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Thejo Engineering Ltd.

BSE: 0 | NSE: THEJO | Series: SM | ISIN: INE121N01019 | SECTOR: Engineering

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Annual Report

For Year :
2018 2017 2016

Director’s Report

The Board of Directors are pleased to present the Thirty-second Annual Report of the Company and its audited financial statements (standalone and consolidated) for the Financial Year ended 31st March, 2018. The summarized financial results for the year ended 31st March, 2018 are given below:

Rs. in lakhs

Standalone

Consolidated

Year Ended 31st March, 2018

Year Ended 31st March, 2017

Year Ended 31st March, 2018

Year Ended 31st March, 2017

Profit before Exceptional Items, Interest, Depreciation and Tax

2,176.62

1,777.04

2,807.92

2,037.73

Less: Exceptional Item

-

-

-

-

Profit before Interest, Depreciation and Tax

2,176.62

1,777.04

2,807.92

2,037.73

Less: Interest

538.03

562.30

559.42

574.56

Profit before Depreciation and Tax

1,638.59

1,214.74

2,248.50

1,463.17

Less: Depreciation

375.29

391.99

541.77

534.82

Net Profit before Taxes

1,263.30

822.75

1,706.73

928.35

Less: Taxation (Including Deferred Tax)

392.54

261.86

396.64

310.69

Net Profit After Tax before Transfer to Minority Interest

870.76

560.89

1,310.09

617.66

Less: Transfer to Minority Interest

-

-

204.69

41.80

Net Profit After Tax and Transfer to Minority Interest

870.76

560.89

1,105.40

575.86

Add: Brought forward from previous year

4,561.99

4,001.10

2,766.72

2,157.09

Balance Available for Appropriations

5,432.75

4,561.99

3,872.12

2,732.95

Appropriations:

Transfer to General Reserve

-

-

-

-

Dividend

120.18

-

120.18

-

Dividend Distribution Tax

24.46

-

24.46

-

Transfer to Statutory Reserve/FCTR

-

-

21.21

33.77

Balance Carried over to Balance Sheet

5,288.11

4,561.99

3,706.27

2,766.72

Note: Dividend and Dividend Distribution tax represent dividend declared at the 31st AGM held on 16th August, 2017. No appropriation for dividend and dividend distribution tax has been made in the Accounts for the dividend recommended for the Financial Year 2017-18, pending approval by the Members at the ensuing Annual General Meeting in line with Accounting Standard (AS) 4.

REVIEW OF FINANCIAL PERFORMANCE AND THE STATE OF COMPANY’S AFFAIRS

Your Company has continued to focus on profitability of operations by enhancing the growth and profitability in subsidiaries and streamlining manufacturing operations and services which have all contributed to signifi cant increase in the prof tability.

STANDALONE

Your Company recorded a revenue from operations of Rs. 17,425.30 lakhs for the year ended 31st March, 2018 as against Rs. 14,990.03 lakhs in the previous year. It achieved an EBITDA of Rs. 2,176.62 lakhs (previous year Rs. 1,777.04 lakhs), resulting in a net profit of Rs. 870.76 lakhs as against Rs. 560.89 lakhs in 2016-17, registering a growth of 22% and 55% in terms of EBITDA and net profit respectively.

CONSOLIDATED

The Company’s consolidated revenue from operations in the year under review aggregated Rs. 22,094.30 lakhs (previous year Rs. 18,102.82 lakhs) on which it made EBITDA of Rs. 2,807.92 lakhs (previous year Rs. 2,037.73 lakhs) and net profit (after transfer to Minority Interest) of Rs. 1,105.40 lakhs as against Rs. 575.86 lakhs in 2016-17 as Thejo Hatcon Industrial Services Company (Thejo Hatcon) and Thejo Australia Pty Ltd (Thejo Australia) continued to grow in terms of turnover and proftability. Thus, the EBITDA and net profit have shown a growth rate of 38% and 92% respectively. Thejo Hatcon has reported a profi t of Rs. 247.48 lakhs and Thejo Australia Rs. 320.85 lakhs during the year as against a prof t of Rs. 82.03 lakhs and Rs. 165 lakhs respectively in the previous year.

