Directors’ Report to the Shareholders
Your Directors present their Fifty Ninth Annual Report and the Audited Accounts of your Company for the year ended March 31, 2018.
Sales (net of Indirect taxes) for the year were Rs. 2,443.17 crores compared to Rs. 2,160.38 crores in the previous year showing an increase of 13.08%.
The Ministry of Corporate Affairs vide its notification dated 16.2.2015 has notified the Companies (Indian Accounting Standards) Rules, 2015. In pursuance of this notification, the Company adopted IndAS with effect from 01.04.2017. The Company''s financial results for the previous year ended 31.03.2017 had also been recast in accordance with IndAS.
The standalone financial results of your Company are as below:
(Rs in Crores)
Gross Profit before finance cost and depreciation
Add: Exceptional Item
Profit before tax
Profit after tax
Total Comprehensive Income
Transfer to General Reserves
Dividend and transfer to General Reserve
The Board approved and paid an Interim Dividend of Rs 6/- per equity share (60%) in February 2018.
Your Directors are pleased to recommend a final dividend of Rs.9/- per equity share (90%) for the year ended 31st March, 2018. The final dividend recommended, subject to approval at the 59th Annual General Meeting, will be paid to all the shareholders as on 09.08.2018. The total dividend payout for the financial year is Rs.18.05 crores on which dividend distribution tax aggregates to Rs. 3.70 crores. The Board has adopted a Dividend Distribution Policy which is available at the Company''s website www.wheelsindia.com
The Company proposes to transfer an amount of Rs. 30 crores to the General Reserves. An amount of Rs. 65.02 crores is proposed to be as Retained Earnings.
Issue of Bonus Shares
On June 22, 2018, the Board recommended a proposal for issue of Bonus Equity Shares in the proportion of 1:1., that is 1 (one) bonus equity share of Rs. 10/- each for every (1) one fully paid-up equity share held as on the record date, subject to approval of the shareholders of the Company through postal ballot.
Management Discussion and Analysis
The last year saw an improved growth in global GDP from 3.2% in the previous year to 3.8% last year. The growth was across geographies. In India, GDP slowed down by 0.5% to 6.7%, as government reform with the introduction of GST temporarily affected economic activity. The growth momentum in the global economy is likely to continue in the coming year and India is expected to see GDP grow at 7.4%. The political rhetoric from leading trading countries towards protectionism is introducing some uncertainty. There was commodity inflation in steel, aluminium and oil towards the second half of the year.
It was a tumultuous year for the commercial vehicle industry in India, with negative growth in the first quarter following the introduction of BS IV engines. This, however, changed towards the second half with stricter implementation of overloading restriction resulting in very strong growth in the second half of the year, so much so that despite a slow start to the year, the growth in the truck market was 9% for the year. The second half of the year also saw the multi-axle market change its preference from the 31T to 37T increasing the number of wheels per vehicle. Your company saw high capacity utilization of its truck wheel plants in the second half of the year, although we did struggle meeting the demand in the fourth quarter.
The latter part of the year also saw a resurgence of demand for light commercial vehicles post-GST implementation, with increasing possibilities for hub and spoke logistics. There was also a strong demand for small trucks after successive years of declining volumes. It is expected that the growth momentum in the commercial vehicle industry could continue up to 2020 when BS VI engines are introduced. The higher cost of these new engines could dampen demand post their introduction but could trigger a “pre-buy” in the period building up to 2020.
The last financial year saw a normal monsoon and strong demand for agricultural tractors. At the same time, there was distress amongst farmers due to lower realizations. The government introduced a number of schemes to boost the agricultural sector and several states announced loan waivers for farmers. There was a strong growth in the rural sector especially in the second half of the year boosting demand for utility vehicles.
In September last year, your Company hived off its passenger car wheel business servicing multinational car companies into a separate subsidiary. Subsequently, Topy Industries, a leading Japanese wheel manufacturer and our technical partner, invested in a 26% stake in the subsidiary. Your Company holds a 74% stake in the new company, WIL Car Wheels Ltd. (WCWL). It is expected that the Japanese partner will leverage its relationship with global car companies and its technology to help grow our car wheel business in India and open export opportunities for WCWL. In the last financial year, there was growth in the passenger car business driven largely by growth of the market leader.
