Mar 31, 2018
DIRECTORS'' REPORT AND MANAGEMENT DISCUSSION & ANALYSIS
Dear Members,
The Directors have pleasure in presenting the Thirty Third Annual Report and the Audited Financial Statements, for the year ended March 31, 2018.
FINANCIAL HIGHLIGHTS
The highlights of financial results of the Company for the year under review are given below:
(Rs, In Million)
For the year ended March 31, 2018 |
For the year ended March 31, 2017 |
|
Revenue from operations (gross) |
22,582.7 |
20,985.5 |
Other Income |
73.9 |
67.8 |
Total Revenue |
22,656.6 |
21,053.3 |
Profit before finance cost, depreciation and tax |
2062.6 |
1745.4 |
Finance Cost |
19.8 |
43.9 |
Depreciation and amortization expenses |
529.2 |
518.5 |
Profit before Tax |
1513.6 |
1183.0 |
Tax expense |
512.1 |
369.7 |
Profit for the year |
1001.5 |
813.3 |
DIVIDEND
Your Directors recommend a dividend of Rs, 1.50 per Equity Share for the year ended March 31, 2018. This is subject to the approval of the Members at the ensuing Annual General Meeting.
COMPANY REVIEW
On 1st October, 2015, Johnson Controls Inc. and Hitachi Appliances, Japan formed a global joint venture and commenced the operations under âJohnson Controls-Hitachi Air Conditioningâ providing a whole range of customized and innovative air conditioning products to global customers. Johnson Controls-Hitachi Air Conditioning India Limited is the subsidiary of the joint venture and a leading air conditioner Company in India. Backed by an experience of over 30 years, the Company offers reliable air conditioners to the customers at the right price to meet their expectations, thereby fostering growth and innovation.
The business of the Company revolves within a single business segment, i.e. Cooling Products. Apart from manufacturing room and commercial air-conditioners, the Company also forays into trading of Refrigerators, Air Purifiers & Washing machines within the country. Additionally, the Company has a total installed capacity of manufacturing 900,000 Room Air conditioners (in a single shift), 120,000 Tons of Ductable units, 9,000 VRFs ODU and 300 Chillers per annum. The company also has a nationwide distribution network consisting of 5 regional offices, 20 branch offices, 203 exclusive sales and service dealers and over 8000 sales points. The company provides aftermarket service through 1235 service points.
With a strong belief in simplifying life, Johnson Controls-Hitachi Air Conditioning India Limited adopts world-class technologies to constantly innovate and inculcate newer concepts and advanced features in its products for a comfortable and relaxed life.
Diversity & Inclusion
To develop a culture of Diversity & Inclusion (D&I) across the organization has been the mission of the Company since long backed by a strong belief in achieving operational excellence, growth and employee engagement as a result of this mission. Increased collaboration and empowering engagement with all employees of the organization is highly essential to attain progress in the area of Diversity & Inclusion. Over the next year, several programs and initiatives are planned to imbibe the importance of D&I mission among all the employees. As a part of the D&I activities, the Company has also created a WISE (Womenâs Interaction, Support and Engagement) Forum.
The International Womenâs Day 2018 was celebrated at the Company as Press for Progress theme. This day was celebrated by conducting various activities like Workshop on Basic Awareness on Diversity & Inclusion, Workshop on Prevention, Prohibition & Redressal of Sexual Harassment of Women at Workplace and Outbound Training activities for all female workforce across the organization.
Talent Retention
Retaining talent is highly important for any organization to ensure steady growth and timely execution and achievement of organizational objectives. Various talent retention initiatives were conducted by the Company last year to ensure reduction in attrition effectively.
For New Joiners, programs like New Employee Orientation (NEO) and New Employee Experience Intervention (NEXINT) were rolled out to capture their early post-joining feedback. These initiatives enabled the Company to succeed in its agenda of helping new employees to settle down in the organization and provide proper on boarding training to them. Furthermore, a High Growth Potential (HGP) Hotline process was streamlined to retain talented employees with high potential from leaving the organization.
Industrial Relations
Amicable and friendly industrial relations throughout the organization are a prerequisite for overall growth and development. The Company has always endeavored to maintain industrial harmony amongst its employees, one example of it being timely negotiations and closure of Charter of Demands (COD). Last year the COD of both the registered unions of the Company were successfully completed for a period of 3 years.
JCMS - Empowered People
The Johnson Controls Manufacturing System, or JCMS, is the one way of manufacturing to attain world-class performance. The entire JCMS encompasses 9 principles which are required to be adhered to various stringent standards, practices and processes that are essential to achieve various Maturity levels from Level 1 (Unmet) to Level 5 (Distinguished). Out of these 9 principles, one of the principles is Empowered People. Led by the Human Resources department, the Empowered People (EP) Principle caters to the Integrated Goals, High Performance Teams, Employee Performance Assessment, Talent Management and Employee Engagement Strategy.
Learning & Development:
As part of our ongoing efforts in developing and enhancing skills of our employees and making them target oriented, various initiatives have been rolled out for organizational talent development.
For the Senior Management Team - Under the âShikharâ program, 3 Leading Business activities, through the Learning Lab aligning the Senior Management teamâs performance in Leading the Business were carried out.
For the Middle Management Team - Under the âSamarthyaâ program, the Functional Overview for Business Alignment (FOBA) workshops were conducted to provide them Inter-Functional learning.
For the Field Technicians - Under the âKaushalyaâ program, On-the-Job Trainings (OJTs) and Classroom Trainings (CRTs) were administered at pan-India locations. These trainings included basics of Product Installation, Troubleshooting and Customer Handling Skills.
Organizational Talent Review (OTR)
OTR is the comprehensive process for reviewing organizational talent. Various activities such as Succession Planning, High Potential (HiPot) Identification and Individual Development Plans (IDP) were carried out for the Management Team under this program.
The overall objective of the OTR process is to ensure alignment between organizationâs growth strategies and employeeâs skills and career aspirations and thereafter, anticipate talent needs, fill talent gaps and offer development experiences to the employees that support the business.
AUDITORS
Pursuant to the provisions of Section 139 of the Companies Act, 2013, Members of the Company, at the Annual General Meeting held on July 25, 2016, appointed M/s. Price Waterhouse & Co. Chartered Accountants LLP (Firm Registration No. 304026E / E300009) as Auditors of the Company to hold office from the conclusion of Annual General Meeting held on July 25, 2016 till the conclusion of the sixth consecutive Annual General Meeting.
DIRECTORSâ RESPONSIBILITY STATEMENT
Your Directors confirm that:
a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures;
b) Such accounting policies selected and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;
c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities
d) Annual accounts have been prepared on a going concern basis;
e) Internal financial controls which are to be followed by the Company have been laid down and that such internal financial controls are adequate and were operating effectively; and
f) Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
BOARD OF DIRECTORS
During the year under review, following changes have been made:
1. Mr. Gurmeet Singh, Managing Director of the Company has been appointed as Chairman of the Company effective from 30th January, 2018. Subsequent to this change:
a. Mr. Gurmeet Singh holds position of Chairman & Managing Director of the Company.
b. Mr. Franz Cerwinka holds position of Non-Executive Non-Independent Director of the Company.
2. Mr. Yoshikazu Ishihara has been appointed as a Director of the Company effective from 30th January, 2018.
3. Ms. Indira Parikh has been re-appointed as an Independent Director by passing a Special Resolution during the year under review.
4. Following Directors have tendered resignation as a Director of the Company:
a. Mr. Varghese Joseph has resigned as an Executive Director of the Company with effect from 30th January, 2018.
b. Mr. Vinay Chauhan has resigned as an Executive Director of the Company with effect from 30th January, 2018.
c. Mr. Devender Nath has resigned as an Independent Director of the Company with effect from 30th January, 2018.
d. Mr. Ravindra Jain has resigned as an Independent Director of the Company with effect from 30th January, 2018.
e. Mr. Ramachandran Subra Mani has resigned as an Independent Director of the Company with effect from 30th January, 2018.
f. Mr. Vinesh Sadekar has resigned as an Independent Director of the Company with effect from 30th January, 2018.
Board do place on record its sincere appreciation for Support, Inspiration, devoting valuable time and the significant contribution of all above Independent Directors and Executive Directors of the Company, made during their tenure in development and progress of the Company by giving their mature advice and guidance.
PERFORMANCE EVALUATION
The Board has carried out an annual evaluation of the performance of the Board, Audit Committee, Stakeholder Relationship Committee, Nomination and Remuneration Committee, Executive Committee, Vigil Mechanism Committee and CSR Committee.
The Board has also carried out annual evaluation of the performance of individual Directors, who were evaluated considering levels of their engagement and contribution, safeguarding the interests of the Company and its minority shareholders, etc. The performance evaluation of the Chairman and the Non-Independent Directors were carried out by the Independent Directors at their separate meeting.
DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM
The Company has established a Vigil Mechanism process as an extension of the Companyâs Code of Conduct whereby an employee, director, customer, vendor or associate of the Company can disclose his genuine doubt in good faith to any member of Vigil Mechanism Committee about unethical behavior, actual or suspected fraud or violation of the Companyâs Code of Conduct or ethics policy, so that appropriate action can be taken to safeguard the interest of the Company. In exceptional cases, a complaint can be reported by a complainant to a Chairperson of Audit Committee. This mechanism is overseen by the Audit Committee.
DISCLOSURE UNDER SECTION 197(12) OF THE COMPANIES ACT, 2012 READ WITH RULE 5 OF COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014:
Name of Director and Key Managerial Personnel (KMP) |
Designation |
% increase in remuneration of director and KMP |
Ratio of the remuneration of director to the median remuneration of the employees of the Company for the financial year |
Mr. Gurmeet Singh |
Chairman and Managing Director |
21.51 |
16.23 : 1 |
Mr. Franz Cerwinka |
Director |
NA |
NA |
Mr. Yoshikazu Ishihara |
Director |
NA |
NA |
Mr. Vinay Chauhan |
Executive Director |
Note 1 |
Note 1 |
Mr. Varghese Joseph |
Executive Director |
Note 1 |
Note 1 |
Mr. Ashok Balwani |
Independent Director |
Note 4 |
0.50 : 1 |
Mr. Mukesh Patel |
Independent Director |
Note 4 |
0.41 : 1 |
Ms. Indira Parikh |
Independent Director |
Note 4 |
0.15 : 1 |
Mr. Devender Nath |
Independent Director |
Note 2 |
0.50 : 1 |
Mr. R S Mani |
Independent Director |
Note 2 |
0.27 : 1 |
Mr. Ravindra Jain |
Independent Director |
Note 2 |
0.50 : 1 |
Mr. Vinesh Sadekar |
Independent Director |
Note 2 |
0.20 : 1 |
Mr. Rishi Mehta |
Chief Financial Officer |
Note 3 |
Note 3 |
Mr. Anil Shah |
Chief Financial Officer |
Note 3 |
Note 3 |
Mr. Parag Dave |
Company Secretary |
10% |
2.72:1 |
Note 1 : Mr. Vinay Chauhan and Mr. Varghese Joseph ceased to be an Executive Director with effect from January 30, 2018.
Note 2 : Mr. Devender Nath, Mr. R S Mani, Mr. Ravindra Jain and Mr. Vinesh Sadekar ceased to be an Independent Director with effect from January 30, 2018.
Note 3 : Mr. Anil Shah retired as a Chief Financial Officer and Mr. Rishi Mehta appointed as a Chief Financial Officer with effect from January 30, 2018.
Note 4 : Sitting fees payable to Independent Directors for attending various meeting remained same.
Comparison of remuneration against Companyâs performance |
|
- Increase in remuneration of each KMP As mentioned in above table |
|
- Increase in total remuneration of all KMP Total remuneration of KMP decreased by 6.85% due to resignation of Executive Directors |
|
Percentage increase in the median remuneration of employees in the |
15% |
financial year |
|
No. of permanent employees on the rolls of Company |
1481 |
Average percentage increase already made in the salaries of |
- Average % increase in the salaries of employees other than |
employees other than the managerial personnel in the last financial |
the managerial personnel 19.34% |
year and its comparison with the percentage increase in the managerial |
- Average % increase in the managerial remuneration 21% |
remuneration and justification thereof and point out if there are any |
|
exceptional circumstances for increase in the managerial remuneration |
We hereby affirm that the remuneration given to all the employees, Directors and KMP is as per the Remuneration policy of the Company.
OTHER DISCLOSURES:
1. Number of meetings of the Board: Four meetings of the Board of Directors of the Company were held during the year under review on May 23, 2017, August 08, 2017, November 07, 2017 and January 30, 2018.
2. Members of the Audit Committee are as under:
a. Mr. Mukesh Patel - Chairman
b. Mr. Ashok Balwani - Member
c. Ms. Indira Parikh - Member
3. The Company has received necessary declaration from each Independent Director under Section 149(7) of the Companies Act, 2013, that he/she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013.
