Report on Corporate Governance’ of this Annual Report.

DIVIDEND DISTRIBUTION POLICY

Pursuant to Regulation 43A of the Listing Regulations, the Company has formulated a Dividend Distribution Policy as provided in Annexure 7 of this Report and is also available on the website of the Company under http:// www. cgglobal. com/frontend/finalnonproduct. aspxRs.cnRs.2=yrnPqECUvhk=

PUBLIC DEPOSITS

The Company has not accepted any deposits from public or its members during the year under review as per Sections 73 and 76 of the Act and no deposits exists as on date.

PARTICULARS OF EMPLOYEES

Disclosures pertaining to remuneration and other details as required under Section 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given in Annexure 3 of this Report.

In accordance with the provisions of Section 197(12) of the Act read with Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of the employees covered under the said rule are available at the Registered Office of the Company for inspection during working hours up to the date of the ensuing Annual General Meeting and any member interested in obtaining a copy thereof may write to the Company Secretary of the Company.

COMPLAINTS RELATING TO SEXUAL HARASSMENT

In terms of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company has adopted a Prevention of Sexual Harassment Policy for protection against sexual harassment and have also constituted Internal Complaint Committee presided by woman employee comprising of five to seven Company employees with an external member to which employees can address their complaints.

During the year under review, no incident of sexual harassment was reported.

VIGIL MECHANISM

The Company has set up a vigil mechanism viz. Whistle Blower Policy as per the provisions of Section 177 of the Act and Regulation 18 of the Listing Regulations to enable its employees to report violations, genuine concerns, unethical behavior and irregularities, if any, noticed by them which could adversely affect the Company’s operations.

The Head of Internal Audit submits a report to the Chairman of the Risk and Audit Committee on a quarterly basis, on all complaints referred to the Management Committee, nominated by the CEO and Managing Director of the Company, with the status of investigations and actions taken by the Management Committee.

No material concerns or irregularities have been reported during the year under review and none of the Whistle Blowers were denied access to the Risk and Audit Committee of the Board.

AUDITORS AND AUDIT REPORTS STATUTORY AUDITORS

The Board of Directors of the Company have, at its meeting held on 26 April 2018, approved the proposal for availing borrowings up to an amount of approximately US$250 million from a consortium of international lenders (‘the Arrangers’) at CG International BV (CGIBV), the wholly-owned subsidiary of the Company, for restructuring current debts of the Company and to avail the benefit of lower interest rate and deferred tenor. These funds will be used to retire the existing debt of the Company both in India and overseas. A condition prescribed by the Arrangers requires the Company to get its financial statements audited by one of the Big Four international auditors for the audit from the period ending September 2018 onwards.

Given the importance of this financial restructuring exercise to the Company and consequent to its discussions on this matter with M/s. Chaturvedi &Shah, Chartered Accountants, the then Statutory Auditors of the Company, they have submitted their resignation with immediate effect vide their letter dated 27 April 2018.

In order to fill the casual vacancy caused by the resignation of M/s. Chaturvedi & Shah, Chartered Accountants, based on the recommendation of the Risk and Audit Committee and the Board of Directors, the shareholders of the Company had on 29 May 2018 in terms of the requirement of the Companies Act, 2013, appointed, M/s. K.K. Mankeshwar & Co., Chartered Accountants (with Firm Registration No.106009W), as the Statutory Auditors of the Company, to hold office till the conclusion of the ensuing 8181 Annual General Meeting of the Company.

The proposal for appointment of Statutory Auditors of the Company from the conclusion of the ensuing 81st Annual General Meeting, pursuant to the recommendation of the Risk and Audit Committee and Board of Directors of the Company is contained in the accompanying Notice of Annual General Meeting and the explanatory statement thereto.

During the year under review, the Statutory Auditors have not reported any instances of offence or fraud committed by the officers or employees of the Company, to the Risk and Audit Committee or the Board of Directors of the Company.

