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Directors Report of Amara Raja Batteries Ltd.

Mar 31, 2015

Dear Members,

The Directors have pleasure in presenting their report together with the audited financial statements for the financial year ended March 31, 2015.

Financial Highlights h million

Parameters 2014-15 2013-14

Net revenue 42,113 34,367

Other income 423 455

Total income 42,536 34,822

Operating profit (EBITDA) 7,241 5,758

Profit before tax (PBT) 6,099 5,367

Profit after tax (PAT) 4,109 3,674

Surplus brought forward 10,960 8,298

Amount available for appropriation 15,068 11,973

Appropriations:

Transfer to General Reserve 411 367

Dividend on equity capital

Proposed dividend 617 552

Corporate dividend tax 123 94

Surplus carried forward to balance sheet 13,917 10,960

Performance overview

- The Company continued its record of clocking highest ever turnover and profit for financial year 2014-15.

- Total revenue (net of excise duty) for the year was Rs. 42.11 billion as against Rs. 34.37 billion in the previous year registering a growth of 23%

- The operating profit (Earnings Before Interest, Tax, Depreciation and Amortisation-EBITDA) for the year stood at Rs. 7,241 million (previous year Rs. 5,758 million) representing 17.19% of net revenue.

- The Profit Before Tax (PBT) and Profit After Tax (PAT) for the year was at Rs. 6,099 million and Rs. 4,109 million as against Rs. 5,367 million and Rs. 3,674 million of the previous financial year respectively.

- The profit after tax has registered an impressive 12% growth.

Industrial battery business

The Company's Industrial Battery business registered double digit revenue growth over the previous financial year, in a challenging and competitive market conditions.

The growth in demand from telecom sector is primarily driven by data growth and the drive for energy optimisation by the tower companies. The demand for UPS batteries was moderate. Increased imports due to our country's Preferential Free Trade Agreements with ASEAN and Sri Lanka are a matter of concern, since the raw materials continue to attract higher import duty.

Amidst these challenges, the Industrial Battery Business improved the overall performance by virtue of its "preferred supplier status" with all major customers, efficient after sales service, customer relationship management and consistent product performance of its flagship brands PowerStack®, Quanta® and QRS Series batteries. The export business too registered good growth as it is more broad based in terms of geographies covered and has a much wider spread in terms of products, customers and applications.

The Company has progressively started providing total solutions to customers enabling it to forge strategic alliances.

Automotive battery business

The Company's Automotive Battery business reported double digit revenue growth supported by volume increase of 12% in four-wheeler and 52% in two-wheeler batteries, over the previous financial year, despite capacity constraints in the automotive four-wheeler batteries.

During the year, the Company commenced full year supplies to two-wheeler OEM business, consolidating its position in this space and growing at 113% over previous year. In four- wheeler OEM space, the company grew the business by 7% in spite of almost flat automobile production. In the aftermarket automotive segment, the Company's brands grew at a healthy pace of 16%. The volume growth in both four-wheeler and two-wheeler aftermarket business continued during the year due to strong preference for Company's products, supported by complete product offering, strengthening of brands Amaron® and PowerZone™, expansion of channel and leveraging customer relationships.

The volume of inverter batteries, which includes both flat and tubular plate, witnessed a good growth of 27% over previous year.

The revenue from export business grew significantly at 37% over previous year. The products of the Company and brand have started gaining recognition in overseas markets, resulting in increased business. The Company will continue its efforts to increase its exports in the Indian Ocean RIM by strengthening and expanding the distributor's network and entering into new markets.

The new four-wheeler battery plant at Nunegundlapalle village, Chittor District with capacity of 2.25 million units per annum was commissioned during the fourth quarter of FY 2015, taking the total capacity of the four-wheeler automotive battery plant to 8.25 million units per annum.

During the year, your Board approved an investment of about Rs. 500 Crores for setting up tubular batteries manufacturing plant (for Home UPS application) with a capacity of 1.44 million units per annum and the project is progressing as per schedule.

Financial position

The Company's financial position has shown immense improvement over the years. The networth as at March 31, 2015 improved to Rs. 16,996 million with the addition of Rs. 3,369 million to the reserves and surplus during the year. There is no interest bearing debt as of March 31, 2015. CRISIL had re-affirmed the ratings on the Company's long-term bank loan facilities at 'CRISIL AA /Stable' and on the short-term bank facilities at 'CRISIL A1 .'

During the year under review, the gross fixed assets including capital work-in-progress increased by Rs. 3,875 million (net of deletions of Rs. 118 million) and are at Rs. 15,277 million (previous year Rs. 11,402 million). The entire additions were funded through internal accruals. The earnings per share of Rs.1 each for the financial year 2014-15 grew by 12% at Rs. 24.05 as against Rs. 21.51 for the previous financial year, while the book value per share as at March 31, 2015 was at Rs. 99 as against Rs. 80 as at March 31, 2014.

Dividend

In line with the dividend policy of the Company, to pay dividend (excluding corporate dividend tax) upto 15% of the profit after tax of the Company, your directors have pleasure in recommending a dividend of Rs. 3.61 per equity share of Rs.1 each (361%) for the financial year ended March 31, 2015, subject to the approval of the shareholders.

The dividend, if approved, would involve a cash outflow of Rs. 616.63 million towards dividend and Rs. 123.29 million towards corporate dividend tax, resulting in a total cash outflow of Rs. 739.92 million.

Transfer to reserves

Your directors have proposed to transfer a sum of Rs. 410.86 million to the general reserve out of the profits earned by the Company. An amount of Rs. 13,917 million is proposed to be retained as surplus in the statement of Profit and Loss.

