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Sundram Fasteners Ltd.

BSE: 500403 | NSE: SUNDRMFAST |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE387A01021 | SECTOR: Fasteners

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Annual Report

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

Director’s Report

REPORT OF THE BOARD OF DIRECTORS

The Directors are pleased to present the Fifty Sixth Annual Report together with the audited financial statements for the year ended March 31, 2019.

FINANCIAL HIGHLIGHTS (STANDALONE)

Rs.in crores

2018-19

2017-18

Revenue from operations

4,002.34

3,419.79

Other income

31.94

29.62

Total revenue (net of excise duty)

4,034.28

3,449.41

Total expenditure

3,265.45

2,799.05

Gross profit before interest, depreciation and taxes

768.83

650.36

Less: Interest

31.02

18.80

Exchange losses / (gains)

7.94

13.76

Depreciation

109.85

98.07

Profit before tax

620.02

519.73

Less: Provision for tax

182.90

152.26

Profit after tax

437.12

367.47

Add: Balance brought forward

171.36

220.82

Balance available for appropriation

608.48

588.29

Appropriations

Interim / Final dividends

98.76

98.76

Tax on Interim dividends

20.14

18.17

Transfer to reserves

300.00

300.00

Transfer from special economic zone reinvestment reserve

(10.75)

-

Transfer from other comprehensive income to reserves

13.68

-

Balance carried forward

186.65

171.36

608.48

588.29

TRANSFER TO RESERVES

The Company has transferred Rs. 300.00 Crores to Reserves.

DIVIDEND

The Board had earlier during the year, declared an interim dividend of Rs. 2.00/- per share (200%) and the same was paid on November 22, 2018. The Directors have decided to pay a Second Interim Dividend of Rs. 3.10 per share, which, together with the first interim dividend, declared and paid earlier, would amount to a total dividend of Rs. 5.10/- per share for the financial year 2018-2019.

ABRIDGED FINANCIAL STATEMENT

In terms of the provision of Section 136(1) of the Companies Act, 2013, Rule 10 of Companies (Accounts) Rules, 2014 and Regulation 36 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors has decided to circulate the Abridged financial statement to the shareholders for the financial year 2018-2019, who have not registered their e-mail id.

Members who desire to obtain the full version of the report may write to the Corporate Secretarial Department at the registered office address and will be provided with a copy of the same. Full version of the Annual Report will also be available on the Company’s website, www.sundram.com

CONSOLIDATED FINANCIAL STATEMENT

In addition to the financial statements, the audited Consolidated Financial Statement of the Company and all of the subsidiaries prepared in the same form and manner as that of its own and in accordance with the applicable Accounting Standards (Ind AS), form part of the Annual Report.

Pursuant to the provisions of Section 136 of the Companies Act, 2013, the Company has placed separate audited accounts in respect of each of subsidiary on its website, www.sundram.com. The Company shall provide a copy of audited / unaudited financial statement, as the case may be, as prepared in respect of each of its subsidiary, upon request by any of its shareholders.

CORPORATE GOVERNANCE

A separate report on Corporate Governance together with a certificate from the Company’s auditors confirming the compliance of conditions of Corporate Governance is attached to this report. Management Discussion and Analysis detailing the state of the company’s affairs is also attached to this report (Please refer Page Nos. 43 to 47).

DIRECTORS

The existing composition of the Company’s Board is fully in conformity with the applicable provisions of the Companies Act, 2013 and Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 with regard to independent directors and women directors.

Ms Preethi Krishna, Director (DIN: 02037253) of the Company is liable to retire by rotation at the ensuing Annual General Meeting (AGM), and being eligible, offers herself for re-appointment. Necessary resolution for her re-appointment is being placed for approval of the members at the AGM. The Board, therefore, recommends her re-appointment as a Director of the Company. A brief resume of Ms Preethi Krishna and other relevant information have been furnished in the notice convening the AGM.

Sri V Narayanan (DIN 00081673), Independent Director, retired from the Board effective, September 22, 2018. The Company has benefited immensely through his association and the Board of Directors place on record their sincere thanks for the services rendered by him as a Director.