There is a strong growth in the construction and mining equipment industry from the second half of the last financial year. This cyclical upturn came 6 years after the last peak, driven largely by strong global GDP and equipment replacement cycles. In India, we saw a similar trend with road and infrastructure development gaining pace in the second part of the last year. The higher level of commodity inflation and replacement demand has also resulted in growth of mining equipment. Your company supplies wheels to the construction and mining equipment industry in India and globally and will benefit from this growth trend.
Your Company''s air suspension division saw reasonable growth last year, on the back of demand for lift axle suspension as the market shifted to higher tonnage vehicles. The demand from state transport undertakings was muted.
Your Company is a major supplier of fabricated and machined parts for the windmill industry in India. The wind energy equipment manufacturers in India had a very poor year last year. The introduction of the government mega auction process for wind power resulted in lower prices requiring a sudden re-alignment of commercials at the windmill manufacturers. This caused a disruption at our windmill customers affecting our windmill component business. Your company started working on export of windmill parts to global companies, that should yield results towards the latter part of the coming year.
Your Company started supplying bogie frame and bolster to the Integral Coach Factory of the Indian Railways in the latter part of the last financial year. The components we supply are towards the manufacture of LBH coaches that will enhance railway passenger safety in the country.
In the last financial year, we saw large fluctuation in volumes in our commercial vehicle wheel business and our windmill component business. The sudden changes in schedule resulted in underutilization of capacities in one part of the year and shortage of capacity in the latter part of the year. The demand fluctuations resulted in sub-optimal running of our plants in these segments. This along with increased inflationary trends related to steel, aluminium, oil and labour in the latter part of the year affected our profitability. Your company, however, did benefit by way of a profit on slump sale of its passenger car wheel business to its subsidiary.
The Indian steel industry is going through a consolidation phase, with financially distressed assets being taken over by profitable steel manufacturers. This is happening at a time when international steel prices have rallied significantly over the last year. The coming year sees a continuation of commodity inflation in line with the global economy. The oil prices have been rising and are expected to remain high in the coming year, potentially affecting our energy and fuel cost, but could also result in volatility of the Indian Rupee with inflationary consequences. We are also seeing wage inflation in line with government related minimum wage increases. While all these inflationary factors will put a strain on our profitability, we also see signs of growth in all major segments of our business in the year ahead.
While we ramp up our capacities to meet the increased customer call for our product, we will also need to ensure tighter cost control measures to counter the high inflation. Your company continues to strive to promote safety practices across its plants, while promoting robust quality reviews across its business''. Your Company has received awards for its performance from customers such as Caterpillar, General Motors, Komatsu, Mahindra & Mahindra, Tata Motors and Volvo Eicher Commercial Vehicles.
In the coming year, we see the trend of cyclical upswing continuing in the commercial vehicle, construction and mining equipment segments of our business.
There is a national election in 2019 and building up to this, there are likely to be pro-agriculture policies followed by the government. In light of this, and the expected normal monsoons, we expect a reasonable growth in the coming year for agricultural tractors. In light of rural prosperity, we expect the market for utility vehicles to continue to do well.
We expect the lift axle suspension business to continue to grow in the coming year, in line with the trend of higher tonnage multi-axle vehicles in the truck industry. There is reasonable demand for air suspension for buses expected as fleet replacement takes place ahead of the 2019 elections.
In the coming year, the government has increased the amount of wind power to be auctioned significantly and we expect more active participation of our windmill manufacturer customers. In addition, we propose to grow exports to windmill equipment manufacturers in the coming year. We will see a full year of railway component business in the year ahead and will increase the range of components we supply to the Indian Railways.
There is strong demand for our products across segments in both the domestic and export markets. The challenge for us is to ramp up in a timely manner to meet these challenges and to control costs effectively at a period of high industrial inflation.
WIL Car Wheels Limited (WCWL) was incorporated on June 7, 2017. Your Company holds 74% stake in WCWL with Topy Industries Limited, Japan holding 26% stake.
WIL Car Wheels Limited reported a gross revenue of Rs. 179.42 crores and profit before tax of Rs. 2.34 crores. There are no comparable figures for the previous year as this Company was incorporated during the year under review.
