Shakti Pumps (India) Ltd.

BOARDS’ REPORT

Dear ‘Members,

The Directors have great pleasure in presenting the 23rd Annual Report and the Company’s Audited Financial Statement for the financial year ended March 31, 2018.

Financial Highlights:

The financial Summary:

(Rs. In Lacs)

Financial Performance

During the year, your Company has registered sales and other income Rs. 44,010.12 Lacs as compared to Rs. 43,114.99 Lacs of previous year showing increase of 2.07%. Company was able to register a domestic sales of Rs. 29,488.95 Lacs and export sale of Rs. 13,002.00 Lacs in the current year in place of Rs. 11,760.59 Lacs in the previous year, a increase of 10.55% and there was an overall increase in sales by 2.07% the Company earned profit before depreciation, interest and tax of Rs. 8,092.84 Lacs as against Rs. 6,255.99 Lacs in the previous year.

Dividend

Based on the Company’s performance, the Board of Directors recommend for approval of the members, a dividend of Rs. 3.70 (37%) per fully paid-up Equity Shares of Rs. 10/- each of the Company, for the year ended March 31, 2018, if approved by the members, would involve a cash outflow of Rs. 680.06 Lakhs.

Transfer of Reserve

The Company has not transferred any amount to the Reserves for the year ended 31st March 2018.

Listing Information

The Company Shares are listed as follows:

Share Capital

There is no change in the authorized share capital of the company and the authorized share capital of the Company as on 31st March, 2018 is Rs. 40.00 crores.

The Company has not allotted any shares during the year. The paid up share capital of the Company as on 31st March, 2018 is Rs. 18,38,01,560/Subsidiaries, Joint Ventures and Associate Companies

As on March 31, 2018 your Company is having following Subsidiaries:

1. Shakti Pumps USA, LLC

2. Shakti Pumps FZE, UAE

3. Shakti Pumps Pty Ltd, Australia

4. Shakti Pumps (Shanghai) Limited- China

5. Shakti Energy Solutions Private Limited.

There has been no material change in the nature of the business of the Company and its Subsidiary.

Pursuant to the provisions of Section 129(3) of the Companies Act, 2013 (Act), a statement containing salient features of financial statements of Subsidiaries Companies in Form AOC-1 in Annexure-I.

The Consolidated Financial Statement of the Company prepared as per the Accounting IND-AS Consolidated Financial Statement of the Company with its Subsidiaries have also been included as part of this Annual Report.

Director’s Responsibility Statement

As required by section 134(3)(c)of Companies Act 2013.

Your Directors state that:-

a) In the preparation of the annual accounts for the year ended March 31, 2018, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same;

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 as at March 31, 2018 and of the profit of the Company for the year ended on that date;

c) 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;

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 are operating effectively; and

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

Management discussion and analysis report

The Management Discussion and Analysis forms an integral part of this Report and gives detail of the overall industry structure, developments, performance and state of affairs of the Company’s various businesses viz., the decorative business international operations, industrial and home improvement business, internal controls and their adequacy, risk management systems and other material developments during the financial year.

Corporate Governance

Corporate Governance is an ethically driven business process that is committed to values aimed at enhancing an organizations brand and reputation. The Companies Act, 2013 and SEBI (Listing obligation and Disclosure Requirements) Regulation 2015 have strengthened the governance regime in the country. The Company is in compliance with the governance requirements and had proactively adopted many provisions, ahead of time. The Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements set out by SEBI.

A separate report on Corporate Governance is provided together with a Certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance. A Certificate of the MD and CFO of the Company, inter alia, confirming the correctness of the financial statements and cash flow statements, adequacy of the internal control measures and reporting of matters to the Audit Committee, is also annexed.

Deposits

During the financial year 2017-18, the Company has not accepted any deposit within the meaning of Sections 73 and 74 of the Companies Act, 2013 read together with the Company’s (Acceptance of Deposits) Rules, 2014.

Details of Significant and Materials order passed by the Regulators, Courts, Tribunals

No significant and material order has been passed by the regulator, courts, tribunals impacting the going concern status and Company’s operations in future.

Corporate Social Responsibility

In line with provision of the Companies Act, 2013, the Company has framed its Corporate Social Responsibility (CSR) policy for the development of programs and projects for the benefit of weaker sections of the Society and the same has been approved by CSR Committee and the Board of Directors of the Company.

CSR policy has been uploaded on the Company’s website at www.shaktipumps.com.

Pursuant to requirements under section 135 and rules made there under a Report on CSR activities and initiatives taken during the in prescribed format is given in Annexure II which is annexed hereto and forms part of Director Report.