4. Details about the Policy on Corporate Social Responsibility (CSR) and projects implemented by the Company during the year under review, as required under Section 134(3)(o), 135(2) read with Companies (Corporate Social Responsibility Policy) Rules, 2014 have been provided as Annexure A.
5. Formal Appointment and Evaluation Policy of the Board of Directors and Senior Management of the Company which has been formulated and recommended by Nomination and Remuneration Committee and adopted by Board of Directors covering appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Section 178(3) is attached as Annexure B.
6. No commission paid to any Director of the Company, so no disclosure is required to be made under Section 197(14).
7. The details forming part of the extract of the Annual Return in form MGT 9 as provided under sub-Section (3) of section 92 is annexed as Annexure C.
8. No loan was granted by the Company to any person to purchase or subscribe to fully paid-up shares of the Company.
9. Secretarial Audit Report: Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Report of the Secretarial Auditors is annexed as Annexure D.
10. There is no fraud reported by Auditors under Section 143(12) of the Companies Act, 2013 during the year under review.
11. Particulars of loans, investments or guarantees under section 186: Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered under Section 186. Company has not made any investment in securities of other Body Corporate. Company has given guarantee of '' 150 Million against the credit facilities availed by dealers.
12. There is no subsidiary, associate and joint venture Company, so no disclosure is required on the performance and financial position of each of the subsidiaries, associates and joint venture companies in Form AOC 1.
13. There is no Company which has become or ceased to be its subsidiary, joint venture or associate Company during the year.
14. During the year, Company has not accepted deposits covered under Chapter V
15. There is no qualification, reservation or adverse remark or disclaimer made by the Auditors in their report.
16. There is no qualification, reservation or adverse remark or disclaimer made by the Company Secretaries in practice in their Secretarial Audit Report.
17. There is no significant and material order passed by the regulators or courts or tribunals impacting the going concern status and Companyâs operations in future.
18. Details of complaints relating to sexual harassment during the year under review: Received during the year: 1; Pending as on 31st March, 2018: 1.
19. Information pursuant to Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, relating to Conservation of energy, technology absorption and foreign exchange earnings and outgo is given as Annexure E to this report.
20. Statement showing particulars of employees under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached with this Annual Report.
21. Contract or arrangement under Section 188(1): There were no contracts or arrangements entered by the party falling under Section 188(1). Particulars of contracts or arrangements with related parties are provided in Form AOC 2 as Annexure F.
22. Policy on dealing with Related Party Transactions has been disclosed on Companyâs website and a we blink is as under:
http://www.jci-hitachi.in/cms/materials/ef34acd1ff.pdf
23. Revision in Accounts or Boardâs Report: There are no revisions made in the Accounts or Boardâs Report.
24. Issue of Equity Shares with differential rights: There was no Equity Share issued with differential voting rights during the year under review.
25. Issue of Sweat Equity Shares: There was no issue of Sweat Equity Share during the year under review.
26. Employee Stock Option and Employee Stock Purchase Schemes: No Employee Stock Option and Employee Stock Purchase Schemes were launched during the year under review.
27. Disclosure under Regulation 34(3) read with Schedule V of the SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015:
a. The Equity Shares of the Company are not delisted or suspended during the year under review.
b. Equity Shares of the Company are listed on the BSE Limited and the National Stock Exchange of India Limited.
c. Annual listing fees have been paid to both the stock exchanges mentioned above.
28. Dividend Distribution Policy is given as Annexure G to this report
29. Company has complied with Secretarial Standards applicable to Company.
ACKNOWLEDGEMENT
Your Directors thank all Customers, Suppliers, Investors, Bankers and other stakeholders of the Company for their co-operation and continued support during the year. We look forward to their continued support in the future also.
We wish to place on record our sincere appreciation for the excellent work put in by the employees of the Company at all levels.
For and on behalf of the Board of Directors
Place : Ahmedabad Gurmeet Singh
Date : May 23, 2018 Chairman & Managing Director
Mar 31, 2017
Dear Members,
The Directors have pleasure in presenting the Thirty Second Annual Report and the Audited Financial Statements, for the year ended March 31, 2017.
FINANCIAL HIGHLIGHTS
The highlights of financial results of the Company for the year under review are given below:
(Rs, In Lacs)
Particulars |
For the year ended March 31, 2017 |
For the year ended March 31, 2016 |
Revenue from operations (gross) |
2,15,283 |
1,79,820 |
Less : Excise Duty |
18,125 |
15,766 |
Revenue from operations (net) |
1,97,158 |
1,64,054 |
Other Income |
574 |
178 |
Total Revenue |
1,97,732 |
1,64,232 |
Profit before finance cost, depreciation and tax |
17,281 |
12,451 |
Finance Cost |
413 |
1,012 |
Depreciation and amortization expenses |
5,081 |
4,555 |
Profit before Tax |
11,787 |
6,884 |
Tax expense |
3,682 |
1,886 |
Profit for the year |
8,105 |
4,998 |
DIVIDEND
Your Directors recommend a dividend of Rs, 1.50 per Equity Share for the year ended March 31, 2017. This is subject to the approval of the Members at the ensuing Annual General Meeting.
COMPANY REVIEW
On October 01, 2015, Johnson Controls Inc. and Hitachi Appliances, Japan completed a global joint venture and commenced the operations of "Johnson Controls-Hitachi Air Conditioning". Johnson Controls-Hitachi Air Conditioning India Limited is a subsidiary of Johnson Controls-Hitachi Air Conditioning. Consequent to the above change, the name of the India unit has been changed from Hitachi Home & Life Solutions (India) Limited to Johnson Controls-Hitachi Air Conditioning India Limited on August 19, 2016.
Through this joint venture, the Company has combined the rich heritage and innovative technology of Hitachi with the industry leading expertise and global network of Johnson Controls. The partnership is aimed at addressing the cooling needs of the consumers in a faster, smarter and much more efficient way than ever before. The Company''s customers will benefit from its world class R&D centres, where researchers work tirelessly to provide innovative solutions and quality products that are designed to meet every expectation.
The Company''s business falls within a single business segment, i.e. Cooling Products. The Company manufactures a wide range of products in this segment starting from Room Air Conditioners (which includes Inverter and Fixed Speed Split ACs along with Window ACs) to Commercial Air Conditioners (which includes VRF (Variable Refrigerant Flow) Systems, Ductable Air Conditioners, Chillers and Telecom Air Conditioners). The Company is not just limited to making Air Conditioners but is also into the trading of Refrigerators and Air Purifiers.
Johnson Controls-Hitachi Air Conditioning India Limited is amongst the top air-conditioning companies in India. It has a strong nationwide distribution network consisting of 5 regional offices, 23 branch offices, more than 200 exclusive sales and service dealers, over 8000 sales points and 1400 service points. In order to serve its customers even better, the Company also has 24 Company owned and operated, Hitachi customer care centres (HCS) which are spread pan India.
Johnson Controls-Hitachi Air Conditioning India Limited believes in simplifying life, which is why, the company constantly innovates, brings in world-class technologies, introduces newer concepts and incorporates advanced features in its products to make life as comfortable as it can get.
Talent Management:
To create leaders for the future, the efforts have to be made today. With this philosophy in mind, the Company continuously strives to incorporate ever-evolving employee specific practices that not only fulfill its requirements but also inspire them to lead the organization to greater heights. Through merit-based reward structure, competency specific learning opportunities and market based salary benchmarking, the Company strives to provide employees with a conducive environment of ''Recognition, Mentoring and Rewards''.
Learning & Development:
The Company is fully committed towards developing highly motivated, competent and engaged workforce. For the same, lot of investment was made in 2016-17 for providing opportunities to employees of all categories for Learning & Development. Competency development is a very critical area of focus and the Company has conducted various Technical & Behavioral learning programmes for various categories of employees across the hierarchy.
Initiatives such as the ''Shikhar - Leadership Management Program'' for Talent Assessment & Development of the Leadership Team were taken. Two phases of programmes of ''Shikhar - Leading Self'' and ''Shikhar - Leading Others'' have been conducted for this group. The ''Samarthya
- Management Development Program'' focused on Competency Assessment and Inter-functional Learning of Middle Management Team.
Company completed the detailed assessment through various simulations and a 360° Assessment process. Extensive programs like ''Utthan''-A program for Self-Development for Operators, the ''Kaushalya'' program for Technical Skill Development of Field Technicians and a dedicated Soft Skill Development program for Hitachi Profile Communicators (HPC) & other Dealer Employees, are some of the steps taken by the Company towards developing its Human Capital and making them ''future ready''.
Gender Diversity:
The Company has kept conscious efforts towards creation of a gender diverse workforce. Various steps have been taken by the Company to create a safe, rewarding and facilitative work environment for female employees. Steps such as, availability of dedicated residential areas and transportation facilities at specific locations, creation of robust policies specific to female employees and creation of an exclusive Company-wide Women Forum, have been taken to attract and encourage gender diversity in the workforce. Various activities such as gender sensitization workshops, women empowerment workshops, self-defence workshops and exclusive networking activities have been conducted as a part of the Women Forum.
GST implementation
The long-awaited Goods and Services Tax Act is expected to be implemented by 1st of July, 2017. The decade-long reform is set to be adopted by all States and Union Territories of India. Most of the mass-consumption goods have been taxed at a lower rates and some essential food commodities have been exempted. However, Air Conditioners and Refrigerators have been put in the highest tax bracket of 28%. This may lead to marginal increase in price of products of the company in short run. However, with the stabilization of GST input credit mechanism and other processes, we expect this price rise to neutralize.
With introduction of GST an over-all positive impact is expected on the GDP of the country. This may be beneficial for the consumer goods industry as a whole in long run.
The Company is fully committed for smooth GST roll-out and is in the final process of completing the necessary modalities to migrate into GST regime.
INTERNAL CONTROL AND SYSTEMS
The Company has an adequate system of internal control to ensure that all the assets pertaining to Company are safeguarded and protected. Internal Audit has also been done through external Auditors at plant as well as at all the branches of the Company as per the detailed scope defined and approved by the Audit Committee. The Internal Audit is planned to substantiate and review the adequacy of controls and laid down procedures & systems.
Observations of Internal Auditors and the detailed plan of action is reviewed and discussed at the meetings of the Audit Committee.
2016-17 being first complete fiscal year post Joint Venture, it has put in place several changes in its policies and processes to align its functioning with global practices such as SOX compliances, whereby the Company developed control and monitoring measures in crucial business processes with an objective to eliminate or reduce risk elements in day to day business activities.
AUDITORS
Pursuant to the provisions of Section 139 of the Companies Act, 2013, Members of the Company, at the Annual General Meeting held on July 25, 2016, appointed M/s. Price Waterhouse & Co. Chartered Accountants LLP (Firm Registration No. 304026E / E300009) as Auditors of the Company to hold office from the conclusion of Annual General Meeting held on July 25, 2016 till the conclusion of the sixth consecutive Annual General Meeting. Accordingly, requisite resolution for ratification of Appointment of M/s. Price Waterhouse & Co. Chartered Accountants LLP as Auditors from the conclusion of Annual General Meeting to be held in 2017 to the conclusion of next Annual General Meeting, forms part of the notice convening the AGM.
DIRECTORS'' RESPONSIBILITY STATEMENT
Your Directors confirm that:
a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures;
b) Such accounting policies selected and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;
c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities
d) Annual accounts have been prepared on a going concern basis;
e) Internal financial controls which are to be followed by the Company have been laid down and that such internal financial controls are adequate and were operating effectively; and
f) Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
PERFORMANCE EVALUATION
The Board has carried out an annual evaluation of the performance of the Board, Audit Committee, Stakeholder Relationship Committee, Nomination and Remuneration Committee, Executive Committee, Vigil Mechanism Committee and CSR Committee.
The Board has also carried out annual evaluation of the performance of individual Directors, who were evaluated considering levels of their engagement and contribution, safeguarding the interests of the Company and its minority shareholders, etc. The performance evaluation of the Chairman and the Non-Independent Directors were carried out by the Independent Directors at their separate meeting.
DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM
The Company has established a Vigil Mechanism process as an extension of the Company''s Code of Conduct whereby an employee, director, customer, vendor or associate of the Company can disclose his genuine doubt in good faith to any member of Vigil Mechanism Committee about unethical behavior, actual or suspected fraud or violation of the Company''s Code of Conduct or ethics policy, so that appropriate action can be taken to safeguard the interest of the Company. In exceptional cases, a complaint can be reported by a complainant to a Chairperson of Audit Committee. This mechanism is overseen by the Audit Committee.
