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Escorts

BSE: 500495|NSE: ESCORTS|ISIN: INE042A01014|SECTOR: Auto - Tractors
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Directors Report Year End : Mar '19    Mar 18

Dear Shareholders,

The Directors have pleasure in presenting the Seventy Third Annual Report of the Company along with Company’s audited financial statements (standalone and consolidated) for the financial year ended on March 31, 2019.

Financial Results

(Rs. crores)

Particulars

Year ended on March 31, 2019

Year ended on March 31, 2018

Gross Revenue

6,277.21

5,075.38

Excise Duty

-

20.85

Net Revenue

6,277.21

5,054.53

Profit from continuing operations before Interest, Depreciation, Exceptional Items & Tax

814.14

616.63

Finance Cost

18.48

28.57

Profit from continuing operations before Depreciation, Exceptional Items & Tax

795.66

588.06

Depreciation & Amortisation

85.37

72.48

Profit from continuing operations before Exceptional Items & Tax

710.29

515.58

Exceptional Item

10.91

(6.76)

Profit from continuing operations before Tax

721.20

508.82

Tax Expense

237.52

164.10

Profit from continuing operations after Tax

483.68

344.72

Profit / (Loss) from discontinued operations before Tax

1.89

-

Tax Expense of discontinued operations

0.66

-

Profit / (Loss) from discontinued operations after Tax

1.23

-

Net profit for the period

484.91

344.72

Appropriations for the year:

Dividends

(23.90)

(17.93)

Tax on dividends

(5.04)

(3.74)

Dividend received on share held by beneficiary trust1

6.73

5.59

* for more information please refer note 45 of the notes to accounts of standalone financial statement

Financial Performance

The brief highlights of the Company’s performance (Standalone) for the financial year ended March 31, 2019 are:-

- Net Revenue of the Company for FY 2019 of Rs. 6,277.21 crores was higher by 24.19% over the last year (Rs. 5,054.53 crores in FY 2018)

- Profit from continuing operations before Interest, Depreciation, Exceptional Items & Tax stood at Rs. 814.14 crores

- Profit from continuing operations before Tax (PBT) stood at Rs. 721.20 crores and Profit from continuing operations After Tax (PAT) stood at Rs. 483.68 crores. Net profit for the period stood at Rs. 484.91 crores

- Your Company sold 96,412 tractors during the year under review as against 80,417 tractors sold during the last financial year

Management Discussion & Analysis

In terms of the provisions of Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred as the “SEBI Listing Regulations”), the Management Discussion and Analysis is set out in this Annual Report and provides a detailed analysis on the performance of individual businesses and their outlook.

Dividend

Based on the Company’s performance, your Directors are pleased to recommend, for approval of the members, a Dividend of Rs. 2.50 per Equity Share (25%) on the face value of Rs. 10/- each, aggregating Rs. 22.22 crores (exclusive of tax on dividend) for the financial year ended March 31, 2019 except on the equity shares held by Escorts Benefit and Welfare Trust (EBWT). The dividend payout is subject to the approval of members at the ensuing Annual General Meeting (AGM).

The dividend payout for the period under review has been formulated in accordance with shareholders’ aspirations and the Company’s Dividend Distribution Policy to pay sustainable dividend linked to long-term growth objectives of the Company to be met by internal cash accruals.

During the year, the Dividend Distribution Policy was amended to specify the Dividend Range. The amended policy is available on our website at https://www.escortsgroup.com/templates/ escortsgroup_home/images/pdf/Dividend-Distribution-Policy.pdf

Employee Stock Option Scheme

The Scheme is in line with the SEBI (Share Based Employee Benefits) Regulations, 2014 (“SBEB Regulations”) and there have been no material changes to the schemes during the financial year 2018-19. The Scheme has been implemented in accordance with the SBEB Regulations and the resolutions passed by the members. The auditors certificate would be available at the Annual General Meeting for inspection by members. The details as required to be disclosed under the SBEB Regulations would be available on the Company’s website at www.escortsgroup.com.