COST AUDITOR

As per the requirement of Section 148(1) of the Act, the Company is required to maintain cost accounts and records. Accordingly, the Company has maintained cost accounts and records for FY2018 as applicable for its product range.

The Company had appointed M/s. Ashwin Solanki & Associates, Cost Accountants, Mumbai (Firm Registration No. 100392) to audit the cost records related to the Company’s products for FY2018. The cost audit report for FY2017 has been filed with the Registrar of Companies, Mumbai within the prescribed statutory deadline.

Upon recommendation of the Risk & Audit Committee, the Board has re-appointed M/s. Ashwin Solanki & Associates as Cost Auditor of the Company for FY2019 at a remuneration of ^600,000 p.a. plus out-of-pocket expenses and taxes, as applicable. The remuneration payable to M/s. Ashwin Solanki & Associates for FY2019 is recommended for ratification by the Members at the ensuing Annual General Meeting.

SECRETARIAL AUDITOR

The Company had appointed M/s. Parikh & Associates, Practising Company Secretaries, Mumbai (Firm Registration No. P1988MH009800) to undertake the Secretarial Audit of the Company for FY2018. Secretarial Audit Report for FY2018 in Form MR-3 is annexed as Annexure 4 to this Report.

There are no qualifications, reservations or adverse remarks or disclaimers made by the Statutory Auditor or the Secretarial Auditor in their reports and hence do not call for any further comments.

DIVIDEND

No dividend has been recommended or paid for the year ended 31 March 2018.

RESERVES

The Reserves, on standalone basis, at the beginning of the year amounted to Rs.4,074 crore and at the end of the year stood at Rs.3,715 crore.

SHARE CAPITAL

As on 31 March 2018:

- The authorised share capital of the Company was Rs.4,076,000,000 (Rupees four hundred and seven crore and sixty lakh) divided into 2,038,000,000 equity shares of Rs.2 (Rupees two) each.

- The subscribed and paid-up share capital of the Company stood at Rs.1,253,492,284 (Rupees one hundred and twenty five crore, thirty four lakh, ninety two thousand, two hundred and eighty four) consisting of 626,746,142 equity shares of V2. (Rupees two) each.

The Company’s equity shares are listed and traded on BSE Limited and National Stock Exchange of India Limited.

The Company has issued Global Depository Receipts (GDRs) in 1996 and the underlying shares for each GDR were issued in the name of The Bank of New York, the Depository. Each GDR of the Company is equivalent to five equity shares. As on 31 March 2018, 164,501 GDRs were outstanding, which represent 822,504 underlying equity shares of the Company.

EXTRACT OF ANNUAL RETURN

The extract of the Annual Return in Form MGT-9 is annexed as Annexure 5 of this Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors would like to assure the Members that the Financial Statements both on stand-alone and consolidated basis, for the year under review conform, in their entirety, to the requirements of the Act.

The Directors confirm that:

- the Annual Accounts have been prepared in conformity with the applicable Accounting Standards alongwith proper explanations relating to material departures;

- the Accounting Policies selected and applied on a consistent basis and judgments and estimates made are reasonable and prudent 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 / loss of the Company for the financial year;

- proper and sufficient care has been taken to maintain adequate accounting records for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- the Annual Accounts have been prepared on a going concern basis;

- the internal financial controls laid down in the Company were adequate and operating effectively;

- the systems devised to ensure compliance with the provisions of all applicable laws were adequate and operating effectively.

ACKNOWLEDGEMENTS

The Board of Directors wish to convey their gratitude and appreciation to all the employees of the Company, for their tremendous efforts as well as their exemplary dedication and contribution to the Company’s performance.

The Directors would also like to thank the employee unions, shareholders, customers, dealers, suppliers, bankers, government and all other business associates for their continued support extended to the Company and the Management.

On behalf of the Board of Directors

GAUTAM THAPAR

CHAIRMAN

(DIN:00012289)

New Delhi, 10 August 2018

Director’s Report