DISCLOSURE UNDER SECTION 197(12) OF THE COMPANIES ACT, 2012 READ WITH RULE 5 OF COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014:
Name of Director and Key Managerial Personnel (KMP) |
Designation |
% increase in remuneration of director and KMP |
Ratio of the remuneration of director to the median remuneration of the employees of the Company for the financial year |
Mr. Shinichi Iizuka (Up to May 30, 2016) |
Chairman |
Nil |
NA |
Mr. Franz Cerwinka (From May 30, 2016) |
Chairman |
Nil |
NA |
Mr. Atsushi Ohtsuka |
Managing Director |
Note 1 |
Note 1 |
Mr. Gurmeet Singh |
Managing Director |
Note 2 |
Note 2 |
Mr. Vinay Chauhan |
Executive Director |
5% |
15-1 |
Mr. Varghese Joseph |
Executive Director |
Note 3 |
13-1 |
Mr. Ashok Balwani |
Independent Director |
Note 4 |
0.39-1 |
Mr. Devender Nath |
Independent Director |
Note 4 |
0.55-1 |
Ms. Indira Parikh |
Independent Director |
Note 4 |
0.36-1 |
Mr. Mukesh Patel |
Independent Director |
Note 4 |
0.81-1 |
Mr. R S Mani |
Independent Director |
Note 4 |
0.21-1 |
Mr. Ravindra Jain |
Independent Director |
Note 4 |
0.55-1 |
Mr. Vinesh Sadekar |
Independent Director |
Note 4 |
0.29-1 |
Mr. Anil Shah |
CFO & Executive Director |
Note 5 |
Note 5 |
Mr. Parag Dave |
Company Secretary |
19% |
3:1 |
Note 1: Mr. Atsushi Ohtsuka ceased to be a Managing Director on January 31, 2017
Note 2: Mr. Gurmeet Singh appointed as Managing Director on February 01, 2017
Note 3: Mr. Varghese Joseph appointed as an Executive Director on August 01, 2015
Note 4: Sitting fees payable to Independent Directors for attending various meeting remained same.
Note 5: Mr. Anil Shah was retired as an Executive Director with effect from September 03, 2016
Comparison of remuneration against Company''s performance |
|
- Increase in remuneration of each KMP - Increase in total remuneration of all KMP |
As mentioned in above table Total remuneration of KMP increased by 43% |
Percentage increase in the median remuneration of employees in the financial year; 22%
No. of permanent employees on the rolls of Company; 1444
Average percentage increase already made in the salaries of employees other than - Average % increase in the salaries of employees the managerial personnel in the last financial year and its comparison with the other than the managerial personnel 14% percentage increase in the managerial remuneration and justification thereof and - Average % increase in the managerial point out if there are any exceptional circumstances for increase in the managerial remuneration 25% remuneration
We hereby affirm that the remuneration given to all the employees, Directors and KMP is as per the Remuneration policy of the Company.
DETAILS OF DIRECTORS OR KEY MANAGERIAL PERSONNEL WHO WERE APPOINTED OR HAVE RESIGNED DURING THE YEAR UNDER REVIEW:
- Mr. Shinichi Iizuka has ceased to be a Chairman of the Company with effect from May 30, 2016.
- Mr. Franz Cerwinka has been appointed as a Chairman of the Company with effect from May 30, 2016.
- Mr. Atsushi Ohtsuka has ceased to be a Managing Director of the Company with effect from January 31, 2017.
- Mr. Gurmeet Singh has been appointed as a Managing Director of the Company with effect from February 1, 2017.
- Mr. Anil Shah, CFO & Executive Director has retired on 3rd September, 2016 upon Superannuation. He ceased to be an Executive Director of the Company with effect from 3rd September, 2016. Company continued to avail his services as Chief Financial Officer.
- No Independent Director has been re-appointed by passing a Special Resolution during the year under review.
INTERNAL FINANCIAL CONTROL:
Internal Financial Control plan adopted by the Company is adequate with reference to the Financial Statement.
1. Conduct of its business by adherence to Company''s policies.
2. Safeguarding of assets.
3. The accuracy and completeness of the accounting records, Prevention and detection of frauds and errors and timely preparation of reliable financial information.
OTHER DISCLOSURES:
1. Number of meetings of the Board: Five meetings of the Board of Directors of the Company were held during the year under review on May 30, 2016, July 25, 2016, October 24, 2016, January 23, 2017 and January 31, 2017.
2. Members of the Audit Committee are as under:
a. Mr. Mukesh Patel - Chairman
b. Mr. Devender Nath - Member
c. Mr. Ravindra Jain - Member
3. The Company has received necessary declaration from each Independent Director under Section 149(7) of the Companies Act, 2013, that he/she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013.
4. Details about the Policy on Corporate Social Responsibility (CSR) and projects implemented by the Company during the year under review, as required under Section 134(3)(o), 135(2) read with Companies (Corporate Social Responsibility Policy) Rules, 2014 have been provided as Annexure A.
5. Formal Appointment and Evaluation Policy of the Board of Directors and Senior Management of the Company which has been formulated and recommended by Nomination and Remuneration Committee and adopted by Board of Directors covering appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Section 178(3) is attached as Annexure B.
6. No commission paid to any Director of the Company, so no disclosure is required to be made under Section 197(14).
7. The details forming part of the extract of the Annual Return in form MGT 9 as provided under sub-Section (3) of section 92 is annexed as Annexure C.
8. No loan was granted by the Company to any person to purchase or subscribe to fully paid-up shares of the Company.
9. Secretarial Audit Report: Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Report of the Secretarial Auditors is annexed as Annexure D.
10. There is no fraud reported by Auditors under Section 143(12) of the Companies Act, 2013 during the year under review.
11. Particulars of loans, investments or guarantees under section 186: Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered under Section 186. Company has not made any investment in securities of other Body Corporate. Company has given guarantee of '' 1500 lacs against the credit facilities availed by dealers.
12. There is no subsidiary, associate and joint venture Company, so no disclosure is required on the performance and financial position of each of the subsidiaries, associates and joint venture companies in Form AOC 1.
13. There is no Company which has become or ceased to be its subsidiary, joint venture or associate Company during the year.
14. During the year, Company has not accepted deposits covered under Chapter V.
15. There is no qualification, reservation or adverse remark or disclaimer made by the Auditors in their report.
16. There is no qualification, reservation or adverse remark or disclaimer made by the Company Secretaries in practice in their Secretarial Audit Report.
17. There is no significant and material order passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.
18. Details of complaints relating to sexual harassment during the year under review: Received during the year: Nil; Pending as on 31st March, 2017: Nil.
19. Information pursuant to Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, relating to Conservation of energy, technology absorption and foreign exchange earnings and outgo is given as Annexure E to this report.
20. Statement showing particulars of employees under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached with this Annual Report.
21. Contract or arrangement under Section 188(1): There were no contracts or arrangements entered by the party falling under Section 188(1). Particulars of contracts or arrangements with related parties are provided in Form AOC 2 as Annexure F.
22. Policy on dealing with Related Party Transactions has been disclosed on Company''s website and a weblink is as under: http://www.jci-hitachi.in/cms/materials/ef34acd1ff.pdf
23. Revision in Accounts or Board''s Report: There are no revisions made in the Accounts or Board''s Report.
24. Issue of Equity Shares with differential rights: There was no Equity Share issued with differential voting rights during the year under review.
25. Issue of Sweat Equity Shares: There was no issue of Sweat Equity Share during the year under review.
26. Employee Stock Option and Employee Stock Purchase Schemes: No Employee Stock Option and Employee Stock Purchase Schemes were launched during the year under review.
27. Disclosure under Regulation 34(3) read with Schedule V of the SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015:
a. The Equity Shares of the Company are not delisted or suspended during the year under review.
b. Equity Shares of the Company are listed on the BSE Limited and the National Stock Exchange of India Limited.
c. Annual listing fees have been paid to both the stock exchanges mentioned above.
28. Dividend Distribution Policy is given as Annexure G to this report ACKNOWLEDGEMENT
Your Directors thank all Customers, Suppliers, Investors, Bankers and other stakeholders of the Company for their co-operation and continued support during the year. We look forward to their continued support in the future also.
We wish to place on record our sincere appreciation for the excellent work put in by the employees of the Company at all levels.
For and on behalf of the Board of Directors
Place : Delhi Gurmeet Singh Vinay Chauhan
Date : May 23, 2017 Managing Director Executive Director
Mar 31, 2016
Dear Members,
The Directors have pleasure in presenting the Thirty First Annual
Report and the Audited Financial Statements, for the year ended March
31, 2016.
FINANCIAL HIGHLIGHTS
The highlights of financial results of the Company for the year under
review are given below:
(Rs. In Lacs)
For the year
ended For the year
ended
March 31, 2016 March 31, 2015
Revenue from operations (gross) 1,81,720 1,70,726
Less: Excise Duty 15,767 13,442
Revenue from operations (net) 1,65,953 1,57,284
Other Income 178 712
Total Revenue 1,66,132 1,57,996
Profit before finance cost,
depreciation and tax 12,451 14,520
Finance Cost 1,012 826
Depreciation and amortization expenses 4,555 3,593
Profit before Tax 6,884 10,101
Tax expense 1,886 2,325
Profit for the year 4,998 7,776
DIVIDEND
Your Directors recommend a dividend of Rs.1.50 per Equity Share for the
year ended 31st March, 2016. This is subject to the approval of the
Members at the ensuing Annual General Meeting.
About Hitachi Home & Life Solutions (India) Limited, a Johnson Controls
- Hitachi Air Conditioning Company
On 1st October, 2015, Johnson Controls, Hitachi Ltd. and Hitachi
Appliances Inc. have completed Global Joint Venture agreement (JV) and
commenced operations of Johnson Controls - Hitachi Air Conditioning
Company (JCH) to provide global customers with full range of Air
conditioning products. Through this agreement Johnson Controls has
acquired a 60 percent ownership stake of JV and Hitachi Appliances Inc.
retained ownership of remaining 40 percent stake of the JV.
Through this joint venture, we have combined the rich heritage and
innovative technology of Hitachi with the Industry-leading expertise
and global network of Johnson Controls. Our partnership aims to address
the cooling needs in a faster, smarter, safe and efficient manner than
ever before. Our customers stand to benefit from our world-class R&D
centers, where our researchers work tirelessly to provide innovative
solutions and quality products that are designed to meet every need.
"Hitachi Home & Life Solutions (India) Limited" (HHLI), is the Indian
arm of Johnson Controls- Hitachi Air Conditioning Company.
Hitachi Home & Life Solutions (India) Limited is one of the earliest
companies to set up Air conditioning Manufacturing in India, HHLI has a
legacy that is over 30 years in the making. Today, the Company
manufactures a wide range of products, from room Air conditioners
(Split & Window ACs) to commercial Air conditioners including Chiller,
Ductable Air conditioners, Telecom Air conditioners & VRF system. HHLI
is also involved in trading of Refrigerators & Air Purifiers and has
strong presence in undertaking turnkey projects in HVAC.
The HHLI headquarters is situated at Kadi, Gujarat with its
manufacturing plant also located there. The Company has a total
installed capacity of 6,00,000 Room Air conditioners per annum (in a
single shift). In addition to that the Company also has the capacity to
manufacture 120000 Tons of Ductable units, 9000 VRFs ODU and 300
Chillers per annum. HHLI is amongst the top Air conditioning companies
in India. It has a strong nationwide distribution consisting of 5
regional offices, 20 branch offices, 203 exclusive sales and service
dealers and over 4000 sales points. Currently, the Company has 33
Exclusive showrooms in India. The organization expects these numbers to
rise up to 150 in the very near future. To provide this wide
distribution network, Company has 40 Company owned service centers
(HCS) and 600 other service points including Multi brand S&S dealers
and franchisees.
At Hitachi Home & Life Solutions (India) Ltd., we believe in "i Care"
philosophy which is our guiding force. i Care is everything we stand
for, believe in, and work towards for our internal and external
customers. We believe in simplifying life. This is why, we constantly
innovate, bring in world-class technology and newer concepts in our
products to make life comfortable for our customers.
MACRO ECONOMIC ENVIRONMENT
The Indian economy has gone through various challenges in recent times.
But it has recovered and is showing strong growth in the face of
adverse global economic scenario. In the recent past, the economy faced
difficult times with several issues like lower growth, widening current
account deficit and high levels of inflation; worsened by two
consecutive years of drought. Yet the Indian Economy has shown
remarkable growth by 7.5% this year and expected 7.7% in 2016. The
downturn in global commodity prices has also helped significantly to
improve the prospects of Indian economy. This, in turn, has had a
positive impact on the Air conditioning industry which has a high
number of commodities that contribute towards its input costs.
OVERVIEW
1. The year gone by has not been very good for the Indian Air
conditioning Industry. The residential business was affected by
unpredictable weather, un-seasonal rainfall during peak summer while
the commercial segment suffered the lagging effects of slowdown from
2012-14.
The residential Air conditioner market for the year was almost flat.
HHLI''s residential business also performed in line with the industry
growth. The residential business showed negligible volume growth but
managed to grow marginally in value terms due to shift towards
high-star rated ACs and Inverter ACs.
2. Though the overall commercial market remained weak, the Company
scored significant success in the Ductable segment. The Company
maintained and bettered its position in the segment with a business
growth of around 15% and improved its market share. The Company
continues to retain its strong position in this segment.
