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Shanthi Gears Ltd.

BSE: 522034 | NSE: SHANTIGEAR |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE631A01022 | SECTOR: Auto Ancillaries

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Annual Report

For Year :
2019 2018 2017 2016 2015 2014 2013 2012 2011

Director’s Report

BOARD’S REPORT & MANAGEMENT DISCUSSION AND ANALYSIS

Dear Shareholders,

The Directors have pleasure in presenting to you the performance of the Company, for the year ended 31 March 2019

COMPANY PERFORMANCE Rs, Crores

PARTICULARS

YEAR ENDED 31.03.2019

YEAR ENDED 31.03.2018

Revenue from operations (Net)

242.97

219.55

Earnings Before Interest Tax Depreciation & Amortization

53.08

48.73

Depreciation and Amortization expense

10.62

15.56

Profit Before Tax

42.46

33.17

Less : Tax expense

9.11

4.59

Profit After Tax

33.35

28.58

Add : Surplus brought forward

34.71

32.33

Appropriations :

Transferred to General reserve

-

9.00

Final dividend paid during the year

-

6.13

Tax on Final dividend paid during the year

-

1.24

Interim dividend paid during the year

40.86

8.17

Tax on Interim dividend paid during the year

8.40

1.66

Balance carried to Balance Sheet

18.80

34.71

Review of Operations

During the year the business registered a top-line growth of 14% to Rs, 243 Crores aided by growth in revenues, the profit after tax grew by 17% to Rs, 33.4 Crores. The business continued to build relationships through high levels of customer engagement during the year. Focus on Servicing and Solution expertise in power transmission helped in sustaining the competitive advantage.

Conscious effort on cash generation helped us to sustain the reduced net working capital levels of previous year. In its endeavor to build sustainable business, the Company continued its journey on certifications and became the first Asian Company to get IRIS (International Railway Industry Standard) certification.

Specific attention is given to development of alternate materials and processes to drive value addition and cost reduction. Consolidation of operations is on-going, in a phased manner. Capital investments were made wherever technological up gradation was required.

The Company remains debt free and invests its surplus funds judiciously balancing safety and returns.

Management Discussion and Analysis

The Management Discussion and Analysis, which forms part of this report, sets out an analysis of the business, the industrial scenario and the performance of the Company.

Dividend

The Board of Directors has recommended a final Dividend of Rs,1/- (Rupee one only) per share on equity share of face value of Rs,1 /- each for the financial year ended 31 March 2019. Together with the one-time special interim dividend of Rs,5/-per share, paid on 14 January 2019, the total dividend for the year works out to Rs,6/-per share on the equity share of face value of Rs,1/- each. The final dividend, if approved by the shareholders, will be paid after 23 July 2019.

Buyback

The Board, at its meeting on 26 December 2018, approved a proposal for the Company to buy back its fully paid-up equity shares of face value of Rs,1/- each from the eligible equity shareholders of the Company for an amount not exceeding Rs,70 Crores. The shareholders approved the said proposal of buyback of equity shares through the postal ballot that concluded on 29 January 2019. The buyback offer comprised the purchase of 50 Lakhs equity shares aggregating 6.12% of the paid-up equity share capital of the Company at a price of Rs,140/- per equity share. The buyback was offered to all eligible equity shareholders of the Company as on the record date (i.e., 08 February, 2019) on a proportionate basis through the ''Tender offer'' route. The Company concluded the buyback procedures on 09 April 2019 and 50 Lakhs equity shares were extinguished on the same day.

One-time Special Interim Dividend and the buyback have been done after taking into consideration the fund requirements for its growth plans in the coming years.

Directors

Mr. L Ramkumar will retire by rotation at the ensuing Annual General Meeting under Section 152 of the Companies Act, 2013 and being eligible, he offers himself for re-appointment.

Mr. Vellayan Subbiah was appointed as Additional Director (Non-Executive Director) on 01 February 2019, liable to retire by rotation and he continues up to the ensuing Annual General Meeting (AGM). Necessary resolution proposing the appointment of Mr. Vellayan Subbiah as a Director liable to retire by rotation under Section 152 of the Companies Act, 2013 forms part of the Notice for the ensuing AGM.