Directors and Key Managerial Personnel

Mr. Eric Stuart Mitchell (DIN: 06561619) and Mr. P Lakshmana Rao (DIN: 01463507) resigned from the Board with effect from August 6, 2014 and January 27, 2015 respectively. The Board wishes to place on record their sincere appreciation for the valuable services rendered by Mr. Eric Stuart Mitchell and Mr. P Lakshmana Rao during their tenure as directors of the Company.

Mr. Bruce Ronning Jr. (DIN: 06938974) was appointed as director in the casual vacancy caused by the resignation of Mr. Eric Stuart Mitchell (DIN: 06561619) with effect from August 6, 2014. He holds office upto the date of the ensuing annual general meeting as Mr. Eric Stuart Mitchell was liable to retire by rotation at this AGM.

Ms. Bhairavi Tushar Jani (DIN: 00185929) was appointed as an Additional Director (Independent) on the Board with effect from March 28, 2015.

The resolutions seeking your approval for the appointment(s) of Mr. Bruce Ronning Jr. as a Director and Ms. Bhairavi Tushar Jani as an independent director for a term of five years effective from August 14, 2015 are included in the notice of the ensuing annual general meeting along with brief details about them. The Company has received a notice in writing under Section 160 of the Act proposing their appointments.

All the Independent Directors have declared that each of them satisfy the criteria of the independence as stipulated under

the Section 149(6) of the Companies Act, 2013 ("Act") and Clause 49 of the listing agreement entered into with the stock exchanges and there was no change in the circumstances which may affect their independence during the year.

Pursuant to the provisions of Section 203 of the Act, Mr. Jayadev Galla, Vice Chairman and Managing Director, Mr. S V Raghavendra, Chief Financial Officer and Mr. M R Rajaram, Company Secretary are the key managerial personnel of the Company.

Auditors

M/s. E Phalguna Kumar & Co., Chartered Accountants, Tirupati and M/s. Chevuturi Associates, Chartered Accountants, Vijayawada, the joint statutory auditors of the Company who hold office until the conclusion of the ensuing annual general meeting had given notice expressing their desire to retire as auditors of the Company at the ensuing annual general meeting, in order to enable the Company to comply with the provisions of the Companies Act, 2013 governing rotation of auditors.

The Board of Directors wishes to place on record their sincere appreciation of the services of the joint statutory auditors especially in terms of ensuring timely completion and the quality of audit.

M/s. Brahmayya & Co., Chartered Accountants and M/s. Deloitte Haskins & Sells LLP, Chartered Accountants had given their consent(s), if appointed, to hold office as the joint statutory auditors for a term of five (5) years from the conclusion of this 30th annual general meeting till the conclusion of 35th annual general meeting. The said firm(s) have confirmed their eligibility under Sections 139 and 141 of the Companies Act, 2013 and rules framed there under for their appointment as the joint statutory auditors of the Company.

The Audit Committee considered, recommended and the Board of Directors propose the appointment of M/s. Brahmayya & Co., Chartered Accountants and M/s. Deloitte Haskins & Sells LLP, Chartered Accountants as the joint statutory auditors of the Company. Necessary resolution is being placed before the members for their approval.

As per Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules as amended from time to time, the Cost Audit is not applicable for the financial year 2014-15. The Cost Audit report for the financial year 2013- 14 was filed on September 16, 2014.

Pursuant to Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company had appointed R.Sridharan & Associates, Company Secretaries to undertake the secretarial audit of the company for the financial year 2014-15. The Secretarial Audit Report in Form MR-3 received from them is annexed herewith as Annexure I.

Corporate Governance

The report on corporate governance along with the certificate from practising company secretary regarding compliance of conditions of corporate governance for the year ended March 31, 2015 pursuant to clause 49 of the listing agreement is annexed hereto and forms part of the annual report. The Managing Director and the Chief Financial Officer of the Company have submitted a certificate endorsing to the Board the correctness of the financial statements and other matters as required under clause 49 (IX) of the listing agreement entered into with the stock exchanges.

Management discussion and analysis

Management discussion and analysis report, highlighting the performance and prospects of the Company's business, forms part of this annual report.

Directors' responsibility statement

Pursuant to Section 134(3)(c) and 134(5) of the Companies Act, 2013, the Board of Directors of the Company confirm to the best of their knowledge and belief that in the preparation of the statement of profit and loss for the financial year ended March 31, 2015 and the balance sheet as at that date ("financial statements"):

i) the applicable accounting standards have been followed;

ii) appropriate accounting policies have been selected and applied consistently and such judgements and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for that period;

iii) proper and sufficient care has been taken 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. To ensure this, the Company has established internal control systems, consistent with its size and nature of operations, subject to the inherent limitations that should be recognised in weighing the assurance provided by any such system of internal controls. These systems are reviewed and updated on an on-going basis. Periodic internal audits are conducted to provide reasonable assurance of compliance with these systems. The audit committee meets at regular intervals to review the internal audit function;

iv) the financial statements have been prepared on a going concern basis.

v) the proper internal financial controls are in place and that such internal financial controls were adequate and were operating effectively

vi) the systems to ensure compliance with the provisions of all applicable laws are in place and were adequate and operating effectively.

Information and Disclosures under the Companies Act, 2013

Extract of Annual Return

The extract of Annual Return pursuant to Section 134(3)(a) and Section 92(3) of the Companies Act, 2013 ('Act') in the prescribed form MGT-9 is annexed herewith as Annexure II

Number of Meetings of the Board

During the year six meetings of the Board of the Directors of the Company were convened and held in accordance with the provisions of the Companies Act, 2013. The date(s) of the Board Meeting, attendance by the directors are given in the Corporate Governance Report forming part of this annual report.