DIVIDEND

The Board of Directors are pleased to recommend payment of dividend of 40% i.e. Rs. 4/- per equity share of Rs. 10/- each for the Financial Year ended 31st March, 2018 (previous year - 35%). The dividend amount of Rs. 137.34 lakhs (previous year - Rs. 120.18 lakhs) together with dividend distribution tax of Rs. 27.95 lakhs (previous years - Rs. 24.46 lakhs) will absorb a sum of Rs. 165.29 lakhs (previous year - Rs. 144.64 lakhs). The dividend payment is subject to approval of the Members at the ensuing Annual General Meeting.

EMPLOYEES STOCK OPTION SCHEME

The Compensation / Nomination and Remuneration Committee of the Board inter alia administers and monitors the Employees’ Stock Option Scheme of the Company which is in accordance with the applicable SEBI Regulations.

During the year under review, there were no material changes in the Employee Stock Option Scheme, 2015 of the Company and the Scheme is in compliance with the SEBI Regulations on ESOPs. Information in respect of options granted under Thejo Employee Stock Option Plan 2015 is given in Note 25.10 forming part of the Financial Statements. As per Regulation 14 of SEBI (Share Based Employee Benefits) Regulations, 2014 read with SEBI circular dated 16th June, 2015, the details of the ESOPs are uploaded on the Company’s website http://www.thejo-engg.com/invest/ESOPs2017.pdf

A Certif i cate from the Auditors of the Company as required under Regulation 13 of SBEB Regulations is attached to the Board’s Report.

CREDIT RATING

CRISIL has retained the Fundamental Grade of 5/5 and has assigned the Current Market Price Grade of 3/5 for the equity shares of the Company under its SME IER (Independent Equity Research) vide its latest report dated 2nd January, 2018. The historical details of Grades assigned to the Company by CRISIL under SME IER are given in the table below:

Date

Nature of Report

Fundamental Grade

Current Market Price Grade (on the date of report)

02nd January, 2018

H1FY18 Result Update

5/5

3/5

14th September, 2017

H2FY17 Result Update

5/5

2/5

11th January, 2017

H1FY17 Result Update

5/5

5/5

27th September, 2016

Detailed Report

5/5

4/5

5th January, 2016

H1FY16 Result Update

5/5

3/5

13th July, 2015

H2FY15 Result Update

5/5

3/5

08th December, 2014

Detailed Report

5/5

4/5

27th June, 2014

H2FY14 Result Update

5/5

3/5

09th May, 2014

Detailed Report

5/5

3/5

Fundamentals Grading: 5/5 - Excellent Fundamentals Valuation Grading: 3/5 - CMP is aligned

SUBSIDIARY COMPANIES

As on the date of this Report, the Company has four subsidiaries, namely, Thejo Hatcon Industrial Services Company, Kingdom of Saudi Arabia (Thejo Hatcon) with 51% shareholding, Thejo Australia Pty Ltd., Australia (Thejo Australia) with 74% shareholding, Thejo Brasil Comercio E Servicos Ltda, Brazil (Thejo Brasil) with 99.99% shareholding and Thejo Engineering LatinoAmerica SpA, Chile (Thejo Chile) with 99.73% shareholding.

The Financial Statements contain the Audited Consolidated Financial Statements of the Company for the Financial Year ended 31st March, 2018. These Statements have been prepared as per Accounting Standard 21 issued by the Institute of Chartered Accountants of India.

PERFORMANCE OF SUBSIDIARY COMPANIES

Thejo Hatcon Industrial Services Company (Thejo Hatcon) is engaged primarily in rubber lining and related industrial services activities. During the period 01st April, 2017 to 31st March, 2018, Thejo Hatcon achieved a turnover of SAR 8 million (Rs. 1,385.46 lakhs) on which it made a net a prof t of SAR 1.42 million (Rs. 247.48 lakhs).