Directors

During the year ended March 31, 2019, Mr. Rajan Nanda, Chairman and Managing Director of the Company passed away on August 5, 2018. The Board of Directors in their meeting held on August 7, 2018 had appointed Mr. Nikhil Nanda, Managing Director as the Chairman of the Company w.e.f. August 7, 2018.

Further, Mr. Ravi Narain, Independent Director of the Company had resigned from the Board of Directors of the Company w.e.f. May 1, 2019 in view of the order passed by SEBI in the matter of National Stock Exchange of India Limited.

In accordance with the provisions of Companies Act, 2013 (hereinafter referred as “the Act”) and Articles of Association of the Company, Ms. Nitasha Nanda, Whole-time Director and Mr. G.B. Mathur, Director retire by rotation at the ensuing AGM and being eligible, offers themselves for re-appointment.

The Company has on the recommendation of Nomination and Remuneration Committee (NRC) and in accordance with the provisions of the Act and SEBI Listing Regulations co-opted Mr. Shailendra Agrawal as an Additional Director on the Board of the Company and designated as the Executive Director w.e.f. March 22, 2019, liable to retire by rotation, subject to approval of the members at the AGM. He shall hold office as Director of the Company upto the date of ensuing AGM and is eligible for appointment as a Director. His appointment is appropriate and in the best interest of the Company.

The Board of Directors on the recommendation of NRC, in their meeting held on May 7, 2019, co-opted Mr. Sunil Kant Munjal as an Additional and Independent Director on the Board of the Company. He shall hold office as Director of the Company upto the date of ensuing AGM.

The Board of Directors on the recommendation of NRC, in their meeting held on May 7, 2019, on the basis of the report of performance evaluation, had recommended the re-appointment of Ms. Nitasha Nanda as Whole-time Director for a period of 5 years w.e.f. January 16, 2020 and Mr. D.J. Kakalia as an Independent Director for a further period of 5 years for approval of members of the Company at the ensuing AGM.

Pursuant to the applicable provisions of the Act, your directors are seeking appointment of Mr. Shailendra Agrawal as an Executive Director w.e.f. March 22, 2019 for a period of 5 years and Mr. Sunil Kant Munjal as an Independent Director for a period 5 years and re-appointment of Ms. Nitasha Nanda as Whole-time Director w.e.f. January 16, 2020 for a period of 5 years and Mr. D.J. Kakalia as an Independent Director for a period of 5 years.

The brief resumes and other disclosures relating to the Directors who are proposed to be appointed/ re-appointed, as required to be disclosed pursuant to Regulation 36 of the SEBI Listing Regulations and Clause 1.2.5 of the Secretarial Standard 2 are given in the Annexure to the Notice of the 73rd AGM.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet with criteria of independence as prescribed under sub-section (6) of Section 149 of the Act and under Regulation 16(1)(b) of SEBI Listing Regulations. The policy for selection of directors and determining directors independence is attached as Annexure -A and forms an integral part of this Report.

The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of the Non-Executive and Executive Directors. In accordance with the Policy, a process of evaluation was followed by the Board for its own performance and that of its Committees and individual Directors. The remuneration policy for directors, key managerial personnel and other employees is annexed as Annexure - B and forms an integral part of this Report.

Your Directors recommend the appointment/ re-appointment of the above said Directors at the ensuing AGM.

The Company has devised a process where various presentations/ programs are being conducted to make them familiarise with various developments at Industry level, new business initiatives and organisation strategies etc.

The details of programme for familiarisation of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company - www.escortsgroup.com.

The Company recognises and embraces the importance of a diverse board in its success. We believe that a truly diverse board will leverage differences in thought, perspective, knowledge, skill, regional and industry experience, cultural and geographical background, age, ethnicity, race and gender, which will help us retain our competitive advantage.

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

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 are provided as Annexure - C and forms an integral part of this Report.

Corporate Governance

Corporate Governance is about maximising shareholders value, ethically and sustainable. At Escorts the goal of corporate governance is to ensure fairness for every stakeholder. We believe strong corporate governance is critical to enhancing and retaining investor trust. We also endeavor to enhance long term shareholder value and respect minority rights in all our business decisions.

