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Directors Report of TD Power Systems Ltd.

Mar 31, 2015

Dear Members

The Directors have pleasure in presenting the Sixteenth Annual Report (Boards' Report) together with the audited Financial Statements of the Company for the year ended March 31, 2015.

Financial Results

For the year For the year ended ended March 31,2015 March 31,2014 (Rs.in Lakhs) (Rs.in Lakhs)

Revenue from operations & other 42,195.06 38,438.88 Income

Operating Profit (EBITDA) 5,472.94 6,370.93

Finance cost 371.99 360.48

Depreciation & amortization 2,800.60 1,459.94

Profit before Tax (PBT) 2,300.35 4,550.51

Tax expense 604.06 1,151.66

Profit after Tax (PAT) 1,696.29 3,398.85

Add: Surplus brought forward from 20,627.58 18,471.97 the Previous Year

Less: Depreciation on Opening 152.26 - balance

Available for appropriation 22,171.61 21,870.82

Appropriations

Provision for Dividends and Tax 1,059.13 894.39 thereon

Transfer to General Reserves 200.85 348.85

Surplus carried to Balance Sheet 20,911.63 20,627.58

Review of Operations

Even as the market sentiments seemed surcharged with the installation of the new government, no tangible change was witnessed in the business environment during Fiscal 2015. The much expected kick start of investments and consequent industrial growth resulting in an improvement in order book was belied. The capital goods industry was subdued belying expectations of a recovery. The core sector of power, cement, steel, oil & gas was sluggish resulting in virtually no expansion in these sectors affecting order flows to the capital goods sector. The world economy continued to be slow and did not instill confidence.

In these challenging circumstances, your Company increased its revenue from operations by Rs. 3,756 lakhs in Fiscal 2015- a rise of about 9.77% on the back of a moderate growth of 18% in orders. Net sales from manufacturing business at Rs. 35,609.12 Lakhs, increased by Rs. 4,773.06 Lakhs, a growth of 15.48% in Fiscal 2015, contributing 84.39% of our Total Income in Fiscal 2015, as compared to 80.22% in Fiscal 2014. Net sales from our Project Business at Rs. 4,867.40 Lakhs increased by Rs. 284.55 Lakhs, a subdued growth of 6.21% in Fiscal 2015 contributing 11.54% of our Total Income as compared to 11.92% in Fiscal 2014.

Exports and deemed exports contributed 66% of Revenue as compared to about 49% in the previous year which reflects our continuing focus on growing our overseas markets. Steam generators contributed 46% of the turnover followed by Hydro generators at 27%. Considering the dismal state of the domestic market, overseas markets have assumed great significance in growing the Companies business year on year and the initiatives undertaken by the Company in the last 3-4 years in seeding these markets are yielding good results encouraging us to enlarge our presence in select markets overseas.

Earnings Before interest, tax, depreciation & amortization (EBITDA) lower by 14.10% at Rs. 5,472.94 Lakhs as compared to Rs. 6,370.93 Lakhs in the previous year due to lower realizations on account on Euro & JPY devaluation. The Profit after tax decreased by Rs. 1,702 lakhs to Rs. 1,696.29 Lakhs as compared to Rs. 3,398.85 Lakhs, a decrease of 50% over previous year mainly due to a higher depreciation and amortization charge of Rs. 2,800.60 lakhs an increase of Rs. 1,340.66 Lakhs or 91.83% over previous year due to increased capitalization of fixed assets, change in the useful life of the asset as prescribed under the Companies Act, 2013 ("Act") and amortization of technical know as per accounting policy of the Company.

The pending orders as of March 31, 2015 are Rs. 40,651.20 lakhs comprising of both manufacturing (Rs. 33,937.50 lakhs) and project business (Rs. 6,713.70 lakhs).

The net worth of the Company stands at Rs. 49,128.13 lakhs with the accretion of Rs. 484.89 lakhs to total reserves during the year. No material changes & commitments affecting the financial position of the Company have occurred between the end of the financial year of the Company to which these financial statements relate and the date of this report.