Committees of the Board

In compliance with the provisions of Sections 135, 177,

178 of the Companies Act, 2013, the Board constituted Corporate Social Responsibility Committee, Audit Committee, Nomination and Remuneration Committee and Share Transfer and Stakeholders Relationship Committee (Committees).

The details of composition of the Committees, their meeting and attendance of the members are given in the Corporate Governance Report forming part of this annual report.

Corporate Social Responsibility (CSR)

The brief outline of the CSR Policy of the Company and the < initiatives undertaken by the Company on CSR activities during the year are given in Annexure III to this report in the format prescribed in Companies (Corporate Social Responsibility Policy) Rules, 2014. The said policy is available on the Company's « website at the link http://www.amararaja.co.in/policies/ARBL- Corporate-Social-Responsibility-Policy.pdf

Nomination and Remuneration Policy

The Board has on the recommendation of Nomination and Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management Personnel and their remuneration. The Nomination and Remuneration Policy < adopted by the Board is available on the Company's website http://www.amararaja.co.in

Evaluation of the Board

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the listing agreement entered into with the Stock Exchanges, the Board had carried out an annual performance evaluation of its own performance, the directors individually as well as committees of the Board.

A structured questionnaire was prepared after taking into consideration inputs received from the Directors, covering aspects of the Board's functioning such as adequacy of the composition of the Board and its committees, execution and performance of specific duties, obligations and governance.

A separate exercise was carried out to evaluate the performance of Individual Directors including the Chairman of the Board.

The Directors performance was evaluated on parameters such as level of engagement and contribution in safeguarding the interest of the Company etc. The performance of every Director was evaluated by the Nomination and Remuneration Committee. Ms. Bhairavi Tushar Jani, additional director, being appointed on March 28, 2015 was excluded from the evaluation process.

The Independent Directors at their separate meeting reviewed the Performance of the Board as a whole, Non independent Directors and the Chairman of the Board.

Familiarisation Programme for Directors

In addition to giving a formal appointment letter to newly appointed Directors on the Board, a handbook covering the role, function, duties and responsibilities and the details of the compliance requirements expected from the Directors under the Companies Act, 2013 and Clause 49 of the listing agreement and other applicable laws were given and explained to the new Directors.

The Directors appointed by the Board are given induction and orientation with respect to Company's Vision, Core purpose, Core Values and business operations. In addition detailed presentations are made by Senior Management Personnel on business environment, performance of the Company at every Board Meeting.

The above initiatives help the Directors to understand the Company, its business and the regulatory framework in which the Company operates and enables the Directors to fulfill their roles/responsibility. The details of the familiarisation programme is available on the Company's website.

Particulars of loans, guarantees and investments

The Company has not given any loans, guarantees or security in connection with loans or made any investments falling within the ambit of Section 186 of the Companies Act, 2013.

Transactions with the Related Parties

All related party transactions that were entered into during the financial year were on arm's length basis and were in the ordinary course of business.

During the year, the Company entered into lease agreements with Amara Raja Infra Private Limited to take on lease land admeasuring 12 acres and 62 acres situated at Nunegundlapalle village, Bangarupalyam Mandal, Chittoor District to construct hostel/canteen, amenities for workmen and also for its expansion plans, which may be deemed not to be in the ordinary course of business of the Company. The shareholders approved these proposals by way of special resolution at the AGM on August 6, 2014 and through postal ballot process. The results of the postal ballot were declared on September 24, 2014.

During the financial year 2014-15, there were no materially significant transactions with the related parties which might be deemed to have had a potential material conflict with the interest of the Company at large.

All Related Party Transactions are placed before the Audit Committee as also the Board for approval. Prior omnibus

approval of the Audit Committee is obtained for transaction with the related parties which are routine and repetitive in nature.

The summary statement of transactions entered into with the related parties pursuant to the omnibus approval so granted are reviewed and approved by the Audit Committee and the Board of Directors on a quarterly basis. The summary statements are supported by an independent audit report certifying that the transactions are at an arm's length basis and in the ordinary course of business.

As all the transactions with the related parties are on Arm's length basis and there are no material related party transactions as per policy adopted by the Company, the particulars of contracts or arrangements with the related parties under Section 188 in Form AOC-2 is not enclosed herewith.

Internal Controls

The details of internal control system and the adequacy of internal financial controls with respect to financial statements are given in the corporate governance report which forms part of the annual report.

Risk Management

During the year, the risk assessment parameters were reviewed and modified. The audit committee reviewed the element of risks and the steps taken to mitigate the risks. In the opinion of the Board, there are no major elements of risk which has the potential of threatening the existence of the Company.

Whistle Blower Policy/Vigil Mechanism

The Company has established a whistle blower policy/ vigil mechanism to provide an avenue to raise concerns. The mechanism provides for adequate safeguards against victimization of employees who avail of it and also for appointment of an Ombudsperson who will deal with the complaints received. The policy also lays down the process to be followed for dealing with the complaints and in exceptional cases, also provides for direct appeal to the Chairperson of the Audit Committee. The Whistle Blower Policy established by the Board is available on the Company's website at the link http://www.amararaja.co.in/policies/ARBL-Whistle-Blower- Policy.pdf

Deposits from Public

The Company has not accepted any deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 and The Companies (Acceptance of Deposit) Rules, 2014 during the year under review. There are no outstanding deposits as on March 31, 2015.

Particulars of Remuneration

The information required pursuant to Section 197(12) of the Act read with Rule 5(1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexured hereto as Annexure IV.

A statement showing names and other particulars of the employees drawing remuneration in excess of the limits prescribed under Rule 5(2) of the said rules is also annexed to the Directors' Report. However, in terms of the provisions of Section 136(1) read with relevant proviso thereto of the Act, the annual report is being sent to the members of the Company excluding the aforesaid statement. The statement is available for inspection at the Registered Office of the Company during working hours. Any member interested in obtaining such information may write to the Company at its registered office address.