Your Company reaffirms its commitment to the good corporate governance practices and has adopted the Code of Business Conduct which has set out the systems, processes and policy conforming to international standards. Pursuant to Regulation 34(3) of the SEBI Listing Regulations, Corporate Governance Report and Auditors’ Certificate regarding compliance of conditions of Corporate Governance are enclosed as Annexure - D and forms an integral part of this Report.

Corporate Social Responsibility (CSR)

The key philosophy of all CSR initiatives of the Company is to make CSR a key business process for sustainable development of the society. The initiatives aim at enhancing welfare measures of the society based on the immediate and long term social and environmental consequence of its activities.

The Company intends to undertake other need-based initiatives in compliance with Schedule VII of the Act.

The CSR Policy may be accessed on the Company’s website www.escortsgroup.com under Investors Information Section. During the year, the Company has spent Rs. 6.13 crores (2.07%) of the average net profits of last three financial years on CSR activities.

The Annual Report on CSR activities is enclosed as Annexure - E and forms an integral part of this Report.

Consolidated Financial Statements

The Consolidated Financial Statements have been prepared in accordance with the Act and Indian Accounting Standard (IND AS) - 110 applicable to the Consolidated Financial Statements read with IND AS-28 on Accounting for Investments in Associates and IND AS-31 on Financial Reporting of Interests in Joint Ventures issued by The Institute of Chartered Accountants of India. The Audited Consolidated Financial Statements along with the Auditors’ Report thereon are annexed with this Report.

Subsidiaries, Joint Ventures and Associate Companies

The statement in Form AOC-1 containing salient features of financial statements of subsidiaries, associate and joint venture companies prepared in accordance with Section 129 of the Act read with Rule 5 of Companies (Accounts) Rules, 2014, forms an integral part of this Report. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiaries, associate and joint venture companies.

During the financial year ended on March 31, 2019, the Company has infused additional equity capital in Escorts Crop Solutions Limited, subsidiary of the Company. The details of the said investment/ disinvestment is provided in the note 6(i) of the Notes to Accounts of the Standalone Financial Statements of the Company.

The Company has also entered into two Joint Ventures with Japanese companies during the year i.e. with Tadano Limited and Kubota Corporation. The Company has also made an investment of Rs. 29.40 crores being 49% stake in the Equity Capital of Tadano Escorts India Private Limited being the Joint Venture of your Company with Tadano Limited, Japan and Rs. 60 crores being 40% stake in the Equity Capital of Escorts Kubota India Private Limited being the Joint Venture of your Company with Kubota Corporation, Japan.

The Company will make available the Annual Accounts of its subsidiaries, associate and joint venture companies and related information to the members of the Company who may be interested in obtaining the same. The annual accounts of its subsidiaries, associate and joint venture companies will also be kept open for inspection at the Registered Office of the Company.

Contracts and Arrangements with Related Parties

All contracts/ arrangements/ transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm’s length basis. During the year, the Company had not entered into any contract/ arrangement/ transaction with related parties which could be considered material in accordance with the policy of the Company on the materiality of related party transactions.

The particulars of contracts or arrangement with related parties referred to in Section 188(1) of the Act in the prescribed Form AOC-2 is appended as Annexure - F to this report.

The Policy on materiality of related party transactions and dealing with related party transactions may be accessed on the Company’s website www.escortsgroup.com under Investors Information Section.

Your Directors draw attention of the members to Note 47 in the notes to accounts in the standalone financial statement and to Note 46 in the notes to accounts in the consolidated financial statement which sets out related party disclosures.

Auditors and Auditors’ Report

Statutory Auditors

Pursuant to the provisions of Section 139 of the Act read with Companies (Audit and Auditors) Rules, 2014, the shareholders of the Company in the 71st AGM held on September 21, 2017 had appointed M/s Walker Chandiok & Co LLP, Chartered Accountants, New Delhi (Firm Registration No. 001076N/ N500013) as Statutory Auditors of the Company for a period of 5 years i.e. upto the conclusion of AGM to be held in the year 2022.

In accordance with the Companies (Amendment) Act, 2017 enforced on May 7, 2018 by MCA, the appointment of Statutory Auditors is not required to be ratified by members at every AGM. The observations and comments given by M/s. Walker Chandiok & Co LLP, Chartered Accountants, Statutory Auditors in their report read together with notes to Accounts for the year ended March 31, 2019 are self-explanatory and hence, do not call for any further comments under Section 134 of the Act. The Statutory Auditors of the Company have not reported any fraud as specified in Section 143(12) of the Act.