Dividend

The Directors have recommended a dividend of Rs. 2.645 per equity share (an increase of 15%) for the year ended March 31, 2015 as against Rs. 2.30 per equity share for the year ended March 31, 2014. This Dividend is subject to approval of the shareholders at the forth coming Annual General Meeting. The dividends will entail a payout of Rs. 1,059.13 lakhs including dividend distribution tax of Rs. 179.99 lakhs.

Management Discussion & Analysis

Pursuant to clause 49 of the listing agreement with the stock exchanges, the Management Discussion & Analysis report covering operations, performance & outlook of the Company is annexed as Annexure 9 to the Boards' Report.

Corporate Governance Report

A separate report on Corporate Governance is included in the Annual Report as Annexure 10 to the Boards' Report. The certificate from a Practicing Company Secretary, regarding the compliance of conditions on Corporate Governance as stipulated in Clause 49 of the Listing Agreement with Stock Exchanges forms part of the said Report.

Note on Board evaluation, Board Diversity Policy, Training of independent directors -familiarization of directors, Policy on directors' appointment and remuneration, Whistle Blower policy / Vigil mechanism, Nomination & Remuneration policy form part of the Corporate Governance report (Annexure 10).

Subsidiaries

As on March 31, 2015, the Company has 3 wholly owned subsidiaries - DF Power Systems Private Limited (an Indian Subsidiary), TD Power Systems (USA) Inc., in the United States of America and TD Power Systems Japan Limited, in Japan.

In accordance with Section 129(3) of the Companies Act, 2013, read with Rule 8 of Companies (Accounts) Rules, 2014, the Company has prepared its consolidated financial statement including all the said Subsidiaries which is forming part of this Report. Further, a statement containing the salient features of the financial statement of the said subsidiaries in Form AOC-1 is appended as Annexure 2 to the Boards' Report.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and audited accounts of each of its subsidiaries, are available on our website www.tdps.co.in. These documents will also be available for inspection during business hours at our registered office in Bengaluru, India.

A review of the operations of the subsidiaries as follows

Indian Subsidiary

During the year ended March 31, 2015, the weakness in order inflow both BTG / EPC projects continued to impact the performance of the Wholly Owned Subsidiary (WOS) DF Power Systems Private Limited. The orders for Thermal Power Market -15MW-150MW, the Company's mainstay was dismal in the year. Thermal Power Private EPC Companies reflected stress in domestic market and certain large players accepted orders merely in the hope of an improved market in future. Though there seemed some market traction starting in Small Power Plants (< 10MW) pricing was an issue. The Cement waste Heat recovery based Power plants, which was seen as an innovative option was cooling off due to lower fuel costs and longer payback periods. Thus, the overall scenario for power projects was rather dismal, the orders in the market were limited and at suboptimal prices prompting the Company to stay away from active bidding for projects.

The difficult market conditions continued to affect revenues and profitability of the Company. Though revenue of Rs. 16,479.99 lakhs for the year ended March 31, 2015 was higher as compared to Rs. 1,3034.71 lakhs for year ended March 31, 2014,this company incurred a net loss of Rs. 1,773.43 lakhs for the year as compared to a loss of Rs. 668.16 lakhs in the previous year. Considering the uncertain market situation, the company's ability to operate viably and profitably, a decision was taken by its Board to disengage from BTG/ EPC projects, scale down the business after completion of the existing projects and review as and when opportunities emerge in future.

US Subsidiary

The seeding efforts in the USA through TD Power Systems (USA) Inc. have not borne fruit in the year under Report and the necessity of having an overseas sales office in the USA is under review. The operations of this company during the year under report have resulted in revenue of USD 20.92 lakhs (Rs. 1,287.5 lakhs) and a loss of USD -2.54 lakhs (Rs. -145.571 lakhs).

Japan Subsidiary

TD Power Systems Japan Limited was incorporated to support the Company's efforts to grow TG Island business in Japan. Due to the dismal market conditions in India and sluggish global economic scenario, the primary activity of TG Island business continued to witness severe stress further compounded by the strengthening of Japanese yen. The operations of this company during the year under report have resulted in revenue of JPY 9,288.21 lakhs (Rs. 5,170.51 lakhs) and a profit after tax of JPY Rs. 263.14 lakhs (Rs. 141.27 lakhs). The Company's order book as of March 31, 2015 stands at JPY 8,780.03 (Rs. 4,555.10 lakhs).