Risk Management

Risk management is the process of identification, assessment, and prioritization, of risk followed by coordinated efforts to minimize, monitor and mitigate/control the probability and/ or impact of unfortunate events or to maximize the realization of opportunities. The Company has laid a comprehensive risk assessments and minimization procedure which is reviewed by the audit committee and approved by Board.

Internal Financial Control

According to Section 134(5)(e) of the Companies Act, 2013 the term Internal Financial Control (IFC) means the policies and procedures adopted by the company 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 frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.

Contracts and Arrangements with related parties

All transactions entered with related parties during the financial year 2017-18, were on an arm’s length basis and were in ordinary course of Business and the provisions of section 188 of the Companies Act, 2013 are not attracted. Further, there are no materially significant related party transactions during the year made by the Company with promoter, Directors, Key Managerial personnel or other designated persons which may have potential conflict with the interest of the Company at large.

All related party transactions are placed before the audit committee for approval. Prior omnibus approval of the audit committee is obtained for the transaction which is of a foreseen and repetitive nature. Transaction entered into pursuant to omnibus approval so granted along with statements giving details of all related party transaction are placed before the audit Committee.

In line with the requirements of the Companies Act, 2013 and SEBI Listing Regulation 2015, the Board has approved a Policy on Related Party Transactions which is also available on Company’s website at www.shaktipumps.com.

Directors

Mr. Ramesh Patidar, Whole-Time Director (DIN: 00931437) retires from the Board by rotation and being eligible, offer himself for reappointment.

The above is subject to approval of the Shareholders in the ensuing Annual General Meeting.

Re-appointment of Mr. Dinesh Patidar (DIN: 00549552) as Managing Director on the Board with effect from 1st September 2018 to 30th August 2021 for a period of three years, subject to approval of Members of your Company at the ensuing Annual General Meeting.

Policy on Directors’ Appointment and Remuneration and other details

The Remuneration Policy of the Company is designed to attract, motivate and retain manpower in a competitive and international market. The policy reflects the Company’s objectives for good corporate governance as well as sustained long-term value creation for shareholders. The Remuneration Policy applies to the Company’s senior management, including its Key Managerial Person and Board of Directors. The Nomination and Remuneration Policy for the members of Board and Executive Management is available on the Company’s website, www.shaktipumps.com

Annual Evaluation of Board’s Performance

In accordance with the provisions of Schedule IV of the Companies Act 2013, a Separate Meeting of the Independent Directors was held on January 29, 2018 without the attendance of Non-Independent Directors and Members of the Management. The Committee has reviewed the performance and effectiveness of the Board in this meeting as a whole for the Financial Year 2017-18.

Finance and Accounts

The agenda for the Finance and Accounts function of your Company is to assist in driving superior performance of the business, pioneer-thought leadership and develop future-ready talent in finance.

- Risk and Internal Adequacy:

Your company has an elaborate Risk Management procedure, which is based on three pillars: Business Risk Assessment, Operational Control Assessment and Policy Compliance processes. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. The Company’s internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Statutory as well as Internal Auditors and cover all offices, factories and key business areas. Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews adequacy and effectiveness of the Company’s internal control environment and monitors the implementation of audit recommendations, including those relating to strengthening of the Company’s risk management policies and systems.

- Goods and Service Tax

Goods and Service Tax (GST) is a landmark reform which will have a lasting impact on the economy and on businesses. Implementation of a well-designed GST model that applies to the widest possible base at a low rate can provide significant growth stimulus to the business and contribution to the Prime Minister’s mission of “Make in India”. Your Company has been preparing for migrating to GST for the past year; changes across IT systems. Supply Chain and operations have been made keeping in mind the sweeping changes that GST would bring in. While there are few areas that need to be addressed, the Government has announced an intention to go live on GST on 1st July, 2017 and your Company will be ready for this transformative reform.

Key Managerial Personnel

The Key Managerial Personnel (KMP) in the Company as per Section 2(51) and 203 of the Companies Act, 2013 are as follows:

Mr. Dinesh Patidar: Managing Director (DIN: 00549552)

Mr. Sunil Manoharlal Patidar: Whole Time Director (DIN: 02561763) Mr. Ramesh Patidar: Whole Time Director (DIN: 00931437)

Mr. Akhilesh Maru: Chief Financial Officer

Mr. Ravi Patidar: Company Secretary & Compliance Officer

Number of Meetings of the Board

The details of the number of Board and Audit Committee meetings of the Company are set out in the Corporate Governance Report which forms part of this Report.

Disclosure relating to Remuneration of Directors, key Managerial Personnel and Particulars of Employees

In terms of the provisions of Section 197(12) of the Companies

Act, 2013 read with Rules 5 (2) of 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 limits set out in the said rules is given in Annexure III.