Thejo Australia Pty Ltd (Thejo Australia) is a servicing Company, primarily engaged in belt splicing, belt jointing, maintenance and related activities. During the period 01st April, 2017 to 31st March, 2018, Thejo Australia achieved a turnover of AUD 6.86 million (Rs. 3,414.45 lakhs) with a profit of AUD 0.64 million (Rs. 320.85 lakhs).

Thejo Brasil Comercio E Servicos Ltda (Thejo Brasil) is primarily engaged in selling of materials used in core sector industries for bulk material handling, mineral processing and corrosion protection. During the period 01st April, 2017 to 31st March, 2018, Thejo Brasil achieved a turnover of BRL 0.53 million (Rs. 107.92 lakhs) with profit of BRL 0.03 million (Rs. 6.13 lakhs).

Thejo Engineering LatinoAmerica SpA (Thejo Chile) is primarily engaged in selling of materials used in core sector industries for bulk material handling, mineral processing and corrosion protection. During the period 01st April, 2017 to 31st March, 2018, Thejo Chile achieved a turnover of USD 0.73 million (Rs. 473.46 lakhs) and had incurred a loss of USD 0.14 million (Rs. 87.48 lakhs).

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

Particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as prescribed under Sub-section 3(m) of Section 134 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 are given in Annexure 1, forming part of the Board’s Report

CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

Your Directors have constituted a Corporate Social Responsibility Committee (CSR Committee), comprising Mr. K.J. Joseph, Mr. Thomas John, Mr. V.A. George and Mr. V.K. Srivastava as Members.

The Committee has been entrusted with the responsibility of formulating and recommending to the Board, a Corporate Social Responsibility Policy (CSR Policy), indicating the activities to be undertaken by the Company, monitoring the implementation of the framework of the CSR Policy and recommending the amount to be spent on CSR activities. The CSR Policy is provided in the Corporate Governance Report.

During the year 2017-18, the Company was required to incur CSR expenditure of Rs. 16.27 lakhs being 2% of the average net prof ts for the immediately preceding three Financial Years. In compliance with this requirement, the Company spent Rs. 16.50 lakhs on eligible projects approved by the Board on the recommendation of the CSR Committee, thus fully meeting the CSR target for the year under review. A brief outline of the Company’s CSR Policy and projects undertaken is given in Annexure 2, forming part of the Board’s Report.

EXTRACT OF ANNUAL RETURN

The Extract of Annual Return in Form No. MGT-9 as per Section 134 (3) (a) of the Companies Act, 2013 read with Rule 8 of Companies (Accounts) Rules, 2014 and Rule 12 of Companies (Management & Administration) Rules, 2014 is attached as Annexure 3, forming part of the Board’s Report and the extracts are uploaded on the Company’s website.

NUMBER OF MEETINGS OF BOARD

Four meetings of the Board of Directors were held during the year. Particulars of meetings held and attended by each Director are detailed in the Corporate Governance Report, which forms part of this Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

Your Directors state that:

a) in the preparation of the annual accounts for the year ended 31st March, 2018, the applicable accounting standards 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 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 31st March, 2018 and of the profit of the Company for the year ended on that date;

c) the Directors have taken proper and suffcient 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 fnancial 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.

POLICY ON DIRECTORS’ APPOINTMENT AND REMUNERATION

The policy of the Company on Directors’ appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under sub-section 3 of Section 178 of the Companies Act, 2013, adopted by the Board of Directors is given in the Corporate Governance Report forming part of the Board’s Report.

AUDITORS’ REPORT

The Auditors’ Report for the year ended 31st March, 2018 does not contain any qualif cation.

AUDITORS

M/s.Brahmayya & Co, Chartered Accountants, were appointed as Auditors at the 31st Annual General Meeting of the Company held on 16th August, 2017 to hold office up to the conclusion of the 36th Annual General Meeting of the Company.

SECRETARIAL AUDIT

The Board appointed Mr. G. Porselvam, Practising Company Secretary, to conduct Secretarial Audit for the Financial Year 2017-18. The Secretarial Audit Report of Mr. G. Porselvam for the Financial Year is attached as Annexure 4 to the Board’s Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Particulars of Loans given, Investments made and Guarantees given which are required to be disclosed under Section 186 (4) of the Companies Act, 2013 are given in Annexure 5, forming part of the Board’s Report.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

Particulars of contracts or arrangements with related parties required to be given under Section 188 (2) of the Companies Act, 2013, in Form No. AOC-2, are set out in Annexure 6, forming part of the Board’s Report.