Axles India Limited, an Associate Company has achieved a turnover of Rs. 486.09 crores and profit before tax of Rs 35.25 crores for the financial year 2017-18 as against the turnover of Rs 455.28 crores and profit before tax of Rs 22.80 crores for the financial year 2016-17.
Your Company''s share of profit is Rs.3.35 crores (unaudited) for the financial year 2017-18 as against Rs. 2.17 crores for the financial year 2016-17.
Consolidated Financial Statements
In accordance with the provisions of Section 129(3) of the Companies Act, 2013 (“2013 Act”) the consolidated financial statements drawn up with the applicable Indian Accounting Standards, forms part of the Annual Report.
In accordance with the provisions of Section 136 of the 2013 Act, the audited financial statements, including the consolidated financial statements and related information of the Company will be available on our website www.wheelsindia.com. These documents will also be available for inspection during business hours at the registered office of the Company.
A statement containing the salient features of the financial statements of the Subsidiary Company / Associate Company is provided in Form AOC1. Refer Annexure I of this report.
The consolidated profit after tax for the year is Rs. 75.49 crores and the consolidated networth is Rs. 586.62 crores as on 31.03.2018.
As at 31st March, 2018, fixed deposits accepted by the Company from public and shareholders aggregated to Rs. 142.79 crores, which are within the limits prescribed under the 2013 Act and the rules framed thereunder.
The provisions of the 2013 Act also mandate that any Company inviting/ accepting/ renewing deposits is required to obtain Credit Rating from a recognised credit rating agency. Your Company has obtained a credit rating of “MA Stable” for its fixed deposits from ICRA.
The details relating to deposits covered under Chapter V of the 2013 Act are given in Annexure II forming part of this Report.
Pursuant to the provisions of Section 134 (3) (p), Section 149(8) and Schedule IV of 2013 Act, SEBI (Listing Obligations & Disclosure Requirements Regulations)
2015 (SEBI LODR), Annual Performance Evaluation of the Board, the Directors as well as Committees of the Board have been carried out.
The Performance Evaluation of the Independent Directors was carried out by the entire Board and that of the Chairman and Non Independent Directors by the Independent Directors. The criteria and manner in which the evaluation has been carried out are provided in Annexure II forming part of this Report.
Particulars of Loans, Guarantees or Investments
The Company has not given any loans or guarantees covered under the provisions of Section 186 of the 2013 Act. The details of the investments made by Company are given in the notes to the financial statements.
Under Regulation 17(1A) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, a special resolution is to be passed for the continuation of the directorship of Mr. S Ram, Chairman as Non-executive Director with effect from 1st April 2019 till the date he retires by rotation. Necessary resolution to this effect, is included in the Notice convening the 59th Annual General Meeting.
The Board of Directors based on the recommendation of the Nomination and Remuneration Committee reappointed Mr. Srivats Ram as Managing director for a period of five years commencing from 01.05.2018.
Under Article 94(3) of the Company, Mr. Paul G Reitz (DIN 07159137) retires by rotation and being eligible, offers himself for re-election. Brief resume of the Director proposed to be appointed along with additional information pursuant to SEBI LODR is given in the Corporate Governance Report.
All the Independent Directors have given declaration that they meet the criteria of independence as laid down under Section 149(6) of the 2013 Act.
Key Managerial Personnel
The Board appointed / designated Mr. R. Raghunathan as Chief Financial Officer and Mr. S. Balasundharam as Company Secretary / Compliance Officer on April 11, 2017 pursuant to the superannuation of Mr. S. Srivathsan, CFO & Company Secretary on April 10, 2017.
Ms. K. V. Lakshmi was appointed as Company Secretary/ Compliance Officer with effect from November 6, 2017 consequent to the resignation of Mr. S. Balasundharam on November 4, 2017.
The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and to fix their remuneration. The Company''s policy on appointment and remuneration including criteria for determining qualifications, positive attributes and independence are provided in the Corporate Governance Report forming part of this Report. The policy is given as Annexure III forming part of this Report.
