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JTEKT India Ltd.

BSE: 520057 | NSE: JTEKTINDIA |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE643A01035 | SECTOR: Auto Ancillaries

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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 have pleasure in presenting their 34th Annual Report together with audited accounts of the Company for the year ended 31st March, 2018.

1) Financial Results

STANDALONE AND CONSOLIDATED PREFORMANCE OF THE COMPANY

(INR in Lakhs)

Standalone

Consolidated

Current Year

Previous Year

Current Year

Previous Year

31.03.2018

31.03.2017

31.03.2018

31.03.2017

Total Income (net of excise duty)

1,21,479.49

1,17,107.37

1,25,725.29

1,21,777.38

Profit before interest , depreciation & tax

14,331.79

13,462.12

16,130.28

15,192.00

- Interest

2,073.53

2,425.91

2,085.33

2,522.26

- Depreciation & write offs

7,312.73

7,477.36

7,723.21

7,883.47

Profit before share of profit of Associates

4,945.53

3,558.85

6,321.74

4,786.27

Add : Share of profit of associates

1,301.53

805.07

Profit before tax

4,945.53

3,558.85

7,623.27

5,591.34

Less : Provision for tax

2,403.21

1,543.13

2,911.25

1,936.47

Provision for deferred tax liability/(assets)

(701.95)

(493.37)

(583.33)

(391.92)

Profit after tax

3,244.27

2,509.09

5,295.35

4,046.79

Less : Share of profit transferred to minority

464.84

349.35

Profit for the year

3,244.27

2,509.09

4,830.51

3,697.44

Retained Earnings

Balance at the beginning of the year

11,792.35

10,479.26

20,234.29

17,740.63

Other opening adjustment

0.36

Profit for the year

3,244.27

2,509.09

4,830.51

3,697.44

Payment of Dividend on equity shares

(993.82)

(993.70)

(993.82)

(993.70)

Corporate Dividend Tax paid

(194.53)

(202.30)

(202.30)

(210.08)

Balance at the end of the year

13,848.27

11,792.35

23,869.04

20,234.29

2) State of Affairs of the Company

Revenue from operations increased by 4.1% to INR 12,122.46 million. PBDIT improved by 6.46% to INR 1,433.18 million. The Company reported PAT of INR 308.10 million. Improvement in profitability reflects the success of Company’s efforts in controlling the fixed costs.

3) Change of Promoter and Name of the Company

During the year under review, JTEKT Corporation, Japan, one of the Promoters of the Company, acquired the complete stake of 25.12% held by Sona Autocomp Holding Limited, the Company’s Indian Promoter. The said acquisition of shares had triggered an ‘Open Offer’ in terms of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and subsequent amendments thereto. Post conclusion of the said Open Offer, the shareholding of JTEKT Corporation, Japan increased to a level of 70.45% and along with Maruti Suzuki India Limited, the total Promoter Group shareholding was increased to 77.39%.

In order to bring public shareholding to the minimum threshold level of 25%, JTEKT Corporation, Japan sold excess Promoters’ shareholding of 2.39%, by way of ‘Offer for Sale’ (OFS) in accordance with the guidelines issued by Securities & Exchange Board of India, in two tranches completed on 20th March, 2018 and 9th April, 2018. The second OFS transaction concluded on 9th April, 2018, received an excellent response from the market with bids received were more than 6 times of the Issue size.

‘JTEKT’ is a registered Trade Mark owned by JTEKT Corporation, Japan. JTEKT is a leading global brand having footprint spanning to almost all continents by having more than 149 subsidiaries worldwide. After the aforesaid transaction your Company became subsidiary of JTEKT Corporation, Japan and consequently became a member of The “JTEKT Group”. The brand “JTEKT” will bring international recognition to your Company and communicate one identity, particularly to global customers of JTEKT Group. Accordingly to leverage on brand “JTEKT”, the name of your Company has been changed from ‘Sona Koyo Steering Systems Limited’ to ‘JTEKT India Limited’ with effect from 7th April, 2018.

4) Dividend

Your directors are pleased to recommend a dividend of 50% on equity share capital of the Company for the financial year 2017-18, same as last financial year.