Dr Nirmala Lakshman, Director, (DIN 00141632) has been appointed as a Non-Executive Independent Director effective, September 20, 2018.

STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS UNDER SUB-SECTION (7) OF SECTION 149

All the independent directors have submitted a declaration pursuant to Section 149(7) of the Companies Act, 2013 stating that they meet the criteria of independence as stipulated in Section 149(6).

EXTRACT OF ANNUAL RETURN

An extract of annual return in Form MGT-9 is annexed as Annexure - I and forms part of this report. In terms of the requirement of Section 134(3) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, the same is available on the Company’s website, www.sundram.com.

BOARD MEETINGS

During the year, five meetings of the Board of Directors were held. The details of the meetings are furnished in the Annual Report disclosures under Regulation 34 and Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 which is attached to this Report (Please refer Page No. 60).

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Companies Act, 2013, the Directors confirm that:

a) in the preparation of annual accounts, the applicable accounting standards had been followed and there were no material departures.

b) they had selected appropriate accounting policies and applied them consistently, and made judgments and estimates that have been made 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 of the Company for the year ended March 31, 2019.

c) they had 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.

d) they had prepared the annual accounts on a going concern basis.

e) they had laid down the internal financial controls to be followed by the Company and such internal financial controls are adequate and are operating effectively.

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

NOMINATION AND REMUNERATION POLICY

Salient features of the Policy:

The policy is to ensure that the remuneration is in line with best comparable market practices, as well as competitive vis-a-vis that of comparable companies both in India and other international markets, which will have a motivating effect to act as a driving force to ensure long term availability of talent and also retention of the best talents. The Policy will have due regard to the situation of the specific regions in which the Company operates.

A brief description about the Company’s Nomination and Remuneration Policy on directors’ appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other related matters provided in Section 178(3) of the Act are provided in the Annual Report Disclosures under Regulation 34 and Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Please refer Page Nos. 65 & 66).

The Nomination and Remuneration Policy is available on the Company’s website at:- https://sundram.com/pdf/corporate/ NominationandRemunerationPolicy.pdf

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013

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 is enclosed vide Annexure - II.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES (REFERRED TO IN SUBSECTION (1) OF SECTION 188 OF THE COMPANIES ACT, 2013)

All transactions with related parties were on arm’s length basis and in the ordinary course of business. There was no material related party contract during the year. Form AOC-2 as required under Section 134 (3)(h) of the Act is enclosed vide Annexure - III to this report.

MATERIAL CHANGES AND COMMITMENTS

There were 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 the financial statements relate and the date of the report.

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

Information with respect to conservation of energy, technology absorption, foreign exchange earnings and outgo pursuant to Section 134 of the Act read with Companies (Accounts) Rules, 2014 is enclosed vide Annexure - IV.

RISK MANAGEMENT

Pursuant to Regulation 21 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors at their meeting held on February 1, 2019 has constituted the Risk Management Committee. Sri Suresh Krishna, Chairman, Ms. Arathi Krishna, Managing Director and Ms. Arundathi Krishna, Joint Managing Director are members of the Committee.

Brief description of terms of reference:-

i. continuous review of business parameters on a regular basis by the management, including commodity hedging positions in a more transparent, detailed and uniform manner.

ii. exercising prudence while incurring capital expenditure or outlays on new projects.

iii. entering into long term contracts with customers to underwrite the capacities created

iv. adoption of a diversified business model in terms of products, market segments, geography and customers to ensure that Company is able to withstand any instability in the entire business eco-system

v. judicious approach to proportionate sourcing of inputs from indigenous and overseas markets in order to take advantage of commodity prices and exchange rate movements

vi. monitoring, reviewing and hedging foreign exchange risks in accordance with the risk management policy

The Company manages its risks through continuous review of business parameters on a regular basis by the management. Insurable risks are analysed and insurance policies are taken to protect the company’s interests. The Audit Committee is also informed periodically of the risks and concerns. Corrective actions and mitigation measures are taken as and when needed.

CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY AND IMPLEMENTATION

The salient features of the Policy are to actively engage and extend support to the communities in which it operates and thus build a better, sustainable way of life by supporting the weaker sections of the society and thus contribute to the human development, to impel measures and to provide solutions that will balance economic, social and environmental issues and to work together with our employees with a commitment for adhering to responsible business practices in terms of quality management, environmental sustainability and support to the community.

The Company has undertaken activities as per the CSR Policy (available on the Company’s website http://www.sundram.com/investors.php) and the Annual report on CSR activities is enclosed vide Annexure - V forming part of this report.

BOARD EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors has carried out annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report attached as Annexure to this report.

PERFORMANCE AND FINANCIAL POSITION OF EACH OF THE SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE

The Company has 7 Domestic Subsidiaries and 5 Overseas Subsidiaries. The financial performance of the subsidiaries during financial year 2018-19 are given hereunder:-

The Company, by way of initial subscription to the Memorandum of Association, has subscribed to 10,000 equity shares of ‘Sunfast TVS Limited’. Sunfast TVS Limited has been incorporated as a new wholly-owned subsidiary of the Company under the Companies Act, 2013 with effect from April 8, 2019.

Sundram Fasteners (Zhejiang) Limited, China (SFZL, China) and Cramlington Precision Forge Limited, United Kingdom (CPFL, UK) are step-down overseas subsidiaries of the Company. The principal activity of CPFL, UK is manufacture of precision forgings and that of SFZL, China is manufacture of fasteners and bearing housing.

The revenue from operations from CPFL, UK during the year under review was at Rs. 11,936.91 lakhs as against Rs. 8,217.48 lakhs in the previous year. The net profit / (loss) was at '' (699.85) lakhs as against '' (458.72) lakhs in the previous year.

The revenue from operations from SFZL, China during the year under review was at Rs. 26,035.51 lakhs as against Rs. 18,832.33 lakhs in the previous year. The net profit was at Rs. 1,803.64 lakhs as against Rs. 1,331.43 lakhs in the previous year.

The revenue from operations from Sundram International Limited, a wholly-owned subsidiary during the year under review was at Rs. 170.32 lakhs as against Rs. 118.65 lakhs in the previous year. The net profit / (loss) was at '' (33.75) lakhs as against '' (72.20) lakhs in the previous year.

TVS Upasana Limited is a wholly-owned subsidiary and is engaged in the manufacture of Spokes and Nipples, automobile kits, tools, dowel pins, small screws, Cold Extruded Parts and other parts catering to automotive industry. The revenue from operations from TVS Upasana Limited during the year under review was at Rs. 17,218.98 lakhs as against Rs. 15,482.98 lakhs in the previous year. The net profit was at Rs. 1,604.69 lakhs as against Rs. 1,744.52 lakhs in the previous year.

Sundram Precision Components Limited (SPCL), a wholly-owned subsidiary is engaged in the manufacture of parts for motor vehicle, sintered parts such as valve guides, valve seats and other parts catering to automotive industry. The revenue from operations from SPCL during the year under review was at Rs. 2,606.84 lakhs as against Rs. 2,585.81 lakhs in the previous year. The net profit was at Rs. 151.59 lakhs as against Rs. 193.00 lakhs in the previous year. The application with respect to the amalgamation of SPCL (‘Transferor Company’) with Sundram Fasteners Limited (‘Transferee Company’) was filed by the transferor company during the financial year with the National Company Law Tribunal, Chennai Bench (NCLT). The final hearing by the NCLT with respect to the amalgamation of transferor company with the transferee company was held during April 2019. The matter was heard and the NCLT has sanctioned the scheme of amalgamation of SPCL with SFL and their respective shareholders, with Appointed Date as April 11, 2019.

The revenue from operations from Sundram Non-Conventional Energy Systems Limited, a subsidiary during the year under review was at Rs. 286.68 lakhs as against Rs. 364.36 lakhs in the previous year. The net profit was at Rs. 162.76 lakhs as against Rs. 208.53 lakhs in the previous year.