Corporate Social Responsibility
As an initiative under Corporate Social Responsibility (CSR), and in accordance with Schedule VII of the
2013 Act, your Company has constituted the CSR Committee under the Board, to frame, monitor and execute the CSR activities. The Board has approved the CSR Policy and guidelines for implementation. The Committee effectively supervises the programme.
Your Company has fulfilled its obligation towards CSR by spending a sum of Rs.117.59 lakhs during the year. The constitution of the CSR Committee and the report as required under the 2013 Act, are provided in Annexure IV, forming part of this Report.
Risk Management, Internal Financial Control Systems and Audit
Your Company has implemented a mechanism for risk management and has formulated a Risk Management Policy. The Policy provides for identification of risks and mitigation measures. The Audit committee is informed on the risk assessment and minimization mechanism adopted by the Company.
The implementation of IT based Governance, Risk and Compliance (GRC) software across the multiple locations of the Company has further strengthened the business processes and has significantly supported the internal audit requirement towards achieving a controlled environment.
Your Company maintains an adequate and effective Internal Control System commensurate with its size. These reasonably assure that the transactions are duly authorized and recorded to facilitate preparation of financial statements in line with the established practices and that the assets are secured against any misuse or loss. The internal control system is supplemented through an extensive internal audit programme besides periodic review by the Management and Audit Committee. The Company has in place adequate internal financial controls.
Vigil Mechanism / Whistle Blower Policy
In accordance with the requirements of the 2013 Act, your Company has established a Vigil Mechanism/ Whistle Blower Policy for Directors and Employees to report genuine concerns. The said Policy meets the requirement of the Vigil Mechanism framework under the 2013 Act, and the members can view the details of the policy on www.wheelsindia.com
Directors’ Responsibility Statement
The Directors acknowledge their responsibility of ensuring compliance with the provisions of Section 134(3)(c) of the 2013 Act. To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the 2013 Act:
a. that in the preparation of the annual financial statements the applicable IndAS have been followed along with proper explanation relating to material departures, if any;
b. that such accounting policies as mentioned in the financial statements have been selected and applied consistently and judgement and estimates have been made 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. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the 2013 Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d. that the annual financial statements have been prepared on a going concern basis;
e. that proper internal financial controls are in place and that the financial controls are adequate and were operating effectively.
f. that proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Related Party Transactions
The Company has formulated a policy on related party transactions and the same is uploaded on the Company''s website www.wheelsindia.com.
All Related Party transactions that were entered into by the Company during the financial year 2017-18, were in compliance of Section 188 of the 2013 Act and the Rules framed thereunder. There are no “Material” contracts or arrangement or transactions at arm''s length basis and hence disclosure in form AOC-2 is not required.
All Related Party transactions were placed before the Audit Committee for their prior approval in accordance with the requirements of the SEBI (LODR) 2015. The transactions entered into pursuant to such approval are placed periodically before the Audit Committee for its review.
There are no materially significant Related Party transactions made by the Company with Promoters, Directors and Key Managerial Personnel which may have a potential conflict with the interest of the Company at large.
Meetings of the Board/ Committees
The Board meets at regular intervals to discuss and decide on Company / business policy and strategy apart from other businesses. The Board / Committee Meetings are pre-scheduled and a tentative annual calendar of the Board and Committee Meetings are circulated to the Directors in advance to facilitate them to plan their schedule and to ensure meaningful participation in the meetings.
The details of the meetings of the Board as well as the Committees are disclosed in the Corporate Governance Report, forming part of this Report.
Significant and Material Orders Passed by the Regulators or Courts
There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. There are no material changes and commitments, if any, 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 this report.
Employees and details of Remuneration
None of the employees of the Company was in receipt of remuneration in excess of the limits prescribed under the 2013 Act and the rules framed thereunder.
The statement of Disclosure of Remuneration under Section 197 of 2013 Act and Rule 5(1) of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (“Rules”), is provided in Annexure V forming part of this Report.
The information as per Rule 5(2) and Rule 5(3) of the Rules, forms part of this Report. However, as per first proviso to Section 136(1) of 2013 Act and Second Proviso to Rule 5 of the Rules, the report and financial statements are being sent to the members of the Company excluding the statement of particulars of employees under Rule 5(2) and Rule 5(3) of the Rules. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered office of the Company. The said statement is also available for inspection by the members at registered office of the Company during office hours till the date of Annual General meeting.