Technology Absorption and Foreign Exchange Earnings and Outgo

The information on conservation of energy, technology absorption, foreign exchange earnings and outgo as per Section 134(3)(m) of the Act read with Rule 8 of The Companies (Accounts) Rules 2014, are annexed hereto as Annexure V and forms part of this annual report.

Regulatory Orders

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.

Awards and Recognitions

Your Company continues to get accolades and awards from its customers and other prestigious domestic/international forums. Some of the awards and recognitions your Company received during the year under review:

- Business Today in its edition "BEST CEOs" ranked Mr. Jayadev Galla, Vice Chairman and Managing Director at 6th position in the overall ranking for the mid-sized companies in India.

- Platinum award" for "Partner of the Year 2014-15" from Indus Towers Limited for customer focused approach, service delivery and product innovation.

- Received "OVERALL EXCELLENCE" award from Maruti Suzuki Limited in the field of QCDM (Quality, Cost, Delivery and Management) parameters.

- Amaron® has been awarded as 'Asia's Most Promising Brand' for the year 2013-14 under Automotive Category by World Consulting and Research Corporation (WCRC).

- The Company won second position in "National award for excellence in cost management for the year 2013 under "Private-Manufacturing-Organisation large" from the Institute of Cost Accountants of India.

- Amara Raja has been adjudged as "1st Best Employer Award" for 2014-15 by The Employer Branding Institute and has won Employer Branding Awards 2014-15 for Talent Management, HR Strategy in Line with Business, Training, Recruitment, Retention Strategy and Career Development. Amara Raja also won "Global HR Excellence Award" for "Talent Management and Innovative HR Practices."

- Amara Raja has been awarded "The Golden Globe Tigers Award 2015" for Excellence and Leadership in Training and Development in three categories. The awards were bestowed by HRD Management committee of World HRD Congress.

Transfer to the Investor Education and Protection Fund

In terms of Section 205A read with Section 205C of the Companies Act, 1956, an amount of Rs. 4,35,179 being unclaimed dividend pertaining to the financial year 2005-06 was transferred to the Investor Education and Protection Fund (IEPF) on October 16, 2014.

Health, safety and environmental protection

The Company has complied with all applicable environmental and labour laws. The Company continues to be certified under ISO-14001 and OHSAS 18001-2007 for its environment management systems and occupational health and safety management systems respectively.

Industrial relations

During the year under review, industrial relations remained cordial and stable. The directors wish to place on record their sincere appreciation for the co-operation received from employees at all levels.

Acknowledgement

The Board of Directors takes this opportunity to place on record their appreciation for the unstinted co-operation, commitment and dedication of all the employees of the Company, and the support extended by the channel partners, customers, vendors, business associates, banks, government authorities and all concerned without which it would not have been possible to achieve all round growth of the Company.

Your Directors also take this opportunity to thank the joint venture partner Johnson Controls Inc. for their valuable assistance and support. The Directors are thankful to the shareholders for their continued patronage.

On behalf of the Board

Place: Hyderabad Dr. Ramachandra N Galla Date: July 15, 2015 Chairman


Mar 31, 2014

Dear Members,

The Directors have pleasure in presenting their report together with the audited financial statements for the financial year ended March 31, 2014.

Financial Highlights Rs. million

Parameters 2013-14 2012-13

Net revenue 34,367 29,589

Other income 455 465

Total income 34,822 30,054

Operating profit (EBIDTA) 5,758 4,658

Profit before tax (PBT) 5,367 4,218

Profit after tax (PAT) 3,674 2,867

Surplus brought forward 8,298 6,221

Amount available for appropriation 11,973 9,088 Appropriations:

Transfer to General Reserve 367 287

Dividend on equity capital

Proposed dividend 552 430

Corporate dividend tax 94 73

Surplus carried forward to balance sheet 10,960 8,298

Performance overview

The financial year 2013-14 was yet another significant year in which your company continued its record of clocking highest ever turnover and profit. The Company has recorded total revenue (net of excise duty) of Rs.34.37 billion as against Rs.29.59 billion in the previous year registering a growth of 16%. The operating profit (Earnings Before Depreciation, Interest, Tax and Amortisation-EBIDTA) for the year stood at Rs.5,758 million (previous year Rs.4,658 million) representing 16.75% of net revenue. The Profit Before Tax (PBT) and Profit After Tax (PAT) for the financial year ended March 31, 2014 was at Rs.5,367 million and Rs.3,674 million as against Rs.4,218 million and Rs.2,867 million of the previous financial year respectively. The profit after tax has registered an impressive 28% growth

Industrial battery business

The Company''s Industrial Battery business registered double digit revenue growth over the previous financial year despite capacity constraints by better product mix. The demand from the telecom sector grew during the year primarily driven by growth in data and for energy optimisation by tower companies. The adverse macro economic conditions had moderated the demand for UPS during the first three quarters and improved in the fourth quarter mainly due to finalisation of projects in the banking sector.

Amidst these challenges, our efficient after sales service, customer relationship management, consistent product performance of both PowerStack® and Quanta® batteries coupled with continued preferred supplier status accorded by all major customers resulted in the improved performance of the industrial battery business

During the year the Company had successfully introduced new range of Quanta series UPS batteries (120 AH and 150 AH), which were well received by the market resulting in improved market share in IT&ITES and Banking sector. The Quick Recharge Series large VRLA battery introduced for telecom application consolidated its position in the market.

The medium VRLA battery for Home UPS application which was introduced in the African markets helped to broad base the export business. The capacities of medium and large VRLA product lines were enhanced to 3.00 million standard equivalent units per annum and 900 million Ah in standard equivalent units per annum respectively during the Q4 of FY 2014.