5) Reserves

(INR in Lakhs)

31-Mar-18

31-Mar-17

Balance as per last financial statements

11,792.35

10,479.26

Add: Profit for the year

3,244.27

2,509.09

Less: Appropriations

Proposed dividend

993.82

993.70

Tax on proposed dividend

194.53

202.30

Net surplus in the statement of profit and loss

13,848.27

11,792.35

6) Change of nature of Business (if any)

There has been no change in the nature of business of the Company during the financial year.

7) Share Capital

The Paid Up Equity Share Capital of the Company as at March 31, 2018 stood at INR 1987.42 lakhs. During the year under review, the Company has not issued any shares / securities. As on March 31, 2018, none of the Directors of the Company hold instruments convertible into equity shares of the Company.

8) Significant and material Orders passed by the Regulators or Courts

There are no significant or material Orders passed by the Regulators or Courts that would impact the going concern status of the Company and its future operations.

9) Material changes and commitments, if any, affecting the 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 to which financial statements relate and the date of the report.

10) Details in respect of adequacy of internal controls

The Company has an effective and reliable internal control system commensurate with its size and operations. The internal controls are aligned to global standards and processes while also adhering to local statutory requirements. The internal controls systems are supported through, management reviews, verification by internal auditors, as well as verification by statutory auditors. Further, the Audit Committee of the Board reviews the internal audit plan, adequacy of internal controls system, significant audit observations and monitors the sustainability of remedial measures.

In addition to policies, procedures, and guidelines, the internal controls system is facilitated by an automated “Compliance Manager Tool”, which enables self-assessment by process owners on status of all applicable regulatory compliances and Internal Controls including, controls relating to adherence to company’s policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information. The status of each self-assessment is approved by an immediate superior. The status of self-assessment is periodically deliberated and reviewed by the Senior Management. Further, the accuracy of sample self-assessments is verified through periodic internal audits.

The aforesaid internal control system provides high degree of assurance with respect to effectiveness and efficiency of operations, adequacy and adherence of internal financial controls and compliances with laws and regulations.

11) Details and Performance of Subsidiary Companies / Associate Company

In terms of the provisions of Section 2(87) of the Companies Act, 2013, the Company has two subsidiaries namely JTEKT SONA Automotive India Limited (JSAI) and Sona Fuji Kiko Automotive Ltd. (SFAL). However, as per the provisions of new Accounting Standards - Ind-AS 110, JSAI is considered as an Associate Company for the purpose of accounting.

- JTEKT SONA Automotive India Limited (JSAI)

In JSAI, the Company is holding 49% of the equity capital and controls the composition of the Board of Directors. This Company was established in technical and financial collaboration with JTEKT Corporation, Japan with a business objective of manufacturing Column Type Electric Power Steering (C-EPS) Systems. The Plants of JSAI are located in Bawal (Haryana), and Chennai. During the year ended 31st March, 2018, JSAI has achieved total revenue of INR 5,8147.71 Lakhs and earned net profit of INR 3,118.95 Lakhs. The Board of Directors of JSAI in their meeting held on 15th May, 2018 has recommended a dividend at the rate of 30% for the financial year ended on 31st March, 2018.

- Sona Fuji Kiko Automotive Limited (SFAL)

In SFAL, the Company is holding 51% of the Equity Capital. This Company was established in technical and financial collaboration with FUJI KIKO Co. Ltd., Japan with a business objective of manufacturing Columns / Column parts to be primarily used in the manufacturing of C-EPS by JTEKT Sona Automotive India Limited. The Plant of SFAL is located in Bawal, Haryana. During the year ended 31st March, 2018, SFAL has achieved total revenue of INR 8,946.85 Lakhs and earned net profit of INR 952.42 Lakhs. The Board of Directors of SFAL in their meeting held on 16th May, 2018 has recommended a dividend at the rate of 30% for the financial year ended on 31st March, 2018.

During the year, the Company has disposed off its entire investment in Sona Skill Development Centre Limited (SSDCL), accordingly, SSDCL ceased to be an Associate Company of JTEKT India Limited with effect from 18th May, 2017.