Mr. Krishna Samaraj was appointed as Additional Director on25 March 2019 under Section 149 of the Companies Act, 2013. He holds office up to the date of the ensuing AGM. The Board recommends his appointment as Independent Director under section 149 of the Companies Act, 2013 for a term of five years viz. from the date of the 46th AGM (2019) till the date of 51 AGM (2024).

Mr. J Balamurugan was appointed as an Independent Director. He holds office up to the date of the ensuing Annual General Meeting. The Board recommends his re-appointment as an Independent Director under Section 149 of the Act for further term of five years viz., from the date of 46* AGM (2019) till the date of the 51 AGM (2024).

Notice has been received from a Member proposing the candidature of Mr. Vellayan Subbiah as Director and Mr. Krishna Samaraj and Mr. J Balamurugan as Independent Directors of the Company.

The Board takes pleasure in recommending the appointment of Mr. L Ramkumar, Mr. Vellayan Subbiah as Directors and Mr. Krishna Samaraj and Mr. J Balamurugan as Independent Directors of the Company at the forthcoming Annual General Meeting.

All the Independent Directors of the Company have furnished necessary declaration in terms of Section 149(6) of the Act affirming that they meet the criteria of independence as stipulated under the Act.

In the opinion of the Board, all the Independent Directors fulfill the conditions specified in the Companies Act, 2013 and Rules made thereunder and SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 and are independent of the Management.

Key Managerial Personnel

Mr. Rajiv Narayanamoorthy, resigned as Chief Executive Officer with effect from 01 February 2019 as he wishes to pursue other interests. The Board wishes to place on record valuable contribution made by Mr. Rajiv Narayanamoorthy during his tenure with the Company.

Mr. M Karunakaran was appointed as Chief Executive Officer of the Company with effect from 01 February 2019.

Mr. M Karunakaran, Chief Executive Officer, Mr. B Balamurugan, Chief Financial Officer and Mr. C Subramaniam, Company Secretary are the Key Managerial Personnel (KMP) of the Company as per Section 203 of the Companies Act, 2013.

Internal Control System and their Adequacy

The Company has an Internal Control System, Commensurating with its size, scale and complexity of its operations. Audit Committee reviews internal audit reports and oversees the internal control system of the Company.

Corporate Governance

Your Company is committed to maintaining high standards of Corporate Governance. A report on Corporate Governance, along with a certificate from the Statutory Auditors on compliance with Corporate Governance norms forms part of this report.

Corporate Social Responsibility (CSR)

As a corporate citizen, your Company is committed to the conduct of its business in a socially responsible manner. The Company contributed a portion of its profit for the promotion of worthy causes like education, healthcare, scientific research etc. As a part of Corporate Social Responsibility program, the Company has undertaken projects in the area of Education, Scientific Research, etc., List of CSR Activities, Composition of CSR Committee and CSR Policy is annexed herewith as Annexure-A.

Annual Return

The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as Annexure-C.

Directors Responsibility Statement

Pursuant to Section 134 (5) of the Companies Act, 2013, the Board of Directors to the best of their knowledge and belief confirm that:

i) in the preparation of the annual accounts, applicable Accounting Standards have been followed and that there were no material departures therefrom;

ii) they have, in the selection of the accounting policies, consulted the statutory auditors and have applied their recommendations 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 31 March 2019 and of the profit of the Company for the year ended on that date;

iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) they have prepared the annual accounts on a going concern basis;

v) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively during the year ended 31 March 2019; and

vi) proper system has been devised to ensure compliances with the provisions of all applicable laws and that such systems were adequate and operating effectively during the financial year ended 31 March 2019.

Policy on Appointment and Remuneration of Directors

Pursuant to Section 178 (3) of the Companies Act, 2013 the Nomination and Remuneration Committee of the Board of the Company has formulated the criteria for Board nominations as well as policy on remuneration for Directors and employees of the Company.

The Remuneration policy provides the framework for remunerating the members of the Board, Key Managerial Personnel and other employees of the Company. This policy is guided by the principles and objectives enumerated in Section 178 (4) of the Companies Act, 2013 and reflects the remuneration philosophy and principles of the Murugappa Group to ensure reasonableness and sufficiency of remuneration to attract, retain and motivate competent resources, a clear relationship of remuneration to performance and a balance between rewarding short and long-term performance of the Company. The policy lays down broad guidelines for payment of remuneration to Executive and Non-Executive Directors within the limits approved by the shareholders.