Automotive battery business

The Company''s Automotive battery business reported double digit revenue growth supported by volume increase of 9% in four-wheeler and 63% in two-wheeler batteries, over the previous financial year, despite capacity constraints in the automotive four-wheeler batteries

During the year, the Company commenced bulk supplies to two-wheeler OEM business, consolidating its position in this space and witnessed a flat volume growth in four-wheeler OEM business due to slowdown in automobile production on account of various macro-economic conditions. The volume growth in both four-wheeler and two-wheeler aftermarket business continued during the year due to strong preference for Company''s products, supported by complete product offering, strengthening of brands Amaron® and PowerZone™, and leveraging customer relationship

The volume of inverter batteries witnessed a drop mainly on account of early onset of monsoon during the year. A separate task force was created to focus and develop this business vertica as the Company sees a promising future for this business

The revenue from export business grew significantly during the year aided by the quality of the product, moderation in import tariff and depreciation rupee. The Company will continue its efforts to increase the exports in the Indian Ocean RIM by strengthening and expanding the distributor''s network and entering into new markets

During the year, the capacity of two-wheeler battery and four- wheeler battery was enhanced to 8.40 million and 6.00 million units per annum respectively. The green field expansion of four- wheeler battery capacity to 8.25 million units is progressing as per schedule and is expected to commence supplies in the second half of FY 2015.

Financial position

The Company''s financial position has shown immense improvement over the years. The networth as at March 31, 2014 improved to Rs.13,627 million with the addition of Rs.3,029 million to the reserves and surplus during the year. There is no interest bearing debt as of March 31, 2014. The surplus cash as at the year end stood at Rs.2,446 million. CRISIL had re-affirmed the ratings on the Company''s loan-term bank loan facilities at ''CRISIL AA /Stable'' and on the short-term bank facilities at ''CRISIL A1 .''

During the year under review, the gross fixed assets including capital work in progress increased by Rs.3,570 million (net of deletions of Rs.161 million) and are at Rs.11,402 million (previous year - Rs.7,832 million). The entire additions were funded through internal accruals. The earnings per share of Rs.1 each for the financial year 2013-14 grew by 28% at Rs.21.51 as against Rs.16.78 for the previous financial year, while the book value per share as at March 31, 2014 was at Rs.80 as against Rs.62 as at March 31, 2013.

Dividend

The Board of Directors of the Company at their meeting held on May 19, 2010 had approved a policy on payment of dividend to shareholders i.e., to pay dividend (excluding corporate dividend tax) up to 15% of the profit after tax of the Company. In line with the said dividend policy your directors have pleasure in recommending a dividend of Rs.3.23 per equity share of Rs.1 each (323%) for the financial year ended March 31, 2014, subject to the approval of the shareholders

Transfer to reserves

As stipulated under the provisions of the Companies Act, 1956 read with Companies (Transfer to Reserves) Rules, 1975, your directors have proposed to transfer a sum of Rs.367.44 million to the general reserve out of the profits earned by the Company. A sum of Rs.10,959.62 million is proposed to be retained as surplus.

Directors

In accordance with the provisions of the Companies Act, 2013, Mr. Shu Qing Yang, Dr. Ramachandra N Galla and Mr. N Sri Vishnu Raju, directors are liable to retire by rotation at the ensuing annual general meeting and being eligible offer themselves for re-appointment.

In accordance with the provisions of Section 149 of the Companies Act, 2013, the present independent directors i.e Mr. P Lakshamana Rao, Mr.Nagarjun Valluripalli, Mr. N Sri Vishunu Raju, Mr. T R Narayanaswamy and Mr. Raymond J Brown are being proposed for appointment as an independent directors of the Company to hold office for a term of five consecutive years effective from August 6, 2014.

Necessary resolutions for appointment/re-appointment of the above directors are being placed before the members for their approval

During the year, Mr. Ravi Bhamidipati resigned from the office of Executive Director and as director with effect from August 31, 2013. The Board wishes to place on record their appreciation for the valuable services rendered by Mr. Ravi Bhamidipati during his tenure as director of the Company.

Auditors

M/s. E Phalguna Kumar & Co., Chartered Accountants, Tirupati and M/s. Chevuturi Associates, Chartered Accountants, Vijayawada, the joint statutory auditors of the Company who hold office until the conclusion of the ensuing annual general meeting and being eligible, have offered themselves for re-appointment.

The Central Government had approved the appointment of M/s. Sagar & Associates, Cost Accountants, Hyderabad as cost auditors for the financial year 2013-14. The cost audit report will be filed with Central Government within 180 days from the close of the financial year. The cost audit report for the previous financial year 2012-13 signed by M/s. Nageswara Rao & Co., Cost Accountants, Hyderabad was filed in extensible Business Reporting Language (XBRL) mode on September 24, 2013, within due date.

Corporate Governance

The report on corporate governance along with the certificate from practising company secretary regarding compliance of conditions of corporate governance for the year ended March 31, 2014 pursuant to clause 49 of the listing agreement is annexed hereto and forms part of the annual report. The Managing Director and the Chief Financial Officer of the Company have submitted a certificate endorsing to the Board the correctness of the financial statements and other matters as required under Clause 49 (V) of the listing agreement entered into with the stock exchanges.

Management discussion and analysis

Management discussion and analysis report, highlighting the j performance and prospects of the Company''s business, forms j part of this annual report.

Transfer to the Investor Education and j Protection Fund

In terms of Section 205A read with Section 205C of the j Companies Act, 1956, an amount of Rs.305,957 being j unclaimed dividend pertaining to the financial year 2005-06 j was transferred to the Investor Education and Protection Fund j (IEPF) on September 30, 2013.