The revenue from operations from Sundram Fasteners Investments Limited, a wholly-owned subsidiary during the year under review was at Rs. 0.98 lakhs as against Rs. 0.52 lakhs in the previous year. The net profit / (loss) was at '' (0.34) lakhs as against '' (0.41) lakhs in the previous year.

TVS Infotech Limited (TVSi), a subsidiary is engaged in information technology business providing Enterprise Solutions for core industries like Manufacturing, Automotive and Distribution and focuses on off-shore and outsourcing operations for clients in India and the U.S.A. The revenue from operations from TVSi during the year under review was at Rs. 667.98 lakhs as against Rs. 786.59 lakhs in the previous year. The net profit was at Rs. 76.96 lakhs as against Rs. 15.49 lakhs in the previous year.

TVS Next Private Limited (TVSN) is a subsidiary of TVSi and a step-down subsidiary of the Company. TVSN’s focused efforts in targeting USA market and Indian Enterprise customers paid dividends in the form of increased revenues. The Company maintains a healthy sales pipeline in both USA and India. Improved utilisation of resources and relentless focus on cost control helped achieve higher profits this year. The revenue from operations from TVSN was at Rs. 2,191.56 lakhs as against Rs. 1,579.60 lakhs during the year under review. The net profit / (loss) was at Rs. 83.15 lakhs as against Rs. 70.69 lakhs in the previous year.

The application with respect to the amalgamation of TVSN (‘Transferor Company’) with TVS Infotech Limited (‘Transferee Company’) was filed by the transferor company during the financial year with the National Company Law Tribunal, Chennai Bench (NCLT). The final hearing by the NCLT with respect to the amalgamation of transferor company with the transferee company was held during April 2019. The matter was heard and the NCLT has sanctioned the scheme of amalgamation of TVSN with TVS Infotech Limited and their respective shareholders, with Appointed Date as April 01, 2018.

The revenue from operations from TVS Infotech Inc, a step-down subsidiary during the year under review was at Rs. 1,835.91 lakhs as against Rs. 2,306.45 lakhs in the previous year. The net profit was at Rs. 62.14 lakhs as against Rs. 84.07 lakhs in the previous year.

The revenue from operations from all the subsidiaries of the Company in aggregate during the year under review was at Rs. 550.42 Crores resulting in overall contribution of 12.00% of the consolidated revenue and 5.00% of the consolidated net profits.

Pursuant to the provisions of Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, a statement containing salient features of the financial statements of the Company’s subsidiaries, Associates and Joint Ventures in detail in Form AOC-1 is attached to the financial statements of the Company (Please refer Page No.196).

CHANGE IN THE NATURE OF BUSINESS

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

NAMES OF COMPANIES WHICH HAVE BECOME OR CEASED TO BE COMPANY’S SUBSIDIARIES, JOINT VENTURES OR ASSOCIATE COMPANIES DURING THE YEAR

No Company has become or ceased to be Company’s subsidiary, joint venture or associate company during the financial year 2018-2019.

PUBLIC DEPOSITS

During the year, the Company has not accepted any deposits, within the meaning of Section 73 of the Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014. No amount on account of principal or interest on deposits from public was outstanding as on Balance Sheet date.

REGULATORY / COURT ORDERS

No significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status of the Company and its future operations.

INTERNAL FINANCIAL CONTROLS OF THE COMPANY

The Company maintains all its financial records in Systems, Applications and Products (SAP) System and all financial transaction flow and approvals are routed through SAP. The Company has in house internal audit team to observe the effective functioning of internal financial controls, ensuring adequacy with respect to financial statements and verify whether the financial transaction flow in the organisation is being done based on the approved policies of the Company. The internal auditor presents the internal audit report every quarter and management comments on the internal audit observations to the Audit Committee. The internal control mechanisms are in place for safeguarding of assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and timely preparation of reliable financial information.

APPOINTMENT AND REMUNERATION OF KEY MANAGERIAL PERSONNEL

The statement of particulars of Appointment and Remuneration of Key Managerial Personnel as per Section 197(12) read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed vide Annexure VI forming part of this report.