The Board of Directors of the Company have, vide resolution dated 9th February, 2018 have approved Scheme of Amalgamation of involving JTEKT SONA Automotive India Limited (Amalgamating Company) and JTEKT India Limited (Amalgamated Company) and their respective shareholders and creditors. The proposed merger is expected to bring business and operational synergies. The aforesaid Scheme was submitted to National Stock Exchange of India Limited and BSE Limited for necessary approvals. The aforesaid Scheme has been returned by Stock Exchanges with an advice to re-submit the scheme post compliance with the provisions of Clause (I)(A)(3)(b) of Annexure I of SEBI Circular No. CFD/DIL3/CIR/2017/21 dated March 10, 2017.

12) Subsidiary Companies Accounts

During the year, the Board of Directors reviewed the affairs of the subsidiary and associate companies. In accordance with Section 129(3) of the Companies Act, 2013, the consolidated financial statements of the Company forms part of the Annual Report. Further, a statement containing the salient features of the financial statement of the subsidiary and associate company in the prescribed Form AOC-1 is attached along with financial statement. The statement also provides the details of performance, financial position of the subsidiary and associate companies.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and audited accounts of each of its subsidiaries and associate company, are available on Company’s website www.jtekt.co.in. These documents will also be available for inspection during business hours at Company’s registered office. The Company shall provide the copy of financial statements of its subsidiary and associate company to the shareholders upon their request.

In accordance with the Accounting Standard ‘AS-110’ on Consolidated Financial Statements read with Accounting Standard ‘AS-28’ on Investment in Associates and Joint Ventures, the Audited Consolidated Financial Statements are provided in the Annual Report.

13) Extract of Annual Return

The extract of Annual Return as provided under sub-section (3) of Section 92 of the Companies Act, 2013 is enclosed as Annexure - I in the prescribed form MGT-9 and forms part of this Report.

14) Corporate Social Responsibility

In compliance with Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules 2014, the Company has established Corporate Social Responsibility (CSR) Committee and statutory disclosures with respect to the CSR Committee and an Annual Report on CSR Activities forms part of this Report as Annexure - II.

This year, the Company partnered with Bharat Vikas Parishad (BVP), a non-political, socio-cultural voluntary organisation registered as a Society. BVP is currently running over 1,600 permanent projects, with almost 400 of which include Hospitals, Clinics, Physiotherapy Centres, Mobile Vans, Pathology Labs, Ultrasound Centres and Blood Banks.

As part of CSR Initiative, the Company identified Vivekanand Arogya Kendra, a diagnostic centre established by BVP, which needed help in establishing the facility. The Company financed the purchase of an Ambulance as well as a portable Ultra-Sound Machine at a total cost of INR 25.62 lakhs. The ambulance is equipped with amenities that are crucial to deliver adequate emergency medical services addressing the needs of immediate medical attention and critical care.

In the past few years, the CSR Team of the Company identified projects in the area of skill development. By using the services of Sona Skill Development Centre (Skill Centre), the team implemented several projects to impart vocational training to underprivileged children. During FY 2018, the Skill Centre stopped conducting the skill development program and therefore the CSR

Team explored other CSR options. It took some time to conclude on Preventive Health Care as one of the areas of contribution. While the Company has started making contribution in this area, however due to constrain of time it was difficult to finalize other projects and hence the entire amount could not be deployed.

15) Number of meetings of the Board of Directors

The Board of Directors met 6 (six) times in the year ended 31st March, 2018. The details of the board meetings and the attendance of the Directors are provided in the Corporate Governance Report.

16) Nomination & Remuneration Committee and its policy

The Board of Directors had constituted a Nomination & Remuneration Committee to review formulation of the criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board a policy, relating to the remuneration of the directors, key managerial personnel and other employees and such other ancillary functions as may be required.

The Company follows a policy on remuneration of Directors and Senior Management Employees. The policy is approved by the Nomination & Remuneration Committee and the Board.

17) Particulars of contracts or arrangements with related parties

The Company has entered into contracts / arrangements with the related parties in the ordinary course of business and on arm’s length basis. Thus, provisions of Section 188(1) of the Act are not applicable.