COMMITTEES OF THE BOARD

Currently, the Company has four Committees of the Board of Directors, namely, the Audit Committee, Compensation / Nomination and Remuneration Committee, Corporate Social Responsibility Committee, and Shareholders’ and Investors’ Grievance Committee. The terms of reference of the Committees are provided in the Corporate Governance Report, forming part of the Boards’ Report. The composition of the Committees is as follows:

Name of the Committee

Composition of the Committee

Status

Audit Committee

Mr. M. P. Vijay Kumar Mr. N. Ganga Ram Mr. A. Satyaseelan Mrs. Sujatha Jayarajan

Independent Director, Chairman Independent Director, Member Independent Director, Member Independent Director, Member

Compensation / Nomination and Remuneration Committee

Mr. N. Ganga Ram Mr. V. K. Srivastava Mr. M. P. Vijay Kumar Mrs. Sujatha Jayarajan

Independent Director, Chairman Independent Director, Member Independent Director, Member Independent Director, Member

Corporate Social Responsibility Committee

Mr. V. K. Srivastava Mr. K. J. Joseph Mr. Thomas John Mr. V. A. George

Independent Director, Chairman Non-executive Director, Member Non-executive Director, Member Managing Director, Member

Shareholders’ and Investors’ Grievance Committee

Dr. C. N. Ramchand Mr. V. K. Srivastava Mr. K. J. Joseph Mr. Thomas John

Independent Director, Chairman Independent Director, Member Non-executive Director, Member Non-executive Director, Member

All the recommendations made by the Audit Committee were accepted by the Board of Directors, without any exception.

VIGIL MECHANISM

The Company has put in place Whistle Blower Policy and established the requisite Vigil Mechanism for employees and Directors for reporting concerns about unethical behaviour, actual or suspected fraud or violation of law to a designated Committee. The Committee consists of Mr. M.D. Ravikanth, Chief Financial Off cer & Secretary, Mr. S. Premjith - Vice President, Services and Mr. Thomas K Abraham - Vice President, HR & Admin. This mechanism also provides for adequate safeguards against victimisation of reporting employees. The Policy has been disseminated to all the employees through display on Notice Board and the Company’s website.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Thomas John (DIN 00435035), Vice Chairman, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment.

Mr. Rajesh John (DIN 05161087), Whole-time Director, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment.

Mr. V.A. George (DIN 01493737) was appointed as Managing Director up to 14th July, 2018 at the 27th Annual General Meeting held on 30th August, 2013. The Board of Directors on the recommendation of the Compensation / Nomination and Remuneration Committee have re-appointed Mr. V.A. George as Managing Director of the Company for a period of 3 (three) years with effect from 15th July, 2018, subject to the approval of the Members.

Mr. N. Ganga Ram (DIN 00001246), Non-Executive Independent Director was appointed as an Independent Director under Sections 149 and 152 read with Schedule IV and all other applicable provisions, if any, of the Companies Act, 2013, for a term up to 31st March, 2019 (“first term”), at the 28th Annual General Meeting of the Company. The Board of Directors on the recommendation of the Compensation / Nomination and Remuneration Committee have recommended re-appointment of Mr. N. Ganga Ram as an Independent Director of the Company for a second term of 5 (five) consecutive years.

Mr. V.K. Srivastava (DIN 00611678), Non-Executive Independent Director was appointed as an Independent Director under Sections 149 and 152 read with Schedule IV and all other applicable provisions, if any, of the Companies Act, 2013, for a term up to 31st March, 2019 (“first term”), at the 28th Annual General Meeting of the Company. The Board of Directors on the recommendation of the Compensation / Nomination and Remuneration Committee have recommended re-appointment of Mr. V.K. Srivastava as an Independent Director of the Company for a second term of 5 (five) consecutive years.