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 requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. During the year under review, there were no cases filed pursuant to the above Act.
In pursuance to SEBI LODR Corporate Governance Report is given in Annexure VI and forms part of this Report.
The Company had appointed M/s Brahmayya & Co, Chartered Accountants, as the Statutory Auditors of the Company for a term of five consecutive years i.e. from the conclusion of the 58th Annual General Meeting till the conclusion of 63rd Annual General Meeting of the Company.
The Company has received the eligibility certificate from the auditors confirming that they are not disqualified to act as Auditors and are eligible to hold office as Auditors of the Company.
Pursuant to Section 148 of the 2013 Act read with the Companies (Cost Audit and Record) Rules 2014, the cost records and the accounts maintained by the Company are required to be audited. The Board on recommendation of the Audit Committee had appointed M/s. Geeyes and Co, Cost and Management Accountants to audit the cost records and the accounts maintained by the Company for the financial year ended 31.3.2018.
The report of the said Cost Auditor will be filed with the Central Government in accordance with the rules framed thereunder.
The said firm were appointed by the Board to conduct the Cost Audit for the year 2018-19 at the remuneration of Rs. 7,00,000/- (excluding applicable taxes and out of pocket expenses)
The Companies Act, 2013 mandates that the remuneration payable to the Cost Auditor is ratified by the members. Accordingly, a resolution seeking members ratification of the remuneration payable to the Cost Auditor for the year 2018-19 is included in the Notice convening the 59th Annual General Meeting.
Pursuant to the provisions of Section 204 of the 2013 Act and the rules framed thereunder, the Company appointed M/s. S Dhanapal & Associates, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is given in Annexure VII and forms part of this Report.
The Company has complied with the Secretarial Standards for the Board Meetings (SS-1) and the General Meetings (SS-2) during the year 2017-18.
Comments on Auditors’ report
There are no qualifications, reservations or adverse remarks or disclaimers made by the Statutory Auditors and Company Secretary in Practice in their reports respectively. The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company for the year under review.
In regard to safety, your Company has been working towards inculcating a culture, installing a system and reviewing its results at its facilities. Starting with the Padi plant, the company is horizontally deploying safety work systems and review mechanisms across its plants. The last year saw decent progress towards this endeavor to build safety into the manufacturing work culture.
Employees have been encouraged to adhere to safety in all their activities in and out of the company premises. Safety training is conducted at all levels on a continuous basis and additional emphasis is given in implementation of safety work standards. The Company rewards best safety performers from different groups of employees regularly. This has helped to inculcate a significant change in outlook. By all these, a significant change in the minds of the employees towards better safe work environment is cultivated.
The Managing Director and Chief Financial Officer have submitted a certificate to the Board on the integrity of the financial statements and other matters required under regulation 17(8) of the SEBI LODR Regulations.
Extract of Annual Return
The details forming part of the extract of the Annual Return in Annexure VIII forms part of this Report.
Energy Conservation, Technology Absorption and Foreign Exchange Earnings & Outgo
Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and outgo as required under Section 134(3)(m) of the 2013 Act, read with rule 8(3) of the Companies (Accounts) rules, 2014 are enclosed as Annexure IX and forms part of this report.
Business Responsibility Reporting
During the year consequent to the requirements of reporting of its business responsibility initiatives becoming mandatory under the SEBI LODR, the Company has formulated a policy on Business Responsibility which lays down the broad principles guiding the Company in delivering various responsibilities to its stakeholders. A copy of this policy is available at www.wheelsindia.com and the Business Responsibility Report for the year ended 31.03.2018 in terms of Regulation 34 of the SEBI LODR is given in Annexure X and forms part of this report.
The Directors wish to thank United Bank of India, State Bank of India, Standard Chartered Bank, HDFC Bank, other Banks and financial institutions for their continued support.
Your Company wishes to thank its customers, suppliers and the communities around its plants for their continued support.
Your Company continues to have the full co-operation of all its employees. The Directors would like to place on record their appreciation of the efforts of the employees in controlling costs and improving the profitability of the Company.
On behalf of the Board of Directors
June 22, 2018 DIN 00018309