The other bright spot in the commercial segment was the growth in the
VRF Segment led by increased demand towards energy- efficient solutions
and use of innovative technology. The Company saw its Set Free- VRF
segment picked up speed in terms of order bookings and projects
executed across various customer segments like Banking, Education,
Hospitality, etc. The Company has invested in manpower and
infrastructure in this new fast growing segment and would continue to
invest in this segment to drive future growth.
3. The Chiller business has been subdued due to the difficult economic
environment of the preceding year. It is also bogged down by delays and
postponement of various commercial real estate projects. Therefore
Company could not perform well in this segment which is heavily
dependent upon the economic conditions.
4. The Company had entered into the project business to fulfill a gap
of providing end-to-end solutions to its customers. The Company has
invested in the required manpower and other requisite support tools for
this business in last few years. This has been the reason why 2015-16
has been a break out year for this business. The Projects business
delivered a big growth over last year and this year has got significant
number of projects in the pipeline.
5. The Telecom and Special Products segment is a niche segment where
Hitachi commands 65-70% market share but the growth over last year has
not been encouraging. Being a niche segment, the growth of this product
category depends on growth of the telecom industry. Judging by the
competition and shrinking margins of telecom operators the segment
growth may face challenges in the coming years.
6. The Company forayed into exports last year on a trial basis and a
small batch was exported during the year. The initial response has been
very encouraging. Today, we are exporting to Sri Lanka, Indonesia and
Bangladesh. In coming years, we plan to expand into other parts of the
world.
7. The home appliances business for the Company has also grown over
the last year. The differentiated product range coupled with advance
features has enabled the Company to carve out a niche which has made
Company''s brand name popular in the 300 Litres segment. The Company
has focused in the distribution channels and has opened new channels
for sale of this product. The introduction of new product category "Air
Purifier" has shown positive response and looks very promising for
future business growth.
8. Customer Service has always been a top priority for the Company.
The Company has started many initiatives to improve the customer
satisfaction index, which has shown a healthy growth year-on-year. With
40 Company-owned HCS centers, i Care Service App, Online Product Demo
Videos and online complaint registration initiatives, the Company will
continue to focus on customer service which will become a key
differentiator for our business in the future.
ROOM AIR CONDITIONERS
Room Air conditioners segment contribution is very high for the Company
in its total business and it is one of our major focus areas. The
Company has a wide range of Split ACs to meet the requirement of the
Indian consumers. The current range of split ACs consists of around 80
models which include 2, 3, 4, 5 star rated ACs and tropical inverter
technology products. The launch of the ''Kashikoi'' range in 2015 added a
technical edge in the range of Split ACs. Its i-See, i-Sense, i-Clean
technologies were designed to meet Indian consumer''s needs. This year,
the Company has focused on promoting its unique "i Clean Plus"
technology in Split AC Range. i Clean Plus technology was offered in
3-star, 4-star, 5-star and Inverter technology products. The Company
has also developed ''Smart i-Connect range'', of Split Air conditioner
with Wi-Fi connectivity which can be operated from any Android or iOS
Smart Phone.
The Company also launched its ''Toushi'' range of products which
primarily caters to replacement markets targeting people seeking to buy
into Hitachi Brand at a value price. The Window range continues to
dominate with 11 models in 2, 3 and 5 star rating. The Company also has
Hot and Cold range of Products in both Splits and Windows.
In order to widen its reach to Tier II & Tier III towns, the Company
has expanded its distribution network through direct dealers and
distributors. Today it caters to more than 4,000 outlets and exclusive
showrooms.
India has a large market for institutional buyers in this segment. With
its ''Logicool'' range, the Company has significantly increased the
number of key accounts year-on-year. With growth in demand of
institutional sales, this product business is expected to grow
strongly.
COMMERCIAL AIR CONDITIONERS
The Commercial range of Air conditioners includes Cassette ACs,
Ductable ACs, Set Free (Variable Refrigerant Flow - VRF) and Chillers.
The Company has presence in all these segments and is strengthening its
position in all these segments every year.
The ductables used to cater to cooling requirements of small corporate
offices, banquet halls, small hospitals etc. This segment, is projected
to have low CAGR and is facing lot of challenge, from other cooling
solutions like VRF. The Company has a good market share in this
segment. This is one segment where very few brands are operating. This
has helped the HHLI in increasing its market share. The introduction of
R410A (Green Gas) range has helped the brand consolidate its position.
The Company has registered a growth of around 15% in this product
category and with an innovative product range, the Company is confident
that it shall grow further in the coming years.
The VRF segment has been the star segment for the industry and has
continued to show robust growth during the calendar year. The Company
has a very strong product range of 8 HP - 54 HP and is growing
exponentially in this business. The Company could succeed to win many
large projects in Hospitality, Entertainment, Banking, Education,
Residential, industrial, Hospitals etc. which resulted in exponential
growth of the VRF sales.
The Chiller market has grown marginally over the last year due to slow
growth in commercial real estate. In view of this the Company faced
difficulty and performed in line with the industry trend. However, the
chiller market in India is expected to grow at CAGR of around 7% which
is a good sign. Judging by the growth trend, the Company is
manufacturing Water-cooled Screw Chillers up to 180 HP in its factory
in India and is looking to increase the localization content to be more
competitive to chart its growth in this business. Currently, Chillers
above 190 HP are being imported by the Company.
The Project Business is another category which is closely allied with
the Chiller business. This business is also growing and has a good
potential to grow in coming years. In order to increase its share of
the Project and Chiller business, the Company has invested in setting
up the infrastructure in terms of manpower as well as upgrading their
skills to take up this business in the past few years. With such
investments, the Company feels confident about establishing growth in
Project Business.
APPLICATION-BASED AIR CONDITIONERS
The Application-based Air conditioners is a category which has grown
rapidly in last few years. The growth was driven by the growth in the
parent industries of telecom and banking. Today, due to increasing
debt, Telecom industry is aggressively switching to IME Model to reduce
operating costs, which has resulted in low growth of Telecom Air
conditioning business. The Company, however has a near monopoly in this
segment and will continue to serve its existing base. The Company is
continuously looking to develop new products and technology that meet
the emerging requirements of the industry. These Innovative solutions
will also help Company to remain ahead of competition in India.
HOME APPLIANCES
The Home Appliances segment of the Company has continuously grown over
the last few years. Last year, the Home Appliances business contributed
9% share in total business of the Company. The Company has created a
niche in Home Appliances category which has helped the brand
substantially. The Company is operating in over 253 Ltrs Frost-Free
Refrigerators market. The Company also launched its new range of Air
Purifiers which caters to increasing demand of Air purifiers in Delhi
and other Metro cities. Currently, the base of Air purifiers is very
small. However, the Company is expecting good growth in this product
segment too. This segment is also strategically important for the
Company as it allows continuous engagement with channel partners during
the lean season.
MANUFACTURING
A good quality product is the backbone of any organization. To achieve
manufacturing excellence, the Company is focusing on continuous
improvement using Lean principles. The Company''s manufacturing
department has always focused on product quality, safe working
environment and productivity improvement at various levels. This year,
the Company has started a continuous improvement Dept. within
manufacturing. The main objective of this Dept. is to focus on waste
elimination and improvement of the manufacturing facilities. This year
Company has implemented continuous improvement activity to heat
exchanger manufacturing, injection moulding facilities etc. This will
enhance the product quality and help to reduce the lead time and cost.
Alongside its focus on lean manufacturing, safe working environment is
also an important priority for the Company. The Company is taking
various steps in educational activities within the plant so that safety
is ensured. The Company has started a special program like KYT ( Kiken
Yochi Training ) where operators are taught how to identify hazards
early and work to eliminate hazards.
This year, the Company has invested into conservation of energy. Three
sets of new machinery has been installed in the injection moulding
shop. This has led to a reduction in outsourcing of moulded parts which
has resulted in cost reduction including transportation cost. Moreover
installation on new fin press with servo motor mechanism has also
resulted into more savings of Power cost.
RESEARCH AND DEVELOPMENT
To combat competition and excel in the segment of Split ACs, the
Company''s Research and Development department has worked tirelessly to
develop new and innovative products which can meet demand of Indian
consumers.
With the changing weather conditions, the Indian consumer habits are
also changing. The demand for the Heat Pump AC is also growing. Hence,
Company has developed a Heat Pump Inverter Air conditioner, which can
operate from -10 to 52°C.
The Company has also developed smart i-connect range of Split Air
conditioners with Wi-Fi connectivity, which can be operated from any
Android or Apple (iOS) Smart Phone.
Apart from innovation in Split ACs, the Company''s R&D facility has also
started a local production of 4 - way cassette indoor units and started
development of the DX kit to operate Air Handling Units (AHUs) with Set
Free Outdoor units.
Company has completed the implementation of processes and procedures
for successful completion of NABL (National Accreditation Board for
Testing and Calibration Laboratories), Accreditation of RAC APF Lab and
VRF APF Lab. This formal recognition of competence of a laboratory by
an Accreditation body in accordance with international criteria
confirms reliability testing of Company''s product before they are put
into the market.
OPPORTUNITIES AND OUTLOOK
1. The Indian market for white goods and Air conditioners is poised
for steady growth. The growth in demand of Air conditioners and other
home appliances is a result of rising income, urbanization, falling AC
prices and a hot climate. Hence, The AC ownership in India is going to
increase exponentially.
2. Product innovations, improved technology and availability of new
variants of products has led to increase in the demand of Air
conditioners.
3. With lucrative and easy finance options and rise in the share of
organized retail, the Air conditioner industry gets an opportunity to
grow further.
4. The changing consumer behaviour as a result of the e-commerce boom
is an opportunity for higher sales.
5. Product Segments like VRF, chillers and projects are a big
opportunity for the Company. The growth trend of VRF is very
impressive. Chillers and Projects are also growing steadily. Now,
given the joint venture, the Company has a better scope to grow in this
segment.
RISKS, CONCERNS AND CHALLENGES
1. Air conditioners, as a product category, still depends heavily on
weather conditions. The sales depends on the severity of the summer
season and the relative demand of the product.
2. Electricity demand for Room ACs is growing rapidly in emerging
economies (such as India). This may impact the sales of ACs if the
products are not energy efficient. Hence, the Company needs to
constantly upgrade the energy efficiency standards.
3. With energy standards set to change in the beginning of 2016, the
resultant cost and price increase may dampen the volume growth expected
by the industry.
4. The ductable segment in which Company has a good market share is
de-growing and is under tremendous pressure to win projects.
5. The hiked excise duty, effective January 2015 (excise duty on
consumer durables was rolled back to 12% from 10%).
6. The under-developed local supplier base.
7. The higher cost of capital and other manufacturing costs due to
frequently revised energy efficiency requirements.
CAUTION:
Management Discussion and Analysis on the Company''s Objectives,
Estimates, Projections and Expectations may be forward-looking within
the tenets of the applicable laws. The actual result may differ from
the views expressed or implied. Factors that can affect the Company''s
performance and outlook are price conditions in the market, global
commodity cycle changes, exchange rate, government regulations, weather
conditions and other incidental factors.
HUMAN RESOURCES
The Company operates in a highly competitive environment vis-a-vis
attracting the best talent for its operations and therefore the human
resources management function has assumed vital importance in the
Company. The Company focuses on attracting, motivating and retaining
the best talent. Its people systems like recruiting, training,
performance management and talent development are robust and
competitive. As we have been growing we are putting in place new HR
programs to ensure that the organization is geared up to deliver for
the future.
People - Our Brand:
The total Strength of employees (Staff and Operators) of the Company
was 1426 as on March 31, 2016. HHLI believes that it is the quality and
dynamism of its human resources that enables it to make a significant
contribution to enhancing stakeholder value. Company works relentlessly
towards being customer-focused, competitively-superior,
performance-driven and future-ready. HHLI has been able to galvanize
its human resource to become more agile, leverage change, stay ahead of
competition and win in the market.
High Performance Culture:
Company strives to foster a culture of high performance. Ongoing
learning, aligning HR systems in line with current market benchmarks,
aligning rewards and recognitions with performance has enabled HHLI to
sustain its reputation of being a meritocratic organisation. We expect
a lot from our team members, differentiate on the basis of performance
and potential through career opportunities and rewards, and lay
particular emphasis on developing, mentoring and training.
Training & Development:
During the year 2015-16, the Company has invested in training in
various categories of employees and indirect team members. Competency
development continues to be a key area of strategic focus for us. We
have been driving various Technical & Behavioural Training Programs at
both the Factory & Head Office and Field. Our focus has been to launch
training initiatives as an on-going process, covering different levels
across the organisation. We launched the process of "Talent Assessment
& Development" Centre for the Senior Management Team. At the Middle
Level "Managerial Effectiveness Skills" was rolled out to build &
enhance the managerial capabilities.