Mr. A. Satyaseelan (DIN 05158896), Non-Executive Independent Director was appointed as an Independent Director under Sections 149 and 152 read with Schedule IV and all other applicable provisions, if any, of the Companies Act, 2013, for a term up to 31st March, 2019 (“first term”), at the 28th Annual General Meeting of the Company. The Board of Directors on the recommendation of the Compensation / Nomination and Remuneration Committee have recommended re-appointment of Mr. A. Satyaseelan as an Independent Director of the Company for a second term of 5 (five) consecutive years.

Mr. M.P. Vijay Kumar (DIN 05170323), Non-Executive Independent Director was appointed as an Independent Director under Sections 149 and 152 read with Schedule IV and all other applicable provisions, if any, of the Companies Act, 2013, for a term up to 31st March, 2019 (“first term”), at the 28th Annual General Meeting of the Company. The Board of Directors on the recommendation of the Compensation / Nomination and Remuneration Committee have recommended re-appointment of Mr. M.P. Vijay Kumar as an Independent Director of the Company for a second term of 5 (five) consecutive years.

Dr. C. N. Ramchand (DIN 05166709), Non-Executive Independent Director was appointed as an Independent Director under Sections 149 and 152 read with Schedule IV and all other applicable provisions, if any, of the Companies Act, 2013, for a term up to 31st March, 2019 (“first term”), at the 28th Annual General Meeting of the Company. The Board of Directors on the recommendation of the Compensation / Nomination and Remuneration Committee have recommended re-appointment of Dr. C. N. Ramchand as an Independent Director of the Company for a second term of 5 (five) consecutive years.

A brief resume of these Directors together with related information is given in the Notice convening the ensuing Annual General Meeting. The Board recommends their appointment / re-appointment as Directors of the Company.

The Company has received declarations from all the Independent Directors of the Company, confi rming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013. None of the Independent Directors will retire by rotation at the ensuing Annual General Meeting.

BOARD EVALUATION

A formal annual evaluation is required to be made by the Board of its own performance and that of its Committees and individual Directors. Section 179(2) of the Companies Act, 2013 requires the Compensation / Nomination and Remuneration Committee to carry out evaluation of every director’s performance. Schedule IV of the Companies Act, 2013 states that the performance evaluation of the Independent Directors is to be done by the Board of Directors, excluding the Director being evaluated.

Accordingly, the Board of Directors carried out annual performance evaluation of the Board, Board Committees, Individual Directors and Chairperson during the year under review. The Compensation / Nomination and Remuneration Committee carried out evaluation of every Director’s performance. Similarly, the performance of the Non-Independent Directors and of the Board as a whole was evaluated by the Independent Directors at a separate Meeting held by them. The evaluation of all the Directors made was on the basis of the criteria and framework adopted by the Compensation / Nomination and Remuneration Committee.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) 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 attached as Annexure 7a to the Board’s Report.

Disclosures relating 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 are also attached as Annexure 7b to the Board’s Report.

CORPORATE GOVERNANCE

Your Company has voluntarily complied with the requirements of Corporate Governance to the maximum extent possible. A report on Corporate Governance is attached as Annexure 8 to the Board’s Report.

GENERAL

Your Directors state that there were no transactions in respect of the following items during the year under review requiring disclosure or reporting:

1. Deposits covered under Chapter V of the Companies Act, 2013.

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

3. Issue of shares (including sweat equity shares) to the employees of the Company under any scheme.

4. Receipt of remuneration or commission by the Managing Director or the Whole-time Directors of the Company from any of its subsidiaries.

5. Significant or material orders passed by the Regulators or Courts or Tribunals which impact the going concern status and Company’s operations in future.

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

ACKNOWLEDGEMENT

The Directors wish to thank the Company’s Bankers for their continued support. The Directors also wish to thank the Company’s customers and stakeholders for their patronage.

Your Directors place on record their appreciation of the good work done by the employees of the Company at all levels.

For and on behalf of the Board

K J JOSEPH THOMAS JOHN V.A. GEORGE

Place : Chennai Chairman Vice Chairman Managing Director

Date: 28th May, 2018 DIN 00434410 DIN 00435035 DIN 01493737

Director’s Report