The Board Nomination criteria and the Remuneration policy are available on the website of the Company at http: //www. shanthigears. com/wp-content/uploads/2019 705/SGL-Remuneration-Policy-Mar-2019.pdf

Related Party Transactions

All related party transactions that were entered during the year under review were on an arm''s length basis and were in ordinary course of business. There are no materially significant related party transactions during the year which may have a potential conflict with the interest of the Company at large. Necessary disclosures as required under Accounting Standard (Ind AS 24) have been made in the notes to the Financial Statements. The Policy on Related Party Transactions, as approved by the Board, is uploaded and is available on the Company''s website http://www.shanthigears.com/wp-content/uploads/2019/ 05/SGL-RPT-Policy-Mar-2019 .pdf

None of the Directors had any pecuniary relationships or transactions vis-a-vis the Company.

Board Evaluation

The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

Vigil Mechanism/ Whistle Blower Policy

The details of vigil mechanism/Whistle Blower policy is given in the Corporate Governance Report.

Human Resources

The HR strategy and initiatives of your Company are designed to effectively partner the business in the achievement of its ambitious growth plans and to build a strong leadership pipeline for the present and several years into the future. Industrial Relations continued to be cordial.

Senior leaders have been investing a lot of time and efforts in identifying and developing succession pipeline for critical positions in the organization. The transition management programmes viz., FTF and LEAD have been very successful and as part of the programme, implementation of Individual Development Plans (IDPs) for talent pool identified through these programmes is being facilitated. The IDPs are being reviewed regularly and On-the-job projects, job enlargement / job rotation, mentoring support to the target group are being provided. Coaching & mentoring was done for select talent across the organization with an intent of developing future leaders. Internal employees have been given opportunities to take up higher roles and grow in the system.

The Company had 541 permanent employees on its rolls, as on 31 March 2019.

The disclosure with respect to remuneration as required under Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached and forms part of this Report as Annexure-B.

The information relating to employees and other particulars required under Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 will be provided upon request. In terms of Section 136 of the Companies Act, 2013, the Report and Accounts are being sent to the Members excluding the information on employees, particulars of which are available for inspection by the Members at the Registered Office of the Company during business hours on all working days of the Company up to the date of the forthcoming Annual General Meeting. If any Member is interested in obtaining a copy thereof, such member may write to the Company Secretary in the said regard.

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

Conservation of energy, technology absorption and foreign exchange earnings and outgo is annexed herewith as Annexure-D.

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

The Company has in place an anti-sexual harassment policy in line with the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Internal Compliance Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (Permanent, contractual, temporary and trainees) are covered under this policy. The Company has not received any complaint about sexual harassment during the year 2018-19.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. M R L Narasimha, Practicing Company Secretary to undertake Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith and forms part of this Report as Annexure-E. The Company has ensured compliance of the Secretarial Standards issued by the Institute of Company Secretaries of India during the period under review. Accordingly, no qualification or observation or other remarks have been made by the Secretarial Auditor in his Report.

Auditors

The Members have appointed M/s Deloitte Haskins & Sells, Chartered Accountants (Firm Registration No. 008072S) the Statutory Auditors of the Company for a period of 5 years from the conclusion of 45th AGM (2018) till the conclusion of 50th AGM (2023).

Mr. B. Venkateswar was appointed as Cost Auditor for audit of the Cost Accounting records of the Company for the year ended 31 March 2020. A resolution seeking Members'' ratification of the Remuneration payable to Cost Auditor is included in the AGM notice dated 29 April 2019. The Cost Audit report will be filed within the stipulated period.

The Directors thank all Customers, Vendors, Banks, State Governments and Investors for their continued support to your Company''s performance and growth. The Directors also wish to place on record their appreciation of the contribution made by all the employees of the Company in delivering the good performance during the year.

On behalf of the Board

L Ramkumar

Coimbatore

Chairman

29 April 2019 DIN-00090089

Director’s Report