Pursuant to Section 136 (1) of the Companies Act, 2013, the report of the Board of Directors is being sent to the shareholders of the Company excluding the statement prescribed under Rule 5 of the Companies (Appointment and Remuneration) Rules, 2014. The statement is available for inspection by the shareholders at the Registered Office of the Company during business hours.

STATUTORY AUDITORS

Pursuant to Section 139 of the Companies Act, 2013, B S R & Co. LLP, Chartered Accountants, Chennai, (Registration No. 101248 W / W- 100022 with the Institute of Chartered Accountants of India), were appointed as Statutory Auditors of the Company at the Fifty Fourth Annual General Meeting (AGM) of the Company for a consecutive period of five years commencing from the conclusion of the Fifty Fourth AGM (i.e., August 24, 2017).

SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Board of Directors had appointed M/s S Krishnamurthy & Co., Company Secretaries, Chennai as the Secretarial Auditor of the Company for the financial year 2018-2019. Secretarial Audit Report issued by Sri K Sriram, Practising Company Secretary (CP No.2215), Partner, M/s. S Krishnamurthy & Co., Company Secretaries, Chennai in Form MR-3 is enclosed in Annexure VII forming part of this report and does not contain any qualification. The Board of Directors has appointed M/s. S Krishnamurthy & Co., Company Secretaries, Chennai as the Secretarial Auditor of the Company for the financial year 2019-2020. Necessary consent has been received from them to act as Secretarial Auditors.

COST AUDITOR

In terms of Section 148 of the Companies Act, 2013 (the Act) read with Companies (Cost Records and Audit) Rules, 2014, as amended, the Board of Directors had appointed Sri P Raju Iyer, Practising Cost Accountant (Membership No.6987) as Cost Auditor for the financial year 2019-2020. The audit committee recommended his appointment and remuneration subject to the compliance of all the requirements as stipulated under the Act and circulars issued thereunder. As specified by the Central Government under Section 148(1) of the Companies Act, 2013, the cost records are required to be maintained by the Company and accordingly such accounts and records are made and maintained.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has adopted the Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. In compliance with the provisions under Section 4 of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013, Internal Complaints Committee (ICC) of the Company has been constituted to redress complaints regarding sexual harassment. No complaint was received during the calendar year 2018.

SECRETARIAL STANDARDS

The Institute of Company Secretaries of India has issued Secretarial Standards (Meetings of the Board and General Meetings) on various aspects of corporate law and practices. The Company has complied with each one of them.

WHISTLE BLOWER POLICY (VIGIL MECHANISM)

Pursuant to Sections 177(9) and (10) of the Companies Act, 2013 and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has a Vigil Mechanism through a Whistle Blower Policy. The details about the whistle blower policy are provided in the Annual Report Disclosures under Regulation 34 and Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Board of Directors during the financial year 2018-2019 has amended the Whistle Blower Policy pursuant to the SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended on December 31, 2018 notified by the Securities and Exchange Board of India to enable employees to report instances of leak of unpublished price sensitive information. The amendment has come into effect from April 1, 2019.

INDUSTRIAL RELATIONS

Industrial relations continued to remain congenial during the current year. The Directors thank the employees for their contribution to the progress of the Company during the year under review.

ACKNOWLEDGMENT

The Directors wish to thank the Chinese Authorities, Officers of Haiyan County, Jiaxin City, Zhejiang province, Chinese tax and other administrative authorities for the support extended to Sundram Fasteners (Zhejiang) Limited, a step-down subsidiary. The Directors wish to thank One North East, the Regional Development Authority for Cramlington, United Kingdom for the continued support extended to the step down Subsidiary. The Directors wish to thank the Company’s bankers, State Electricity Boards in Tamil Nadu, Pondicherry, Andhra Pradesh and Uttarakhand, customers and vendors, employees for all the assistance rendered by them from time to time.

On behalf of the Board

May 9, 2019 SURESH KRISHNA

Chennai Chairman

Director’s Report