Workforce Employment:
As a continuous process of skill building and creating employment
opportunities, this year we again did a Certificate program - IKVK in
collaboration with Commissionerate of Employment and Training
Gandhinagar to provide a single point contact for industries to provide
efficient platform for the career growth of Skilled Candidates in
Gujarat. Objective of the Program, is to test & certify the Existing
skills of the experienced but unqualified workers and to award skill
certificates after upgrading and updating the skills. The course is
designed specific to the requirement and to provide simple
understanding of Air conditioning and Refrigeration fundamentals.
Safety & Health:
A safe work place environment has been at its core at HHLI. We launched
Hitachi Safety League (HSL) as step to create awareness & commitment
towards zero injury or accident culture. Continuous safety drives are
being carried out for all employees thereby reiterating the emphasis of
safety in personal life.
Internal Control and Systems
The Company has adequate system of internal control to ensure that all
the assets pertaining to Company are safeguarded and protected.
Internal Audit has also been done through external Auditors at plant as
well as at all the branches of the Company as per the detailed scope
defined and approved by the Audit Committee. The Internal Audit is
planned to substantiate and review the adequacy of controls and laid
down procedures & systems.
Observations of Internal Auditors and the detailed plan of action is
reviewed and discussed at the meetings of the Audit Committee.
Auditors
Audit Committee and Board of Directors have recommended appointment of
M/s. Price Waterhouse & Co. Chartered Accountants LLP (Firm
Registration No. 304026E/E300009) as an Auditor of the Company.
Accordingly, requisite resolution forms part of the notice convening
the AGM.
Directors'' Responsibility Statement
Your Directors confirm that:
(a) In the preparation of the annual accounts, the applicable
accounting standards have been followed along with proper explanations
relating to material departures;
(b) Such accounting policies selected and applied them consistently and
made judgments and estimates that are reasonable and prudent so as to
give a true and fair view of the state of affairs of the Company at the
end of the financial year and of the profit of the Company for that
period;
(c) Proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of this
Act for safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularities
(d) Annual accounts have been prepared on a going concern basis;
(e) Internal financial controls which are to be followed by the Company
have been laid down and that such internal financial controls are
adequate and were operating effectively; and
(f) Proper systems have been devised to ensure compliance with the
provisions of all applicable laws and that such systems were adequate
and operating effectively.
Performance evaluation
Board has carried out an annual evaluation of performance of Board,
Audit Committee, Stakeholder Relationship Committee, Nomination and
Remuneration Committee, Executive Committee, Vigil Mechanism Committee
and CSR Committee.
Board has also carried out annual evaluation of the performance of
individual Directors, who were evaluated considering level of their
engagement and contribution, safeguarding the interests of the Company
and its minority shareholders, etc. The performance evaluation of the
Chairman and the Non Independent Directors were carried out by the
Independent Directors at their separate meeting.
Details of establishment of Vigil Mechanism
Company has established a Vigil Mechanism process as an extension of
the Company''s Code of Conduct whereby an employee, director, customer,
vendor or associate of the Company can disclose his genuine doubt in
good faith to any member of Vigil Mechanism Committee about unethical
behavior, actual or suspected fraud or violation of the Company''s Code
of Conduct or ethics policy, so that appropriate action can be taken to
safeguard the interest of the Company. In exceptional cases, a
complaint can be reported by a complainant to a Chairperson of Audit
Committee. This mechanism is overseen by the Audit Committee.
Disclosure under Section 197(12) of the Companies Act, 2013 read with
Rule 5 of Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014:
Name of Director Designation % increase in Ratio of the
remuneration of
Director
and KMP remuneration of to the median
remuneration
of the
Director and KMP employees of
the Company for
the financial
year
Mr. Shinichi
Iizuka Chairman Nil NA
Mr. Shoji Tsubokuta Managing Director Note 1 Note 1
Mr. Atsushi Ohtsuka Managing Director Note 2 Note 2
Mr. Anil Shah CFO & Executive
Director 24% 16:1
Mr. Vinay Chauhan Executive Director 21% 16:1
Mr. Gurmeet Singh Executive Director Note 3 13:1
Mr. Varghese Joseph Executive Director Note 4 Note 4
Mr. Amit Doshi Executive Director Note 5 Note 5
Mr. Ashok Balwani Independent Director Note 6 0.37:1
Dr. Devender Nath Independent Director Note 6 0.56:1
Ms. Indira Parikh Independent Director Note 6 0.19:1
Mr. Mukesh Patel Independent Director Note 6 0.72:1
Mr. R S Mani Independent Director Note 6 0.19:1
Mr. Ravindra Jain Independent Director Note 6 0.56:1
Mr. Vinesh Sadekar Independent Director Note 6 0.25:1
Mr. Parag Dave Company Secretary 17% 0.19:1
Note 1: Mr. Shoji Tsubokuta ceased to be a Managing Director on 31st
August, 2015
Note 2: Mr. Atsushi Ohtsuka appointed as a Managing Director on 1st
September, 2015
Note 3: Mr. Gurmeet Singh appointed as an Executive Director on 21st
July, 2014
Note 4: Mr. Varghese Joseph appointed as an Executive Director on 1st
August, 2015
Note 5: Mr. Amit Doshi Ceased to be an Executive Director on 1st June,
2015
Note 6: Sitting fees payable to Independent Directors for attending
various meeting remained same.
Comparison of remuneration against Company''s performance
- Increase in remuneration of each KMP As mentioned in above table
- Increase in total remuneration of all Key Managerial Personnel Total
remuneration of KMP increased by 22%
- Average increase in remuneration of all employees other than KMP
Average increase in remuneration of all employees other than
KMP: 14%
Performance of the Company for the financial year 2015-16 Financial
year 2015-16 Income from operations was Rs.181720.18 Lacs and profit
before tax was Rs.6883.97 Lacs.
Percentage increase in the median remuneration of employees in the
financial year 5%
No. of permanent employees on the roll of the Company 1426
- Variations in the market capitalisation of the Company, price
earnings ratio as at the closing date of the current financial year and
previous financial year
2014-15 2015-16
- Market Cap (Rs. In Lacs) 393724 330097
- Price earning ratio 50.63 66.05
- Percentage increase / decrease in the market quotations of the shares
of the Company in comparison to the rate at which the Company came out
with the last public offer
IPO in 1991 @ Rs.10
Market Price as on 31st March, 2016 is Rs.1214 Compounding annual
growth rate per year: 20%
Average percentage increase already made in the salaries of employees
other than the managerial personnel in the last financial year and its
comparison with the percentage increase in the managerial remuneration
and justification thereof and point out if there are any exceptional
circumstances for increase in the managerial remuneration
- Average % increase in the salaries of employees other than the
managerial personnel 14%
- Average % increase in the managerial remuneration 22%.
Key parameters for any variable component of remuneration availed by
the directors
As per the Remuneration Policy of the Company, Variable component of
remuneration is decided on basis of Company''s performance and
individual performance of the Executive Directors.
Ratio of the remuneration of the highest paid director to that of the
employees who are not directors but receive remuneration in excess of
the highest paid director during the year
Mr. Ichio Iwai: Ratio 1 : 1.22
Mr. Tomonaga Watabane: Ratio 1 : 1.25
We hereby affirm that the remuneration given to all the employees,
Directors and KMP is as per the Remuneration policy of the Company.
Risk Management System Company has implemented Enterprise Risk
Management (ERM) system to identify, assess, monitor and mitigate the
various risks associated with the Company.
Risks are identified and then classified into different categories such
as Strategic, Operational, Business risk and Risk related to act of
god. Then score based on level and significance of risk is given and
subsequently risk mitigation steps are taken.
Every quarter a statement identifying new risks and updation on
pre-identified risks along with their mitigation process or counter
measures taken are reported before the Audit Committee.
Details of directors or Key managerial personnel who were appointed or
have resigned during the year under review:
- Mr. Shoji Tsubokuta has ceased to be a Managing Director of the
Company with effect from 31st August, 2015.
- Mr. Atsushi Ohtsuka has been appointed as a Managing Director of the
Company with effect from 1st September, 2015.
- Mr. Amit Doshi has ceased to be an Executive Director of the Company
with effect from 1st June, 2015.
- Mr. Varghese Joseph has been appointed as an Executive Director of
the Company with effect from 1st August, 2015.
- No Independent director has been re-appointed by passing a special
resolution during the year under review.
Internal Financial Control:
Internal Financial Control plan adopted by the Company is adequate with
reference to the Financial Statement.
1. Conduct of its business by adherence to Company''s policies.
2. Safeguarding of assets.
3. The accuracy and completeness of the accounting records, Prevention
and detection of frauds and errors and timely preparation of reliable
financial information.
Other disclosures:
1. Number of meetings of the Board: Four meetings of the Board of
Directors of the Company were held during the year under review on 29th
May, 2015, 24th July, 2015, 26th October, 2015, 8th February, 2016.
2. Members of the Audit Committee are as under:
- Mr. Mukesh Patel - Chairman
- Dr. Devender Nath - Member
- Mr. Ravindra Jain - Member
3. The Company has received necessary declaration from each
Independent Director under Section 149(7) of the Companies Act, 2013,
that he/she meets the criteria of independence laid down in Section
149(6) of the Companies Act, 2013.
4. Details about the Policy on Corporate Social Responsibility (CSR)
and projects implemented by the Company during the year under review,
as required under Section 134(3)(o), 135(2) read with Companies
(Corporate Social Responsibility Policy) Rules, 2014 have been provided
as Annexure A.
5. Formal Appointment and Evaluation Policy of the Board of Directors
and Senior Management of the Company which has been formulated and
recommended by Nomination and Remuneration Committee and adopted by
Board of Directors covering appointment and remuneration including
criteria for determining qualifications, positive attributes,
independence of a director and other matters provided under Section
178(3) is attached as Annexure B.
6. No commission paid to any Director of the Company, so no disclosure
is required to be made under Section 197(14).
7. The details forming part of the extract of the Annual Return in
form MGT 9 as provided under sub-Section (3) of section 92 is annexed
as Annexure C.
8. No loan was granted by the Company to any person to purchase or
subscribe to fully paid-up shares of the Company.
9. There is no fraud reported by Auditors under Section 143(12) of the
Companies Act, 2013 during the year under review.
10. The details of familiarisation programme have been disclosed on
the Company''s website and a weblink is as under:
http://www.hitachi-hli.com/images/investor_relation_reports/
aggr_0.39343200%201421661808.pdf
11. Particulars of loans, investments or guarantees under section 186:
Company has not granted any loans, secured or unsecured, to companies,
firms or other parties covered under Section 186. Company has not made
any investment in securities of other Body Corporate. Company has given
guarantee of Rs.1500 lacs against the credit facilities availed by
dealers.
12. There is no subsidiary, associate and joint venture Company, so no
disclosure is required on the performance and financial position of
each of the subsidiaries, associates and joint venture companies in
Form AOC 1.
13. There is no Company which has become or ceased to be its
subsidiary, joint venture or associate Company during the year.
14. On 1st October, 2015, Johnson Controls, Hitachi Ltd. and Hitachi
Appliances Inc. have completed Global Joint Venture agreement (JV) and
commenced operations of Johnson Controls - Hitachi Air Conditioning
(JCH) to provide global customers with a full range of Air conditioning
products. Through this agreement Johnson Controls has acquired a 60 per
cent ownership stake of the JV and Hitachi Appliances Inc. retained
ownership of remaining 40 percent stake of the JV.
15. During the year, Company has not accepted deposits covered under
Chapter V.
16. Auditor''s Report: There is no qualification, reservation or
adverse remark or disclaimer made by the Auditors in their report.
17. Secretarial Audit Report: Pursuant to the provisions of Section
204 of the Companies Act, 2013, the Report of the Secretarial Auditors
is annexed as Annexure D.
The Secretarial Auditors have made observation relating to non-fling of
Form MGT-10 for reporting changes in shareholding of Top 10
Shareholders of the Company. The Company understands that reporting of
change in the shareholding is required if such change is of 2% or more
of Company''s capital and not of the individual shareholding.
18. There is no significant and material order passed by the
regulators or courts or tribunals impacting the going concern status
and Company''s operations in future.
19. Details of complaints relating to sexual harassment during the
year under review: Received during the year: Nil; Pending as on 31st
March, 2016: Nil.
20. Information pursuant to Section 134(3)(m) of the Companies Act,
2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014,
relating to Conservation of energy, technology absorption and foreign
exchange earnings and outgo is given as Annexure E to this report.
21. Statement showing particulars of employees under Rule 5(2) of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules,
2014 is attached with this Annual Report.
22. Contract or arrangement under Section 188(1): There were no
contracts or arrangements entered by the party falling under Section
188(1). Particulars of contracts or arrangements with related parties
are provided in Form AOC 2 as Annexure F.
23. Policy on dealing with Related Party Transactions has been
disclosed on Company''s website and a weblink is as under:
http://www.hitachi-hli.com/images/investor_relation_reports/aggr
_0.17509900%201421661745.pdf.
24. Revision in Accounts or Board''s Report: There are no revisions
made in the Accounts or Board''s Report.
25. Issue of Equity Shares with differential rights: There was no
Equity Share issued with differential voting rights during the year
under review.