Cost Auditors

The Board of Directors of the Company has re-appointed M/s. Ramanath Iyer and Co., Cost Accountants, New Delhi (Firm Registration No. 000019), Cost Auditors of the Company under Section 148 of the Act, for conducting the audit of cost records for the financial year 2019-20.

The due date of filing the Cost Audit Report for the year ended on March 31, 2018 was September 30, 2018 and the same had been filed on September 13, 2018.

Secretarial Auditors

The Board of Directors of the Company had appointed M/s. Jayant Gupta and Associates, Practicing Company Secretary to conduct secretarial audit of the Company for the financial year 2018-19.

The Secretarial Audit Report for the financial year ended March 31, 2019 is enclosed as Annexure - G and forms an integral part of this Report.

The observations and comments given by the Secretarial Auditors in their report are self-explanatory and hence, do not call for any further comments under Section 204(3) of the Act.

The Board has also re-appointed M/s. Jayant Gupta and Associates, Practicing Company Secretary to conduct secretarial audit of the Company for the financial year 2019-20.

Risk Management

The Risk Management Committee of the Board has been entrusted with the responsibility to assist the Board in (a) overseeing and approving the Company’s enterprise wide risk management framework; and (b) Overseeing that all the risks that the organisation faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks.

Internal Financial Control and its Adequacy

The Board has adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to Company’s policies, the safeguarding of its assets, the prevention and detection of fraud, error reporting mechanisms, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures.

The Company has in place adequate internal financial controls for ensuring the orderly and efficient conduct of its business. During the year, such controls were tested and no reportable material weakness in the design or operation was observed.

Disclosures

Meetings of the Board

Ten meetings of the Board of Directors were held during the year. For further details, please refer Report on Corporate Governance annexed as Annexure - D to this Report.

Audit Committee

For constitution and other details of the Audit Committee, please refer Report on Corporate Governance annexed as Annexure-D to this Report.

All the recommendations made by the Audit Committee were accepted by the Board.

Extracts of Annual Return

In terms of provisions of Section 92 of the Act read with the Companies (Management and Administration) Rules, 2014, the extracts of Annual Return in Form MGT-9 is enclosed as Annexure - H and forms an integral part of this Report. The Annual Return for Financial Year 2017-18 is also available on the Company’s website at www.escortsgroup.com.

Vigil Mechanism

The Company has adopted a Whistle Blower Policy establishing vigil mechanism for Directors and Employees to report their concerns about unethical behavior, actual or suspected fraud or violation of the Company’s Code of Conduct. The mechanism provides for adequate safeguards against victimisation of effected Director(s) and Employee(s). In exceptional cases, Directors and Employees have direct access to the Chairman of the Audit Committee. It is affirmed that no personnel of the Company has been denied access to the Audit Committee. The Whistle Blower Policy is available on Company’s website.

Registrar and Share Transfer Agent

The Share Transfer and related activities are being carried out by M/s Karvy Fintech Private Limited (earlier Karvy Computershare Private Limited), Registrar and Share Transfer Agents from the following address:-

M/s Karvy Fintech Private Limited

Karvy Selenium, Tower B, Plot No. 31-32,

Gachibowli, Financial District, Nanakramguda,

Hyderabad-500032, Telangana

All correspondence may kindly be sent to the above address only.

Particulars of Loans given, Investments made, Guarantees given and Securities provided

Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient has been given elsewhere in the Annual Report and forms an integral part of this Report.

Particulars of Employees and related disclosures

In terms of provisions of Section 197(12) of the Act, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the prescribed limits are available with the Company Secretary. Having regard to the provisions of Section 136(1) of the Act, the Annual Report excluding the aforesaid information is being sent to the members of the Company. Any member interested in obtaining such particulars may write to the Company Secretary of the Company and the same will be furnished on request.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as Annexure - I and forms an integral part of this Report.