However, in terms of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, all transactions with related parties, which are of material in nature, are subject to the approval of the Members of the Company.

18) Secretarial Audit Report

Pursuant to Section 204 of the Companies Act, 2013, the Company had appointed Mr. S.S Gupta, Company Secretaries, in Practice, as its Secretarial Auditors to conduct the secretarial audit of the Company for the FY 2017-18. The Company provided all assistance and facilities to the Secretarial Auditors for conducting their audit. The Report of Secretarial Auditors for the FY 2017-18 is annexed to this report as Annexure - III. The report does not contain any qualification.

19) Risk Management Policy

The Board of Directors of the Company had constituted a Risk Management Committee to oversee the risk management process in the Company.

The Company has laid down a well-defined risk management mechanism covering the risk mapping and trend analysis, risk exposure, potential impact and risk mitigation process. A detailed exercise is being carried out to identify, evaluate, manage and monitoring of both business and non-business risks. The Risk Management Committee periodically reviews the risks and suggests the steps to be taken to control and mitigate the same through a properly defined framework.

20) Corporate Governance

The Company has complied with the corporate governance requirements under the Companies Act, 2013, and as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as ‘Listing Regulations’). A separate section on corporate governance under the Listing Regulations, along with a certificate from the auditors confirming the compliance, is annexed and forms part of this Annual Report.

21) Vigil Mechanism

The Company has established a vigil mechanism for Directors and employees to report their genuine concerns. For details, please refer to the Corporate Governance Report attached to this Report.

22) Listing

The Securities of your Company are listed at National Stock Exchange and Bombay Stock Exchange and the Company has paid the Listing Fee due to them.

23) Deposits

During the year the Company has not invited any deposits covered under Chapter V of the Companies Act, 2013.

24) Loans, Guarantees and Investments

During the year under review, no loans, guarantees and investments were made by the Company under Section 186 of the Companies Act, 2013, hence the said provision is not applicable.

25) Directors & Key Managerial Personnel

As on 31st March, 2018, your Company has nine (9) Directors consisting of four (4) Independent Directors (including one Woman Director), two (2) Non-executive Directors, a Non-executive Chairman, one Executive Director and an Executive Managing Director.

In terms of the definition of ‘Independence’ of Directors as prescribed under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 149(6) of the Companies Act, 2013 and based on the confirmation / disclosures received from the Directors, the following Non-Executive Directors were the Independent Directors :-

1) Mr. Ravi Bhoothalingam

2) Lt.Gen.(Retd.) Shamsher Singh Mehta

3) Mr. Ramesh Suri

4) Mrs. Geeta Mathur

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Companies Act, 2013 and Listing Regulations.

During the year under review, Mr. Sunjay Kapur, Mrs. Rani Kapur and Mr. Kiran Manohar Deshmukh have resigned from the Board of the Company and Mr. Seiho Kawakami and Mr. Sudhir Chopra were appointed as additional directors by close of the business hours of 18th May, 2017. Further, Mr. Hidekazu Omura and Mr. Kiyozumi Kamiki were elevated to the position of Non-Executive Chairman and Managing Director respectively.

During the year, one of the senior members of the Board, Mr. Prem Kumar Chadha, was ceased to be a director of the Company due to his sudden sad demise on 23rd June, 2017. Mr. Prasan Abhaykumar Firodia and Mrs. Ramni Nirula, Independent Directors of the Company have resigned from the Board of the Company effective from 31st May, 2017 and 30th October, 2017 respectively.

Upon recommendations of Nomination and Remuneration Committee, the Board of Directors in their meeting held on 10th November, 2017 have appointed Mrs. Geeta Mathur, as an Independent Woman Director on the Board of the Company.

Your Directors take this opportunity to place on record the appreciation of services rendered by Mr. Sunjay Kapur, Mrs. Rani Kapur, Mr. Kiran Manohar Deshmukh, Mr. Prasan Kumar Firodia and Mrs. Ramni Nirula during their association with the Company and also pay homage to the departed soul of Mr. Prem Kumar Chadha.