26. Issue of Sweat Equity Shares: There was no issue of Sweat Equity
Share during the year under review.
27. Employee Stock Option and Employee Stock Purchase Schemes: No
Employee Stock Option and Employee Stock Purchase Schemes were launched
during the year under review.
28. Disclosure under Regulation 34(3), Schedule 5 of the SEBI(Listing
Obligation and Disclosure Requirement) Regualtions,2015:
- The Equity Shares of the Company are not delisted or suspended during
the year under review.
- Equity Shares of the Company are listed on the BSE Limited and the
National Stock Exchange of India Limited.
- Annual listing fees have been paid to both the stock exchanges
mentioned above.
Acknowledgement
Your Directors thank all Customers, Suppliers, Investors, Bankers -
Bank of America, N.A., State Bank of India, ICICI Bank and Standard
Chartered Bank and other stakeholders of the Company for their
co-operation and continued support during the year. We look forward to
their continued support in the future also.
We wish to place on record our sincere appreciation for the excellent
work put in by the employees of the Company at all levels.
For and on behalf of the Board of Directors
Place : Delhi Atsushi Ohtsuka Anil Shah
Date : 30th May, 2016 Managing Director CFO & Executive Director
Mar 31, 2013
Dear Members,
The Directors have pleasure in presenting the Twenty Eighth Annual
Report and the Audited Financial Statements, for the year ended March
31, 2013.
Financial Highlights
The highlights of financial results of the Company for the year under
review are given below:
(Rs.in Lacs)
For the year
ended For the year ended
March 31,
2013 March 31, 2012
Revenue from operations (gross) 101922 86732
Less : Excise Duty 8923 6923
Revenue from operations (net) 92999 79809
Other Income 161 87
Total Revenue 93160 79896
Profit before finance cost,
depreciation and tax 4805 3114
Finance Cost 721 1003
Depreciation and
amortization expenses 2018 1832
Tax expense 536 (47)
Profit for the year 1530 326
Dividend
Your Directors recommend a dividend of Rs. 1.50 per Equity Share for the
year ended March 31, 2013 to the Equity shareholders holding 27,190,884
Equity Shares (including shareholders holding 4,230,876 Equity Shares
allotted on 8th April, 2013).
This is subject to the approval of the Members at the ensuing Annual
General Meeting.
Issue of Equity Shares on Rights Basis
Company had, vide Letter of Offer dated February 27, 2013, offered
fully paid-up Equity Shares at a price of Rs.130 per Equity Share
(including face value of Rs.10 per Equity Share and share premium of Rs.120
per Equity Share) to the Equity Shareholders of the Company on a Rights
Basis in the ratio of 1(One) equity share for every 5 (Five) Equity
Shares(s) held by the equity shareholders on the record date,
i.e. March 06, 2013. The Rights Issue was opened on March 14, 2013 and
closed on March 28, 2013. Company has made allotment of 4,230,876
Equity Shares on April 8, 2013 aggregating to Rs. 5500 Lacs.
Manufacturing Unit II reconstructed at Kadi (Gujarat)
Manufacturing Unit II situated at Kadi (Gujarat) was entirely gutted in
a major fire incident happened on July 18, 2012 and fortunately no
human casualty was there. The loss incurred by the Company is
adequately covered under insurance claim. Company has received interim
payment of Rs. 7,000 Lacs from the Insurance Company.
We have overcome this turbulence and within 165 days'' time, we have
rebuilt it. The Unit II has been reconstructed and production has
recommenced from January 13, 2013.
We have received unconditional support from all stakeholders, dealers,
customers, vendors, state government and employees.
Directors'' Responsibility Statement Your Directors confirm that:
(i) in the preparation of the annual accounts, the applicable
accounting standards have been followed along with proper explanation
relating to material departures ;
(ii) such accounting policies have been selected and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year ended March 31, 2013 and
of the profit of the Company for that year ;
(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; and
(iv) annual accounts have been prepared on a going concern basis.
Report of Corporate Governance
Report on Corporate Governance under clause 49 of the Listing Agreement
is attached to this Report.
Particulars as per Section 217 of the Companies Act, 1956
A statement showing particulars of employees as required under Section
217(2A) of the Companies Act, 1956, read with Companies (Particulars of
Employees) Rules, 1975 is attached with this Annual Report and
information pursuant to Section 217(1)(e) of the Companies Act, 1956
read with Rule 2 of the Companies (Disclosure of Particulars in the
Report of the Board of Directors) Rules, 1988, relating to Conservation
of energy, technology absorption and foreign exchange earning and outgo
is given as Annexure-I to this report.
Particulars about Cost Audit Report
M/s. Kiran J Mehta & Co. (Membership No. 4733), Cost Accountants,
Ahmedabad, has been appointed as Cost Auditors of the Company for the
year 2012-13. Cost Audit Report for the year 2012-13 will be submitted
on or before due date i.e. 27th September, 2013.
Acknowledgement
Your Directors thank all Customers, Suppliers, Investors, Bankers -
State Bank of India, ICICI Bank and Standard Chartered Bank and other
stakeholders of the Company for their co-operation and continued
support during the year. We look forward to their continued support in
the future also.
We wish to place on record our sincere appreciation for the excellent
work put in by the employees of the Company at all levels.
For and on behalf of the Board of Directors
Place : Ahmedabad, Gujarat Motoo Morimoto Anil Shah
Date : May 15, 2013 Managing Director Executive Director
Mar 31, 2012
The Directors have pleasure in presenting the Twenty Seventh Annual
Report and the Audited Financial Statements, for the year ended 31st
March, 2012.
Financial Highlights
The highlights of financial results of the Company for the year under
review are given below:
(Rs in Lacs)
For the year ended For the year ended
31st March, 2012 31st March, 2011
Revenue from operations
(gross) 86731.93 82988.99
Less : Excise Duty 6923.02 6588.24
Revenue from operations
(net) 79808.91 76400.75
Other Income 87.41 467.31
Total Revenue 79896.32 76868.06
Profit before finance
cost, depreciation and tax 3002.05 6336.11
Finance Cost 891.04 737.54
Depreciation and amortization
expenses 1831.74 1605.20
Tax expense (46.90) 1060.80
Profit for the year 326.17 2932.57
DIVIDEND
Your Directors recommend a dividend of Rs 1.50 per Equity Share for the
year ended 31st March, 2012. This is subject to the approval of the
Members at the ensuing Annual General Meeting.
INDUSTRY STRUCTURE AND DEVELOPMENTS
The home appliances industry (only Air conditioners and Refrigerators)
is estimated to be around Rs 1,465,000 Lacs. Room Air conditioners
contribute to around Rs 630,000 Lacs and Refrigerators contribute Rs
835,000 Lacs.
During the year under review, India's economic situation continued to
decline due to depreciation in INR, high inflation rate and increased
interest rates which adversely impacted Air conditioners business. In
such indecisive environment, inflow and execution of orders remained
slow. In addition to that industry faced the problem of margin pressure
in all segments and in fact maintaining profit margin has been a tough
job for all the consumer Durable players.
Air conditioning Industry
Our estimate of the industry performance during FY 2011-12 is given
below:
Category Total Industry Sales
2011-12 2010-11 Growth
Room Air conditioners
(in Lacs Units) 28.5 33.0 (14%)
Duct able Air conditioners
(in Lacs Tr.) 3.6 3.5 3%
Room Air conditioners
The Room Air conditioner category consists of both the Window and Split
Air conditioners for the use in Residential and Commercial spaces.
The Room Air conditioning industry declined by 14% in 2011-12 in
comparison to about 31% growth in 2010-11.
Despite of such decline of industry, company has grown by 1% over the
last year with 2.32 Lacs units against 2.30 Lacs units in last
financial year in Room Air conditioner segment.
The demand of Split Air conditioners is continuously increasing and the
price gap between a Window and a Split Air conditioner has shrunk in
recent years. Today, the Split Air conditioners contribute to more than
74% of Room Air conditioner market.
During the year under review, the off-take during the peak summer
season turned out to be lower than expectations which resulted into a
situation where company was saddled with excess inventory. The Company
has taken measures for liquidation of such inventory. Margin pressure
continues to be a concern in Room Air conditioning segment. Several
remedial steps taken by the Company including price increase, reduction
in overheads and reduction in production cost by value engineering.
In the Room Air conditioner category we have about 8% market share in
terms of sales volume. We are aiming to capture 10% market in terms of
sales volume which will translate into 12% in value terms. We have
expanded our network and are present in more than 300 towns with approx
2000 sales points. Another step is to launch exclusive Air conditioner
models to each Distribution Channel i.e. Direct Dealer network,
Distributor network, Modern Trade, Construction industry and
Institutions.
Company has the mass-premium Air conditioner range, called 'Kaze' in
the Split and the Window Air conditioners segment. The 'Kaze' range
will help the Company to reach the middle level income group who want a
quality product and at the same time Value for their money.
A range of Split Air conditioner models, called 'Sugoi' and 'Kampa' are
launched exclusively for distribution network to widen the Air
conditioner range and spread the availability across the country. The
Company has also launched its popular Split Air conditioner models 'ACE
Followme', 'ACE Cutout' and 'i-Tec' with refreshing looks.
Presently, Company's Split Air conditioners range comprises of 38
models, with capacities ranging from 1.0 Tr. to 3.5 Tr. The Window Air
conditioners range includes 17 models within 1.0 Tr. to 2.0 Tr.
capacities.
Achievement
Your company has been awarded "Certificate of Merit" at National Energy
Conservation Awards Ceremony by Bureau of Energy Efficiency (BEE),
Ministry of Power. Mr. Motoo Morimoto, Managing Director of the Company
was awarded by Hon'ble Union Minister for Power, Mr. Sushil Kumar
Shinde at the function held at Vigyan Bhavan, New Delhi on 14th
December, 2011.
The Function was presided over by the Hon'ble Prime Minister of India,
Dr. Manmohan Singh, Hon'ble Union Minister of State for Power, Mr. K.
C. Venugopal, Secretary Min. of Power, Mr. Uma Shankar and Mr. Ajay
Mathur - Director General-BEE.
The Company has won the Award based on parameters like the number of
star labelled products sold, the energy savings achieved, its
technology and the growth in sales of high energy efficient products
over the previous financial year.
'i-Clean': The Auto Clean Air conditioner
The Company has refreshed the 'i-Clean' Range with a new color fascia.
The 'i-Clean' is equipped with exclusive feature - Automatic filter
clean technology, which cleans the filter automatically after every 10
hours and maintains a hygienic room environment. This model is 5 star
rated (1.2 Tr. & 1.5 Tr. Class) and loaded with all other innovative
features like Auto Climate Technology, Auto Humidity Control, Kaimin,
On/Off timer with advanced startup etc. The 'i-Clean' is available in
1.2 Tr., 1.5 Tr. & 2.0 Tr. Class. Looking to the exclusive feature, in
current year, this model has been accentuated by the Company in
advertising campaign.
5 star rated Window Air conditioners range, as efficient as Split Air
conditioners
For Air conditioners, the star levels are categorized over a band of
EER. EER is the Energy Efficient Ratio, which indicates the amount of
cooling capacity in watts the Air conditioner delivers for every watt
of electrical energy consumed by it. At present, for Split Air
conditioners, the EER has to be minimum 2.5 to qualify for 1-Star
rating and EER of 3.3 and above for 5-Star categories. For window air
conditioners, the EER has to be minimum 2.3 to qualify for 1 star
rating and EER of 3.1 and above for 5 star rating. BEE has plans to
move up the energy efficiency level continuously every two years.
This year Company is strengthening its 5 star rated Window Air
conditioners range (1.1 Tr. & 1.5 Tr. capacities) with 'Summer TM' and
'Summer QC'. 'Summer TM' is Split in a box concept which is based on
twin motor technology and Summer QC is available with 3.3 EER (W/
W)(1.5 Tr.) which is equivalent to a 5 star rated Split Air conditioner
of 2012. It is creditable that Company's Window Air conditioners are as
efficient as the Split Air conditioners. Both the Window Air
conditioners are with innovative features, silent cooling and stylish
looks in 3 capacities 1.1 Tr, 1.5 Tr. and 2.0 Tr. Class.
Commercial range of Air conditioners
During the year under review the Packaged / Duct able Air conditioning
market has grown at a moderate pace on account of delayed / slow
commercial construction activities by builders.
This segment of the industry has grown at about 3% however Company grew
at 4.8% which is more than the market growth rate. The Company offers
the 'Takumi' range of Duct able Air conditioners with unique Energy
Efficient Engineering design and the wide flexibility in application
provides pragmatic solutions to suit best for varied and complex
cooling requirements. The range of these products is available from 3.0
Tr. to 16.5 Tr. which have been well accepted in the market.