Disclosure by Independent Directors

All Independent Directors have given declarations that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company is committed to provide the healthy environment to all its employees, the company has in place a Prevention of the Sexual Harassment Policy and an Internal complaints committee as per the requirements of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, The policy aims at educating employees on conduct that constitute sexual harassment, ways and means to prevent occurrence of any such incident, and the mechanism for dealing with such incident, in the unlikely event of its occurrence. The Company has also constituted an Internal Committee as required under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and rules made there under. The Company has zero tolerance on Sexual Harassment at workplace. During the year under review, no complaints were received against the sexual harassment at workplace.

Auditors

The Company’s auditors M/s. Modi Manoj & Co., Chartered Accountants, who are the statutory auditors of the company, hold office till the conclusion of the 25th Annual General Meeting and being not eligible for reappointment have tendered their resignation. Pursuant to the provisions of Section 139 of Companies Act, 2013 and the rules framed thereunder, it is proposed to appoint M/s. PGS & Associates . (FRN: 122384W), Chartered Accountants, Mumbai, who have given their consent as per the provisions of section 139 (1) to act as Statutory Auditors of the Company and based on the recommendation of the Audit Committee and the Board of directors in its meeting held on 16th August, 2018 for a period of three year from the conclusion of 23rd Annual General Meeting up to the conclusion of the 26th Annual General Meeting, subject to approval of Members in ensuing Annual General Meeting.

The Company has received written consent(s) and certificate(s) of eligibility in accordance with Sections 139, 141 and other applicable provisions of the Companies Act, 2013 and Rules

issued thereunder (including any statutory modification(s) or re-enactment(s) thereof for the time being in force) from M/s. PGS & Associates. Further, M/s. PGS & Associates., Chartered Accountants, have confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India as required under the Listing Regulations.

The Auditor’s Report for the financial year 2017-18 does not contain any qualification, reservation or adverse remark.

Secretarial Auditor

The Board has appointed Mr. Manish Maheshwari (FCS 5174), Practicing Company Secretary to conduct the Secretarial Audit of the Company for the financial year 2018-19. The Secretarial Audit Report is annexed herewith Annexure IV to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Cost Auditor

As per the requirement of Central Government and pursuant to the provisions of Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014, as amended from time to time, the Company has been carrying out audit of Cost Records.

The Board of Directors, on the recommendation of Audit Committee, has appointed M/s. M.P. Turakhia & Associates, Cost Accountant, as Cost Auditor to audit the cost accounts of the Company for the Financial Year 2018-19 at a remuneration of Rs. 55,000 As required under the Companies Act, 2013. A resolution seeking members’ approval for the remuneration payable to the Cost Auditor forms part of the Notice convening the Annual General Meeting.

Extract of Annual Return

The extract of Annual Return as on March 31, 2018 in the prescribed Form No. MGT-9, pursuant to Section 92(3) of the Companies Act, 2013 and Rule 12 (1) of the Companies (Management and Administration) Rules, 2014 is attached herewith as ''Annexure V'' and forms part of this Report.

Compliance of Secretarial Standard

The Company has complied with the Secretarial Standards issued by The Institute of Company Secretaries of India and approved by the Central Government as required under Section 118(10) of the Companies Act, 2013.

Vigil Mechanism

The Company has framed a vigil mechanism/whistle blower policy to deal with unethical behavior actual or suspected fraud or violation of the Companies Code of Conducts or ethics policy, if any. The Vigil Mechanism/ whistle blower policy has been uploaded on the website of the Company.

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

The Details of loans, guarantees or investments covered under the provision of under Section 186 of the Companies Act, 2013 are given in the Note to the Financial Statement.

Conservation of Energy, technology absorption and Foreign Exchange earnings and Outgo

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated under Section 134 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, is set out herewith as “Annexure VI” to this Report.

Acknowledgement

The Directors of the Company wish to convey their gratitude and place on record their appreciation for all the employees at all levels for their hard work, solidarity, cooperation and dedication during the year.

The Directors sincerely convey their appreciation to customers, shareholders, vendors, bankers, business associates, regulatory and government authorities for their continued support.

Appreciation and Acknowledgements

Your Directors place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment.

The enthusiasm and unstinting efforts of the employees have enabled the Company to remain as industry leaders.

The board places on record its appreciation for the support and co-operation your company has been receiving from its suppliers, retailers, dealers and other associated with the company.

Your company looks upon them as partners in its progress and has shared with them the rewards of growth. It will be your Company’s endeavour to build and nurture strong links on mutuality of benefits, respect for and co-operation with each other, consistent with consumer interests.

The Directors also take the opportunity to thank all shareholders, clients, vendors, Banks, Government and Regulatory authorities and stock exchanges, for their continued support.

For and on behalf of the Board of Directors

SHAKTI PUMPS (INDIA) LIMITED

Place: -Pithampur Dinesh Patidar

Dated: -16th August 2018 Chairman

DIN:-00549552