Public Deposits

The Company has not accepted/ renewed any Fixed Deposit during the financial year and as such no amount of principal or interest was outstanding as of the Balance Sheet date.

Investor Education and Protection Fund (IEPF)

Pursuant to the applicable provisions of the Companies Act, 2013, read with IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (‘the Rules’), all unpaid or unclaimed dividends are required to be transferred by the Company to the IEPF established by the Central Government, after the completion of seven years.

Further, according to the rules, the shares in respect of which dividend has not been paid or claimed by the shareholders for seven consecutive years or more shall also be transferred to the demat account created by the IEPF Authority. Accordingly, the Company was required to transfer the unclaimed and unpaid dividends and shares as per the requirements of the IEPF rules, details of which are provided on our website.

As on March 31, 2019, no unclaimed deposits are pending for transfer to Investor Education and Protection Fund.

Credit Rating

During the year, the credit rating of the Company have been upgraded as under:

ICRA Limited has upgraded the long-term rating from “ICRA A ”/ Positive to “ICRA AA-”/ Stable and short-term rating reaffirmed “ICRA A1 ”.

India Ratings has upgraded the long-term rating from ‘IND A / Positive to ‘IND AA-/ Positive and short-term rating reaffirmed “IND A1 ”.

CRISIL has assigned long term rating “CRISIL AA-”/ Stable and short term rating “CRISIL A1 ”.

Material Changes and Commitment affecting the financial position

There are no material changes affecting the financial position of the Company subsequent to the close of the Fiscal 2019 till the date of this report.

Prevention of Sexual Harassment

The Company has zero tolerance for sexual harassment at workplace and has adopted a policy on Prevention, Prohibition and Redressal of Sexual Harassment at Workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder for prevention and redressal of complaints of sexual harassment at workplace. The Company is committed to providing equal opportunities without regard to their race, caste, sex, religion, colour, nationality, disability, etc. All women associates (permanent, temporary, contractual and trainees) as well as any women visiting the Company’s office premises or women service providers are covered under this Policy. All employees are treated with dignity with a view to maintain a work environment free of sexual harassment whether physical, verbal or psychological.

The Company has also complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Secretarial Standards

The Company is in compliance with all the applicable Secretarial Standards.

Business Responsibility Report (BRR)

The SEBI Listing Regulations mandate the inclusion of BRR as part of the Annual Report for top 500 listed entities based on market capitalisation.

In compliance with the SEBI Listing Regulations, the BRR describing the initiatives taken by the Company from an environmental, social and governance perspective is enclosed as Annexure - J and forms an integral part of this Report.

Directors’ Responsibility Statement

Pursuant to the requirement under Section 134(5) of the Act, with respect to Directors’ Responsibility Statement, your Directors, to the best of their knowledge and ability, hereby confirm that:

(i) in the preparation of the annual accounts for the year ended March 31, 2019, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed alongwith proper explanation relating to material departures;

(ii) the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2019 and of the profit and loss of the Company for the year ended on that date;

(iii) the Directors have taken proper and sufficient care 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;

(iv) the Directors have prepared the annual accounts for financial year ended March 31, 2019 on a ‘going concern’ basis;

(v) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

(vi) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

General

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

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend, voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOS referred to in this Report.

4. Neither the Managing Director nor the Whole-time Directors of the Company receive any remuneration or commission from any of its subsidiaries.

5. 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. However, members attention is drawn to note 34 on Commitments and Contingencies in the Notes forming part of the financial statement.

Acknowledgement

Your Directors would like to express their sincere appreciation of the positive co-operation received from the Central Government, the Government of Haryana and Uttaranchal and Karnataka, Financial Institutions and the Company’s Bankers, Customers, Dealers and all other business associates.

The Directors also wish to place on record their deep sense of appreciation for the commitment displayed by all executives, officers, workers, employee unions and staff of the Company resulting in the successful performance of the Company during the year.

The Board also takes this opportunity to express its deep gratitude for the continued co-operation and support received from its valued shareholders.

For and on behalf of the Board of Directors

Sd/-

Place: Faridabad Nikhil Nanda

Date: May 7, 2019 Chairman & Managing Director

Source : Dion Global Solutions Limited
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