This year, the Chiller and VRF segments have shown growth. The chiller
industry grew at approximately 8.8%, whereas Company grew at 12%. We
offer a wide range of chillers in the Air-cooled (40 HP to 400 HP) and
Water-cooled (40 HP to 570 HP) categories and now manufactures water
cooled chillers up to 120 HP capacity in India plant as well as imports
it if customers so demand. The VRF category is also a promising and
fast growing segment. The Company offers a range of Set Free (VRF) in
Modular type from 8 HP to 54 HP and front flow type from 8 HP to 12 HP.
Telecom Air conditioners
This specialized Air conditioning system is designed for unmanned
Telecom Shelters / Telecom BTS sites. 'Space maker', Company's product
for the telecom sector consists of varied features viz. high cooling
capacity and safety features. The 'Space maker' range is available from
0.9 Tr. to 4.0 Tr. capacities. Company has also now developed a 'Free
Cooling Unit' for this Segment, which reduces the running power
consumption and hence the OPEX for the Operator. It is well accepted by
all the customers.
This segment has shrunk due to sharing of towers amongst the telecom
operators who tried to manage with existing infrastructure. Therefore,
new setups are not coming up and the growth is negative. However,
Company is maintaining its leadership position with the market share of
about 56% in comparison to 42% in last year.
Refrigerators
Company is increasing its focus on the Refrigerator category with the
launch of 2012 range i.e. Side-by-Side refrigerator with inverter
technology. This was launched to increase and strengthen the high end
range. The other models i.e. Big French (4-Door), 3-Door and 2- Door
refrigerators were also introduced with all new look and features.
These models will be available by mid of 2012 in the market. Currently
the Company offers 12 models in 3 variants i.e. Big French (4-Door),
three door and two door refrigerators.
Company operates in 300 Ltr. & above frost free segment only, which is
about 15% of total frost fne refrigerator industry and the size of this
segment is 22.5 Lacs units. The Company operates only in premium
category therefore the big sales volume is not expected. During the
year under review the production of refrigerators suffered because of
the floods in the Thailand Manufacturing Plant. This affected the
supplies and because of that, the business of the Company affected by
4% against last year.
Customer Service
Company has expanded network of company owned and company operated
service centers to 34 nos. in 26 towns with over 1500 technicians apart
from 616 other service points including multi brand S&S, exclusive S&S
and franchisees. With this network company is covering approx 317 towns
across country.
Company has launched genuine accessories under the brand 'RYOKU'. In
the initial phase 'Ryoku' Stabilizers, 'Ryoku' Copper, 'Ryoku' Stand
and 'Ryoku' IDUs are available to the customers.
Apart from training of Company's own service technicians, Company has
trained technicians of service franchisees in the state of art training
center "Hitachi Centre for excellence". Other than Technical and
behavioral training, the training to the Dealer Sales person and
Hitachi Profile communicators is also imparted.
Market Drivers' Outlook, Opportunities, Threats, Risks and Concerns
Market Driver Description Outlook
AC Penetration Room Air Conditioner penetration is very
low approx 3% in the country.
It is expected to grow in future. I
Market Growth Middle income level population is growing;
their average income levels are rising.
Smaller towns are showing encouraging
growth. These towns are very critical, as
1s the next round of growth will come from
them.
Input Cost India's core inflation has gone up signi
featly over the past year, and is unlikely
to moderate significantly in the coming
months. Thereby input costs of raw material
especially of Aluminum, Copper and Sheet
Metal has gone up and has led to an erosion
of Margins. Increasing Tax, freight cost,
and operational cost are some other factors
which increase the cost.
Energy
Efficiency From Jan 2012 onwards BEE has made the star
rating system more stringent, which means
the EER of all star ratings has gone up.
Therefore to qualify to be a 5 star Air
conditioners the minimum EER is now 3.3,
which was 3.1 earlier. Company offers higher
EERs in all the models therefore we could
easily adopt to the new system.
Because of BEE standards of Energy efficiency
the specifications of all Air conditioners
have gone up which may result in the cost
increase for new product development.
Market Driver Description Outlook
Growth of
Modern Trade While there are established distribution
networks in both rural and urban India, the
presence of well-known brands and organized
sector is increasing. Shopping malls are
becoming increasingly common in Indian
cities. This will have a positive impact 1s
on the consumer durables industry, as
organized retailing would not only streamline
the supply chain, but also facilitate
increased demand, especially for high-end
and branded products.
The growth of Power Retailers and Corporate
Power Retailers will hit the margins
because they will increase their share and
will demand more margins because of their
increased muscles.
Lack of
Consumer
Finances Banks / NBFCs are tightening their consumer
finances, the funding options have minimized.
Inventory funding is also very tight, which
is not a good situation for sU dealers to
run their operations.
Power Quality High electricity cost and quality of power
supply in the country is a cause of concern,
Long power cuts and voltage fluctuations
may affect the pace of industry growth.
Seasonality Air conditioner is seasonal
product therefore delayed/ short duration
summer affects the overall business
performance and 2011-12 was affected badly
due to the same.
Is Indicates a favorable trend in the market categories in which we
compete.
- Indicates a negative trend in the market categories in which we
compete.
HUMAN RESOURCES
The total strength of employees (staff and operators) of the Company
was 694 as on 31st March, 2012.
Operations at all the 34 service centers stabilized during the year.
Manning at all the Centers was completed during the year.
To further enhance the Quality of Service to the Customers, training in
the areas of both Technical & Behavioral functions was organized for
the Technicians & Engineers. The technicians were also given product
specific trainings to deliver service for all kinds of products.
To further develop the Central Air conditioning business specialized
manpower was added in various areas of Project Design, Estimation, and
Execution for handling Central Air conditioner Projects all over India.
To strengthen the Supply Chain an exclusive pool of 20 Nos. of Engineer
Trainees were recruited. They were deployed in various functions of
Supply Chain like Design, Quality Management, Manufacturing, and
Materials at the Plant.
The Competency based Annual Appraisal Process was completed. As a token
of appreciation, a Special Scheme to Reward the Long-term Association
of Employees was initiated last year, which continued during the
Appraisal process.
INTERNAL CONTROL AND SYSTEMS
Company has adequate system of internal control to ensure that all the
assets pertaining to Company are safeguarded and protected. Internal
Audit has also been done through external Auditors at plants as well as
at all the branches and service centers of the Company as per the
detailed scope defined and approved by the Audit Committee. The
Internal Audit is planned to substantiate and review the adequacy of
controls and laid down procedures & systems.
Observations of Internal Auditors and the detailed plan of action is
reviewed and discussed at the meetings of the Audit Committee.
DIRECTORS' RESPONSIBILITY STATEMENT
Your Directors confirm that:
(i) in the preparation of the annual accounts, the applicable
accounting standards have been followed ;
(ii) such accounting policies have been selected and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year ended 31st March, 2012 and
of the profit of the Company for that year;
(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; and
(iv) annual accounts have been prepared on a going concern basis.
REPORT OF CORPORATE GOVERNANCE
Report on Corporate Governance under clause 49 of the Listing Agreement
is attached to this Report.
PARTICULARS AS PER SECTION 217 OF THE COMPANIES ACT, 1956
A statement showing particulars of employees under Section 217(2A) of
the Companies Act, 1956, read with Companies (Particulars of Employees)
Rules, 1975 is not required to attach with this Report since no
employee has drawn remuneration above the limit prescribed in Rules.
Information pursuant to Section 217(l)(e) of the Companies Act, 1956
read with Rule 2 of the Companies (Disclosure of Particulars in the
Report of the Board of Directors) Rules, 1988, relating to Conservation
of energy, technology absorption and foreign exchange earnings and outgo
is given as Annexure-I to this report.
PARTICULARS ABOUT COST AUDIT REPORT
M/s. Kiran J Mehta & Co. (Membership No. 4733), Cost Accountants,
Ahmadabad, has been appointed as Cost Auditors of the Company for the
year 2011-12. Cost Audit Report for the year 2011-12 will be submitted
on or before due date i.e. 27th September, 2012.
ACKNOWLEDGEMENT
Your Directors thank all Customers, Suppliers, Investors, Bankers -
State Bank of India, ICICI Bank and Standard Chartered Bank and other
stakeholders of the Company for their co-operation and continued
support during the year. We look forward to their continued support in
the future also.
We wish to place on record our sincere appreciation for the excellent
work put in by the employees of the Company at all levels.
For and on behalf of the Board of Directors
Place : Ahmadabad, Gujarat Motoo Morimoto Anil Shah
Date : 24th May, 2012 Managing Director Executive Director
Mar 31, 2011
The Directors have pleasure in presenting the Twenty Sixth Annual
Report and the Audited Financial Statements, for the year ended March
31, 2011.
FINANCIAL HIGHLIGHTS
The highlights of financial results of the Company for the year under
review are given below:
(Rs. in Mn.)
For the year
ended For the year
ended
March 31, 2011 March 31, 2010
Income from operations 8291.28 6859.70
Less : Excise Duty 658.82 450.67
Other Income 56.40 118.31
Total Income 7688.86 6,527.34
Profit before interest,
depreciation and tax 580.32 703.08
Interest 20.46 15.10
Depreciation 160.52 117.77
Tax 106.08 108.81
Profit after tax 293.26 461.40
Amount brought forward from previous year 802.24 427.14
Balance available for appropriation 1095.50 888.54
Amount transferred to General Reserve 29.33 46.14
Proposed Dividend (including Corporate
Dividend Tax) 40.02 40.16
Surplus carried to Balance Sheet 1026.15 802.24
DIVIDEND
Your Directors recommend a dividend of Rs. 1.50 per Equity Share for
the year ended March 31, 2011. This is subject to the approval of the
Members at the ensuing Annual General Meeting.
DIRECTORS RESPONSIBILITY STATEMENT
Your Directors confirm that:
(i) in the preparation of the annual accounts, the applicable
accounting standards have been followed ;
(ii) such accounting policies have been selected and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year ended March 31, 2011 and
of the profit of the Company for that year ;
(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; and
(iv) annual accounts have been prepared on a going concern basis.
REPORT OF CORPORATE GOVERNANCE
Report on Corporate Governance under clause 49 of the Listing Agreement
is attached to this Report.
PARTICULARS AS PER SECTION 217 OF THE COMPANIES ACT, 1956
A statement showing particulars of employees under Section 217(2A) of
the Companies Act, 1956, read with Companies (Particulars of Employees)
Rules, 1975 is not required to attach with this Report since no
employee has drawn remuneration above the limit prescribed in Rules.
Information pursuant to Section 217(1)(e) of the Companies Act, 1956
read with Rule 2 of the Companies (Disclosure of Particulars in the
Report of the Board of Directors) Rules, 1988, relating to Conservation
of energy, technology absorption and foreign exchange earning and outgo
is given as Annexure-I to this report.
ACKNOWLEDGEMENT
Your Directors thank all Customers, Suppliers, Investors, Bankers -
State Bank of India, ICICI Bank and Standard Chartered Bank and other
stakeholders of the Company for their co-operation and continued
support during the year. We look forward to their continued support in
the future also.
We wish to place on record our sincere appreciation for the excellent
work put in by the employees of the Company at all levels.
For and on behalf of the Board of Directors
Place : Ahmedabad Motoo Morimoto Anil Shah
Date :May 23, 2011 Managing Director Executive Director
Mar 31, 2010
The Directors have pleasure in presenting the Twenty Fifth Annual
Report and the Audited Financial Statements, for the year ended March
31, 2010.
Financial Highlights
The highlights of financial results of the Company for the year under
review are given below:
(Rs. inMn.)
For the year ended For the year ended
March 31, 2010 March 31, 2009
Income from operations 6,855.79 5,190.22
Less: Excise Duty 450.66 491.25
Other Income 118.31 72.35
Total Income 6,523.44 4,771.32
Profit before interest,
depreciation and tax 703.08 373.88
Interest 15.10 26.67
Depreciation 117.77 79.93
Tax 108.81 56.54
Profit after tax 461.40 210.74
Amount brought forward from
previous year 427.14 216.40
Balance available for
appropriation 888.54 427.14
Amount transferred to
General Reserve 46.14 --
Proposed Dividend (including
Corporate Dividend Tax) 40.16 --
Surplus carried to Balance
Sheet 802.24 427.14
Dividend
Your Directors recommend a dividend of Rs. 1.50 per Equity Share for
the year ended March 31, 2010. This is subject to the approval of the
Members at the ensuing Annual General Meeting.
Industry Structure & Developments
Consumer Appliances Industry
The Indian consumer durable industry is estimated to be in the range of
Rs. 350,000 Mn. The home appliances industry (products that your
Company deals in) is estimated to be around Rs.55000 Mn. Room Air
conditioners contribute to the largest share of this at around Rs.
50,000 Mn. followed by Refrigerators at around Rs. 5,000 Mn. (This size
of Rs. 5,000 Mn. is for the Frost Free Refrigerators above 300 Ltrs.
capacity).
Air conditioning Industry
Our estimate of the industry performance during FY 2009-10 is given
below;
Total Industry Sales (in Mn.)