Fixed deposits

The Company has not accepted any deposits from the public j in terms of Section 58A of the Companies Act, 1956, during j the year under review and hence there were no outstanding j deposits as on March 31, 2014.

Health, safety and environmental protection The Company has complied with all applicable environmental and labour laws. The Company continues to be certified under ISO-14001 and OHSAS 18001-2007 for its environment management systems and occupational health and safety : management systems respectively.

Industrial relations

During the year under review, industrial relations remained cordial and stable. The directors wish to place on record their sincere appreciation for the co-operation received from employees at all levels.

Disclosures

The particulars of conservation of energy, technology absorption, foreign exchange earnings and outgo prescribed under Section 217(1 )(e) of the Act read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are annexed hereto and forms part of this report.

The statement giving particulars of employees who were in receipt of remuneration in excess of the limits prescribed under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended, is given in the annexure to the Directors'' Report.

However, in terms of the provisions of Section 219 (1) (b) (iv) of the Companies Act, 1956, the Directors'' Report is being sent to all the members of the Company, excluding the aforesaid information. The said information would be filed with the Registrar of Companies and also would be available for inspection by the members at the registered office of the Company. Any member interested in obtaining such particulars may write to the Company at its registered office.

Awards and Recognitions

Your Company continues to get accolades and awards from its customers and other prestigious domestic/international forums Some of the awards and recognitions your Company received during the year under review:

- Two Excellence awards at International level Quality Circle competitions (ICQC) organised by the Association of Pioneer Quality Control Research (PQCRA) in Taiwan

- Won "Best Organisation Supporting QC movement" award, (fourth time in a row) along with seven Gold awards and two Silver awards at Regional level QC competitions organised by Quality Circle Forum of India (QCFI)

- Won "Best Organisation Supporting QC movement" award in Private Sector for the first time at the National Level along with four par excellence and four excellence awards from QCFI at National Level

- Received "Operational Excellence in Warehousing" award at Asia Manufacturing Supply Chain Summit.

- Won "Most Preferred Battery Brand - Telecom" award from FROST & SULLIVAN at India Back-up Power Industry Excellence Awards 2013

- "Platinum award" for "Partner of the Year 2013-14" from Indus Towers Limited for customer focused approach, i service delivery and product innovation.

- "Consistent high quality performance" award from Maruti Suzuki Limited.

- The Company won first position in "National award for excellence in cost management" for the year 2012 under "Private-Manufacturing-Organisation large" from the Institute of Cost Accountants of India.

Directors'' responsibility statement

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Board of Directors of the Company confirm to the best of their knowledge and belief that in the preparation of the statement of profit and loss for the financial year ended March 31, 2014 and the balance sheet as at that date ("financial statements"),:

i) the applicable accounting standards have been followed;

ii) appropriate accounting policies have been selected and applied consistently and such judgements and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for that period;

iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. To ensure this, the Company has established internal control systems, consistent with its size and nature of operations, subject to the inherent limitations that should be recognised in weighing the assurance provided by any such system of internal controls. These systems are reviewed and updated on an on-going basis. Periodic internal audits are conducted to provide reasonable assurance of compliance with these systems. The audit committee meets at regular intervals to review the internal audit function,

iv) the financial statements have been prepared on a going concern basis

Acknowledgement

The Board of Directors takes this opportunity to place on record their appreciation for the unstinted co-operation, commitment and dedication of all the employees of the Company, and the support extended by the channel partners, customers, vendors, business associates, banks, government authorities and all concerned without which it would not have been possible to achieve all round growth of the Company.

Your directors also take this opportunity to thank the joint venture partner Johnson Controls Inc. for their valuable assistance and support. The directors are thankful to the shareholders for their continued patronage.

On behalf of the Board

Place: Hyderabad Dr. Ramachandra N Galla

Date: May 28, 2014 Chairman


Mar 31, 2013

Dear Members,

The Directors have pleasure in presenting their report together with the audited financial statements for the financial year ended March 31, 2013.

Financial Highlights Rs. Million

Parameters 2012-13 2011-12

Net revenue 29,614 23,645

Other income 465 280

Total income 30,079 23,925

Operating profit (EBIDTA) 4,658 3,570

Profit before tax (PBT) 4,218 3,186

Profit after tax (PAT) 2,867 2,151

Surplus brought forward 6,221 4,661

Amount available for appropriation 9,088 6,812

Appropriations:

Transfer to General Reserve 287 215

Dividend on equity share capital

Proposed dividend 430 323

Corporate dividend tax 73 52

Surplus carried forward to balance sheet 8,298 6,221

Performance overview

The Company has recorded total revenue (net of excise duty) of Rs.29.61 billion as against Rs.23.64 billion in the previous year showing a remarkable 25% growth. The operating profit (Earnings Before Depreciation, Interest, Tax and Amortisation-EBIDTA) for the year stood at Rs.4,658 million (previous year Rs.3,570 million) representing 15.73% of net revenue. The Profit Before Tax (PBT) and Profit After Tax (PAT) for the financial year ended March 31, 2013 was at Rs.4,218 million and Rs.2,867 million as against Rs.3,186 million and Rs.2,151 million of the previous financial year respectively. The profit after tax has registered an impressive 33% growth. The financial year 2012-13 was a yet another significant year in terms of highest ever turnover and profit in the history of the Company.