Further, consequent upon resignation of Mr. Deshmukh, the Board of Directors of the Company appointed Mr. Kiyozumi Kamiki, Managing Director, as one of the whole time Key Managerial Personnel of the Company effective from the close of business hours of 18th May, 2017.

The Managing Director and Director (Corporate Affairs) & Company Secretary of the Company have not received any remuneration or commission, except Sitting Fee, if any, from any of the subsidiaries of the Company.

Pursuant to the provisions of Section 152(6) and Articles of Association of the Company, Mr. Toshiya Miki (DIN: 07505339) will retire by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for reappointment.

26) Board Evaluation

The Company has devised a Policy for performance evaluation of Independent Directors, the Board, its Committees and other individual Directors which include criteria for performance evaluation of the non-executive directors and executive directors.

The performance evaluation of the Board, its Committees and individual directors was conducted and the same was based on questionnaire and feedback from all the Directors on the Board as a whole, Committees and self-evaluation.

Based on the questionnaire and feedback, the performance of every director was evaluated in the meeting of the Nomination and Remuneration Committee.

A separate meeting of the independent directors was convened, which reviewed the performance of the Board (as a whole), the non-independent directors and the Chairman. Post the Annual Independent Directors’ meeting, the collective feedback of each of the Independent Directors was discussed by the Chairman of the Nomination & Remuneration Committee with the Board’s Chairman covering performance of the Board as a whole; performance of the non-independent directors and performance of the Board’s Chairman.

27) Audit Committee

The Audit Committee of Directors of the Company presently consists of the following members:

1) Mr. Ravi Bhoothalingam, Chairman

2) Lt. Gen. (Retd.) Shamsher Singh Mehta, Member

3) Mr. Kiyozumi Kamiki, Member

4) Mrs. Geeta Mathur, Member

More details on the Audit Committee are given in the Corporate Governance Report.

28) Directors’ Responsibility Statement

Pursuant to clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, the directors confirm that:

a) in the preparation of the annual accounts for the financial year 2017-18, the applicable accounting standards have been followed along with proper explanation relating to material departures;

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

c) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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

e) the directors, have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

f) the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

29) Statutory Auditors and their Report

As per Section 139 of the Companies Act, 2013, read with the Companies (Audit and Auditors) Rules, 2014, the members of the Company in its 33rd Annual General Meeting held on 22nd August, 2017 approved the appointment of M/s. B S R & Co. LLP, Chartered Accountants (ICAI Registration No - 101248W/W-100022), as the Statutory Auditors of the Company for an initial term of 5 years i.e. from the conclusion of 33rd Annual General Meeting till the conclusion of 38th Annual General Meeting of the Company (subject to ratification of the appointment by the members at every Annual General Meeting).

Accordingly, the appointment of M/s. B S R & Co. LLP, Chartered Accountants as Statutory Auditors of the Company, is being placed before the shareholders at the 34th Annual General Meeting, for the ratification.

The Report given by M/s. B S R & Co. LLP, Chartered Accountants on the financial statements of the Company for the year 2018 is part of the Annual Report. There has been no qualification, reservation or adverse remark or disclaimer in their Report.

30) Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo.

A statement containing the necessary information on conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be given pursuant to provisions of Section 134 of the Companies Act, 2013, read with the rules made there under is annexed as Annexure - IV and forms part of this report.

31) Employees

Disclosure pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are provided in Annexure - V(a) to this Report.

A statement showing the details of employees of the Company who are drawing salary as per the limits prescribed under rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 during the Financial Year 2017-18 or part thereof, is attached herewith as Annexure - V(b) to this Report.

32) Acknowledgements

Your Directors acknowledge with gratitude the co-operation and support extended by JIN’s customers namely Maruti Suzuki, Mahindra & Mahindra, Tata Motors, Honda, Fiat India, Toyota Kirloskar, General Motors, John Deere, Club Car, E-z-go, Renault-Nissan and Isuzu, the Financial Institutions, Banks, various agencies of the Government.

Your Directors also wish to place on record their sincere appreciation of the services rendered by all the employees of the Company and are thankful to the Shareholders for their continued patronage.

For and on behalf of the Board

Place : Gurugram Hidekazu Omura

Dated : 18th May, 2018 Chairman

Director’s Report