Category:
2009-10 2008-09 Growth
Room Air conditioners
(in Units) 2.51 2.01 25%
Ductable Air conditioners
(in Tr.) 0.33 0.37 -11%
Air conditioner is now much more than a cooling appliance. Its image
has transformed to being a stylish and intelligent indoor Air
conditioning system. The customers now look for various other features
like aesthetics, comfort features, designs, colours, latest
technologies, higher energy efficiency and better service. Split Air
conditioners are fuelling the growth of the industry with design
innovations, elegant looks in a feature packed indoor unit.
Room Air conditioners
The Room Air conditioner category consists of both the Window and Split
Air conditioners for the use in residential and commercial spaces.
The Room Air conditioning industry experienced a growth rate of close
to 25% in 2009-10 in comparison to about 7% growth in 2008-09. However
penetration of Room Air conditioners in India is still low at around 3%
only.
The demand of Split Air conditioners is continuously increasing. The
market share of Split Air conditioners is more than 65%, because Split
Air conditioners are more elegant in looks, produce much lesser noise
and are more energy efficient. Your Company has constantly formulated
its strategies to garner more share in this segment which has helped to
achieve a growth of over 52% in Split Air Conditioner category. Your
company has introduced a new range of Split Air conditioners to further
strengthen its position in this segment.
Your Company offers a wide range of Room Air conditioners. Through its
extensive research and development, your Company has remained at the
forefront of the Air conditioning industry. New technological
breakthroughs allow Hitachi to provide high quality, efficient and
reliable Air conditioning solutions.
Your company has grown @ 46% over the last year with 1.58 lac units
against 1.08 lac units in last financial year in Room Air conditioners
segment.
Your Company has launched a new range of Split Air conditioners i-TEC
(Inverter AC, Available in 1.5 Tr.) and upgraded "ACE Followme" (Tr.
0.9, 1.2, 1.5 & 2.0). These new Air conditioners, equipped with Direct
Efficient Technology are a perfect blend of absolute comfort, silence,
durability and elegant design. They ensure consistent cooling and are
highly energy efficient as well. This year we have also launched
another Split Air conditioner range KAZE for Tier II Cities. We have
done media launch of KAZE in 31 towns and received comprehensive &
positive coverage in all leading media. Other ranges of Split Air
conditioner are Atom Square, Ace Cutout, Star, Atom XL, and
Logicool to cater to the specialized need of specific segments. In
Window Air conditioner segment Quadricool TM & Quadricool SM are
available in Tr. 1.1, 1.5 & 2.0.
This year, the BEE (Bureau of Energy Efficiency, A Government
enterprise under the Ministry of Power) has made Energy Star labeling
for Room Air conditioners mandatory from January 2010. Your Company had
adopted voluntarily the scheme of Star Labeling last year hence the
customers were able to choose the Hitachi brand star rated Split Air
conditioners. Your Companys star rated Air Conditioners have been
received very well in the market. Last year 79% of Hitachi Split Air
conditioners sold were having 5 star rating.
Ductable Range of Air conditioners
The spread of the global economic downturn significantly affected
business environment in India as well. Your Company also faced similar
pressure in Commercial AC business. Because of restricted investment in
infrastructure, retail and IT & ITES, the Commercial AC business was
affected. Your Company has had a de-growth in the last financial year
in the Ductable Split range and Chillers. However, in the Telecom Air
conditioner category your Company continued and strengthen its
leadership position.
In Commercial Air conditioning business, in the first half of financial
year market was sluggish due to global slow down impact, while from
second half of the year market started positive movement. In first half
of year, your Company de-grew but lower than the market de-growth rate,
while in second half of the year, your Company registered higher growth
than the market, which helped us to restrict de-growth lower than the
market. Your Company gained around 1% in market share in year 2009-10.
Your Company has the Takumi range of Ductable Air conditioners, which
is the emergence of Hitachis engineered system to create One-of-a-kind
solution to Air conditioning industry. Its unique energy efficient
engineering design and flexibility in application provides pragmatic
solutions to suit best for cooling requirements. The range of these
products available is from 3.0 Tr. to 16.5 Tr. which are highly
appreciated and well received in the market. The customer of this
segment comprises of Retail Chains, MNCs, IT/ITES sectors, BPOs, Call
Centers, Institutes, Malls, etc.
Telecom Air conditioners
This cutting edge Air conditioning system is specially designed for
unmanned Telecom Shelters/ Telecom BTS sites. Our specialized & unique
product, Spacemaker comes with higher cooling capacity, unique safety
features, lower power consumption and lower operating costs. Market
share of your Company in this segment is above 32%. Looking to the
future growth of the telecom industry, it is expected that we shall
maintain our share in this segment.
Refrigerators
Your Company offers a wide range of stylish & premium refrigerators
available in 2-Door, 3-Door and Big French (4-Door) models. Range of
refrigerators not only adds depth and character to the consumers
kitchen but also compliments with the strong cutting-edge technology to
make beautiful solutions for household needs.
The refrigerators are differentiated on account of their innovative
functionality, style and utility intertwined with the advanced
features. The Minus Zero Cooling, New Front Jet Freezing, Electronic
Temperature Control, Nano Titanium Filter Treatment and Digital Control
Panel features allow the food to stay fresh and healthy for longer
periods. The advanced Minus Zero Cooling mode preserves the nutritional
value and the moisture in the food stored and the Digital Control Panel
helps in controlling the temperature inside the refrigerator without
opening the doors, thereby saving energy consumption.
Your Company has grown by over 4% against last year. New models have
been introduced in 2-door & big French category. It is expected that
your Company will perform better in coming years in this category.
Set up of New Air conditioner Manufacturing Facility
Your company has inaugurated new Air conditioner manufacturing facility
in August 2009. This facility is one of the largest Air conditioner
manufacturing facilities in India and also one of the largest Air
conditioner manufacturing facilities of Hitachi in the world. The new
facility is adjoining the old plant, was built in a record time of 71/2
months. The plant is state of art and equipped with advanced machinery.
With this new plant the annual production capacity has increased to
2.30 Lac units in single shift working. The new facility would
manufacture Room & Commercial Air conditioners including Ductable Air
conditioners and Telecom Air conditioners. The Chiller manufacturing
will start in the next financial year.
Set up of Hitachi Customer Satisfaction Centers
During the year under review, your Company has set up its own Service
Centers. These centers will be entirely owned & operated by your
Company, thereby assuring better & personalized service to every
customer. In the first phase, Company has opened Service Centers, in
the major cities. Gradually this concept will be expanded to smaller
towns across the country.
Future Outlook: Opportunities, Threats, Risks and Concerns
Opportunities:
Growth in Smaller Towns
Smaller towns are showing encouraging growth. These towns are very
critical, as the next round of growth will come from them. The relevant
consumer base is large and growing, as are affluence levels, which will
result in augmentation of purchasing power and branded product
consumption.
Increased Affordability of Products
Air conditioners are now affordable both in terms of initial investment
and running cost and are now treated as a necessity rather than a
luxury item. The reduction of the price gap between the Split Air
conditioner and Window Air conditioner has fuelled the growth of the
Split Air conditioner segment. With the emergence of the apartment
culture in metros and non metros the need of below 1.0 Tr. and between
1 Tr. and 1.5 Tr. capacities has emerged. Understanding that need of
the market your Company has extended ACE Followme range to 0.9, 1.2,
1.5 & 2.0 Tr. and other models KAZE & Ace Cutout also have the same
tonnage class.
Increase in Income Levels
Increasing affluence levels across the country will lead to increase in
consumption growth. Growing middle class with increasing disposable
income supported with robust economic growth are good signs for the
industry. Retailers are marketing their goods more aggressively by
providing easy financing options to the consumers by partnering with
banks.
Increasing Share of Organised Retail
The Indian retail market, which is the fifth largest retail destination
globally, has been ranked as the most attractive emerging market for
investment in the retail sector. The organised retail sector is all set
to witness maximum number of large format malls and branded retail
stores in the next two years. Tier II cities are emerging as the
favoured destinations for the retail sector with their huge growth
potential. Shopping malls are becoming increasingly common in Indian
cities. This will have a positive impact on the consumer durable
industry, as organised retailing would not only streamline the supply
chain, but also facilitate increased demand, especially for high-end
and branded products.
Threats, Risks and Concerns:
1. During last one year the cost of steel, copper & plastic have been
rising sharply. Energy labeling initiated by the government is also
adding to the input cost of product.
2. Banks / NBFCs are tightening their consumer finances. In view of
problems at the world level in the banking sector, the funding options
have minimized. Inventory funding is also very tight, which is not a
good situation for dealers to run their operations.
3. Excise duty has gone upto 10% in the last union budget. Some of the
states have also increased VAT additionally upto 2.5%. Ã
4. High electricity cost & quality of power supply remain a hindrance
in the growth of business. Long power cuts and voltage fluctuations may
affect the pace of industry growth.
5. The import of low cost products from neighboring countries
continues to be a threat to the consumer durable industry.
Human Resources
The total strength of employees (staff and operators) of your company
was 557 as on March 31, 2010.
Hitachi Customer Satisfaction (HCS) was formed as a new Process at HHLI
for enhancing the service delivery to customers. A pool of Service
Engineers has been inducted into the system at 19 HCS centers.
In order to streamline the Customer Complaints redressal, the National
Service Centre (NSC) was strengthened with deployment of 25 Engineers
alongwith regular Customer Service Executives to centrally handle
customers issues at Head Office level. It is handling regular customer
issues as well as Institutional Customers service co-ordination.
Re-Modeling of Compensation Structure was done with a uniform step wise
structure of Position Classes during the annual appraisal. Variable
Salary limits were also enhanced at all levels.
A unique team building programme was organised for all employees in
which each employee got an opportunity to visit and learn about the new
State of Art Plant at Kadi and then participate in the Out Bound
Training (OBT) with a cross- functional groups. This programme educated
our employees about the growth plans of the Company for 2010-11, the
challenges to be taken and the team work and passion required to take
it forward.
Forty eight Graduate Engineer Trainees (GETs) were recruited. After the
intensive Plant Training, the GETs were assigned specific On the Job
Training (OJT) in various departments in Plant and Field under senior
staff for guiding and mentoring them.
The Central Air-conditioning business team is being continuously
strengthened with addition of manpower in areas of Project Design,
Estimation, Execution and Commercial for handling Central AC Projects.
Internal Control and Systems
Company has adequate system of internal control to ensure that all the
assets pertaining to Company are safeguarded and protected. Internal
Audit has also been done through external Auditors at Plants as well as
at all the branches of the Company as per the detailed scope defined
and approved by the Audit Committee. The Internal Audit is planned to
substantiate and review the adequacy of controls and laid down
procedures & systems.
Observations of Internal Auditors and the detailed plan of action is
reviewed and discussed at the meetings of the Audit Committee.
Change in Managing Director
During the year Mr. Shinichi lizuka, Managing Director, has moved to
Hitachi Appliances Inc., Tochigi, Japan on his new assignment. Board of
Directors do place on record its sincere appreciation for his
significant contribution made during his tenure in development and
progress of the Company by giving his mature advice and guidance. Mr.
Motoo Morimoto has been appointed as Managing Director of the Company
with effect from April 01, 2010.
Auditors
The Companys Auditors, M/s. S.R. Batliboi & Co., Chartered
Accountants, retire at the conclusion of the forthcoming Annual General
Meeting and are eligible for re-appointment, but have expressed their
unwillingness to be re-appointed.
Directors Responsibility Statement
Your Directors confirm that: *
(i) in the preparation of the annual accounts, the applicable
accounting standards have been followed ; (ii) such accounting policies
have been selected and applied them consistently and made judgments and
estimates that are reasonable and prudent so as to give a true and fair
view of the state of affairs of the Company at the end of the financial
year ended March 31, 2010 and of the profit of the Company for that
year;
(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 ; and
(iv) annual accounts have been prepared on a going concern basis.
Report of Corporate Governance
Report on Corporate Governance under clause 49 of the Listing Agreement
is attached to this Report.
Particulars as per Section 217 of the Companies Act, 1956
A statement showing particulars of employees as required under Section
217(2A) of the Companies Act, 1956, read with Companies (Particulars of
Employees) Rules, 1975 is attached with this Annual Report and
information pursuant to Section 217(1)(e) of the Companies Act, 1956
read with Rule 2 of the Companies (Disclosure of Particulars in the
Report of the Board of Directors) Rules, 1988, relating to Conservation
of energy, technology absorption and foreign exchange earning and outgo
is given as Annexure-I to this report.
Acknowledgement
Your Directors thank all Customers, Suppliers, Investors, Bankers -
State Bank of India, ICICI Bank, Standard Chartered Bank and Mizuho
Corporate Bank and other stakeholders of the Company for their
co-operation and continued support during the year. We look forward to
their continued support in the future also.
We wish to place on record our sincere appreciation for the excellent
work put in by the employees of the Company at all levels.
For and on behalf of the Board of Directors
Motoo Morimoto
Managing Director
Place: Ahmedabad, Gujarat Anil Shah
Date: May 24, 2010 Executive Director
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