Industrial battery business

The Company''s Industrial Battery business registered double digit revenue growth over the previous financial year and improvement in price realisation, despite capacity constraint and challenging & competitive market conditions. The demand from the telecom sector is primarily from replacement. This sector during the year has witnessed significant slowdown in both network expansion and up-gradation plans. The growth rate of UPS demand has moderated by the country''s adverse macro-economic conditions. Amidst these challenges, the industrial battery business improved the overall performance by virtue of its "preferred supplier status" with all major customers, backed by timely supplies, efficient after sales service, customer relationship management and consistent product performance of both PowerStack® and Quanta® batteries. During the year the Company has successfully introduced a new range of large VRLA battery (Quick Recharge Series - QRS) for telecom application which offers reliable performance enabling customers to optimise power cost.

The Company continues to retain dominant market share both in telecom and UPS battery businesses. The Company is investing on the capacity enhancement in medium and large VRLA product lines to meet the growing demand and also to sustain the growth momentum. The greenfield capacity expansion (from 1.80 million units to 3.60 million units per annum) project in medium VRLA product line and brownfield capacity expansion (to 900 million Ah per annum) project in large VRLA product line are progressing as per schedule and will commence supplies in Q3/Q4 FY 2014. The ultimate large VRLA product line capacity will be 1.00 billion Ah. The total capital commitment for the said expansions is Rs.2.40 billion.

Automotive battery business

The Company''s Automotive Battery business reported strong double digit revenue growth supported by good volume increase of 20% in four-wheeler and 37% in two-wheeler batteries, over the previous financial year, despite capacity constraints in automotive four-wheeler batteries during the year. The year under review witnessed double digit volume growth in automotive OEM business, notwithstanding depressed automobile production in the country due to unfavorable macro-economic conditions.

Substantial volume growth in both four-wheeler and two-wheeler replacement segments was due to strong demand for Company''s products, ably supported by focused action around the product offering, brand, channel and customer relationship. The continuing consumer preference for Amaron® and PowerZone™ enabled gains in market share both in aftermarket and OEM. The Company is well on course towards bulk supplies to two-wheeler original equipment manufacturers.

The launch of Amaron® and PowerZone™ branded tubular inverter batteries and Home UPS under private label program facilitated the Company to fill the gap in product offering to the channel and helped to improve volume and market share. The pan-India consumer response to these products has been very encouraging and this vertical will aid to grow the revenue and profits of the Company in the years to come.

During the year, the Board of Directors has approved investments of Rs.5.05 billion for enhancing automotive four-wheeler battery capacity from 5.60 million units to 8.25 million units per annum and two-wheeler battery capacity from 4.80 million units to 8.40 million units per annum through green and brownfield projects to meet the growing demand and to improve market share.

Financial position

The Company''s financial position has shown immense improvement over the years. The networth as at March 31, 2013 improved to Rs.10,598 million with the addition of Rs.2,363 million to the reserves and surplus during the year. There is no interest bearing debt as of March 31, 2013. The surplus cash as at the year end stood at Rs.3,652 million. The Company has parked the surplus funds in fixed deposits with reputed banks to ensure utmost safety, liquidity and return. The debt to equity ratio as at March 31, 2013 is 0.08 times, without adjusting for surplus cash. The Company is confident of funding the recently announced various capacity expansions, at the current location and at a strategic second location, through surplus cash, estimated internal accruals during 2013-14 and with moderate debt.

CRISIL has upgraded the ratings on the Company''s long- term bank loan facilities to ''CRISIL AA /Stable'' from ''CRISIL AA/Stable'' and has re-affirmed the ratings on the short- term bank facilities at ''CRISIL A1 ''.

During the year under review, the gross fixed assets including capital work in progress increased by Rs.1,304 million (net of deletions of Rs.155 million) and are at Rs.7,832 million (previous year - Rs.6,528 million). The entire additions were funded through internal accruals. The earnings per share of Rs.1 each for the financial year 2012-13 grew by 33% at Rs.16.78 as against Rs.12.59 for the previous financial year, while the book value per share as at March 31, 2013 was at Rs.62 against Rs.48 as at March 31, 2012.

Sub-division of Shares

Pursuant to the approval of the shareholders at the twenty seventh annual general meeting of the Company held on August 14, 2012, the face value of the equity shares of the Company was sub-divided from Rs.2 per equity share to Rs.1 per equity share, with effect from September 26, 2012. Consequent to this sub- division, shareholders were issued two equity shares of Rs.1 each in lieu of one equity share of Rs.2 each held by them as on the record date i.e. September 26, 2012, fixed for this purpose. Subsequent to the sub-division, the total number of shareholders has significantly increased to over 21,000 from about 16,500.

Dividend

The Board of Directors of the Company at their meeting held on May 19, 2010 had approved a policy on payment of dividend to shareholders i.e., to pay dividend (excluding corporate dividend tax) up to 15% of the profit after tax of the Company. In line with the policy your directors recommend a dividend of Rs.2.52 per equity share of Rs.1 each (252%) for the financial year ended March 31, 2013, subject to the approval of the shareholders.

The dividend, if approved, would involve a cash outflow of Rs.430.45 million towards dividend and Rs.73.15 million towards corporate dividend tax, resulting in a total cash outflow of Rs.503.60 million.

Transfer to reserves

As stipulated under the provisions of the Companies Act, 1956 read with Companies (Transfer to Reserves) Rules, 1975, your directors have proposed to transfer a sum of Rs.287 million to the general reserve out of the profits earned by the Company.

A sum of Rs.8,298 million is proposed to be retained as surplus.

Awards and Recognitions

Your Directors have pleasure in reporting the following awards and recognitions that your Company received during the year under review:

- "Gold award for excellence" in SME (Subject Matter Expertise) services from Indus Towers Limited

- Automotive battery plant won 5S sustenance award from CII Southern Region

- Won 3 star award in International Convention on Quality Circles

- Quality award from Bosch India Limited

- "World excellence award" under the category of warranty improvement from Ford, USA

- Special prize for "Good TPM Practices" by ABK AOTS DOSOKAI

- Won "Most Preferred Battery Brand - Telecom" award from FROST & SULLIVAN at India Back-up Power Industry Excellence Awards 2013

The Company won third position (back to back recognition) in "National award for excellence in cost management" for the year 2012 under "Private-Manufacturing-Organisation large" from the Institute of Cost Accountants of India.

Directors

In accordance with the provisions of Section 256(1) of the Companies Act, 1956 and Article 105(a) of the Articles of Association of the Company, Mr. T R Narayanaswamy, Mr. P Lakshmana Rao and Mr. Nagarjun Valluripalli, directors are liable to retire by rotation at the ensuing annual general meeting and being eligible offer themselves for re-appointment.

Mr. Ravi Bhamidipati was appointed as an additional director with effect from October 8, 2012 and has been designated as an Executive Director of the Company for the period from October 8, 2012 to March 31, 2014, subject to the approval of the shareholders.

Mr. Craig W Rigby resigned from the Board with effect from April 18, 2013 and Mr. Eric Stuart Mitchell was appointed as an additional director with effect from April 18, 2013 who will hold office upto the date of the ensuing annual general meeting.

Necessary resolutions for appointment/re-appointment of the above directors are being placed before the members for their approval.

The Board wishes to place on record their appreciation and acknowledgement for the valuable services rendered by Mr. Craig W Rigby, the outgoing director, during his tenure as director of the Company.

Auditors

M/s. E Phalguna Kumar & Co. Chartered Accountants, Tirupati and M/s. Chevuturi Associates, Chartered Accountants, Vijayawada, the joint statutory auditors of the Company who hold office until the conclusion of the ensuing annual general meeting and being eligible, have offered themselves for re-appointment. The Board recommends their re-appointment as the joint statutory auditors of the Company.

The Central Government had approved the appointment of M/s. Nageswara Rao and Co. Cost Accountants, Hyderabad as cost auditors for the financial year 2012-13. The cost audit report will be filed within 180 days from the close of the financial year. The cost audit report for the previous financial year 2011-12 signed by Mr. A.V.N.S Nageswara Rao, Cost Accountant, Hyderabad was filed in extensible Business Reporting Language (XBRL) mode on December 31, 2012, within due date.

Corporate Governance

The report on corporate governance along with the certificate from practising company secretary regarding compliance of conditions of corporate governance for the year ended March 31, 2013 pursuant to Clause 49 of the listing agreement is annexed hereto and forms part of the annual report. The Managing Director and the Chief Financial Officer of the Company have submitted a certificate endorsing to the Board the correctness of the financial statements and other matters as required under Clause 49 (V) of the listing agreement.

Management discussion and analysis

Management discussion and analysis report, highlighting the performance and prospects of the Company''s business, forms part of this annual report.

Transfer to the Investor Education and Protection Fund

In terms of Section 205A read with Section 205C of the Companies Act, 1956, an amount of Rs.307,659 being unclaimed dividend pertaining to the financial year 2004-05 was transferred to the Investor Education and Protection Fund (IEPF) on October 1, 2012.

Fixed deposits

The Company has not accepted any deposits from the public in terms of Section 58A of the Companies Act, 1956, during the year under review and hence there were no outstanding deposits as on March 31, 2013.

Health, safety and environmental protection

The Company has complied with all applicable environmental and labour laws. The Company continues to be certified under ISO-14001 and OHSAS 18001-2007 for its environment management systems and occupational health and safety management systems respectively.

Industrial relations

During the year under review, industrial relations remained cordial and stable. The directors wish to place on record their appreciation for the excellent co-operation received from all employees at all levels.

Particulars of employees

The statement giving particulars of employees who were in receipt of remuneration in excess of the limits prescribed under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended, is given in the annexure to the Directors'' Report.

However, in terms of the provisions of Section 219 (1) (b) (iv) of the Companies Act, 1956, the Directors'' Report is being sent to all the members of the Company, excluding the aforesaid information. The said information would be filed with the Registrar of Companies and also would be available for inspection by the members at the registered office of the Company. Any member interested in obtaining such particulars may write to the company secretary at the corporate operations office of the Company.

Conservation of energy, technology and foreign exchange

The particulars of conservation of energy, technology absorption, foreign exchange earnings and outgo prescribed under Section 217(1)(e) of the Act read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are annexed hereto and forms part of this report.

Directors'' responsibility statement

Pursuant to Section 217(2AA) of the Companies Act, 1956, the directors confirm that, to the best of their knowledge and belief:

i) In the preparation of the statement of profit and loss for the financial year ended March 31, 2013 and the balance sheet as at that date ("financial statements"), applicable accounting standards have been followed;

ii) Appropriate accounting policies have been selected and applied consistently and such judgements and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for that period;

iii) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. To ensure this, the Company has established internal control systems, consistent with its size and nature of operations. In weighing the assurance provided by any such system of internal controls its inherent limitations should be recognised. These systems are reviewed and updated on an on-going basis. Periodic internal audits are conducted to provide reasonable assurance of compliance with these systems. The audit committee meets at regular intervals to review the internal audit function;

iv) The financial statements have been prepared on a going concern basis.

Acknowledgement

The Board of Directors takes this opportunity to place on record their appreciation for the unstinted co-operation, hard work and dedication of all the employees of the Company, and the support extended by the channel partners, customers, vendors, business associates, banks, government authorities and all concerned without which it would not have been possible to achieve all round growth of the Company.

Your directors also take this opportunity to thank the joint venture partner for their valuable assistance and support. The directors are thankful to the shareholders for their continued patronage.

On behalf of the Board

Place: Milwaukee Dr. Ramachandra N Galla

Date: May 13, 2013 Chairman

 
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