Internal Financial Control

The Company has established adequate internal control system, commensurate with the nature of its business and size of its operations in order to ensure quality and reliability of underlying processes focused towards achieving operational efficiency, reliability of financial data and safeguarding of assets. Internal Financial control system ensures that the financial and other records are reliable for preparing financial and other statements and for maintaining accountability of assets of the Company. Internal controls are evaluated by the external/internal Auditors and supported by Management reviews. All audit observations and follow up actions thereon are initiated for resolution by the Finance Function and reported to the Audit Committee.

Directors' Responsibility Statement

Pursuant to clause (c) of sub section (3) of section 134 of the Companies Act, 2013, with respect to the Directors' Responsibility Statement, it is hereby confirmed that

a. In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b. The directors had selected such accounting policies 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 and loss of the Company for that period;

c. The directors had taken proper and sufficient care 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. The directors had prepared the annual accounts on a going concern basis;

e. The directors, in the case of a listed company, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

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

Board of Directors & Key Managerial Personnel

Board of Directors ("The Board")

As per the provisions of the Companies Act, 2013, Mr. Mohib N. Khericha retires at the ensuing Annual General Meeting and being eligible seeks re-appointment. The Board recommends his re-appointment.

During the Financial Year 2014-15, in compliance of relevant provisions of the Companies Act, 2013 and Rules thereunder, Mr. Nitin Bagamane, Dr. Arjun Kalyanpur, Ms. Nandita Lakshmanan and Mr. Ravi K Mantha the existing Independent Directors were appointed as Independent Directors of the Company, at the Annual General Meeting of the Company held on August 12, 2014. The details of the terms & conditions of their appointment are available on the website of the Company(www.tdps.co.in) in compliance of the revised Clause 49 of the Listing Agreement.

The said Independent Directors have given declaration stating that they meet the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

Mr. Hitoshi Matsuo, Non-Executive / Non Independent Director, has tendered resignation as Director of the Company effective from closing of business hours on February 21, 2015. The Board places on record its appreciation for the services rendered by Mr. Hitoshi Matsuo during his tenure with the Company.

On the recommendation of the Nomination and Remuneration committee, the Board of Directors of the Company appointed Mr. K G Prabhakar as Director (Category-Non Independent/Executive) of the Company with effect from May 20, 2015 in the casual vacancy caused by the resignation of Mr. Hitoshi Matsuo. Mr. K.G. Prabhakar is a Chartered Accountant with over 28 years of work experience in corporate finance, Accounting and taxation and is associated with the Company since 2001. Currently he is the Chief Financial Officer (CFO) of the Company.

Key Managerial personnel

Mr. Nikhil Kumar, Managing Director, Mr. K. G. Prabhakar, Chief Financial Officer and Mr. N. Srivatsa, Company Secretary are deemed to be Key Managerial Personnel of the Company as per the provisions of the Companies Act, 2013 and Rules thereunder and they were already in office before the commencement of the Companies Act, 2013.

Risk Management Policy

Pursuant to the revised Clause 49 of the Listing Agreement, a Risk Management committee of the Board of directors of the Company has been constituted. The details of the committee and its terms of reference are set out in the corporate governance report forming part of this report. While the Company has identified certain major risks and initiated appropriate measures to mitigate the said risks, a process to enhance the risk management framework is underway.

Auditors

M/s. B. K. Ramadhyani & Co. LLP, Chartered Accountants, were appointed as Statutory Auditors of the Company to hold office till the conclusion of the ensuing Annual General Meeting and are eligible for reappointment. They have confirmed their eligibility to the effect that their reappointment, if made, would be within the prescribed limits under the Companies Act, 2013 and that they are not disqualified for reappointment.

The Notes on financial statements referred to in the Auditors Report are self -explanatory. The Auditors Report does not contain any qualification, reservation or adverse remark.

Secretarial Auditor

The Board appointed Mr. Sudhir V Hulyalkar, Practicing Company Secretary, Bangalore, to conduct the Secretarial Audit of the Company for the Financial Year 2014-15.

The Secretarial Audit Report for FY 2014-15 forms part of the Annual Report at Annexure 8 to the Boards' Report and does not contain any qualification, reservation or adverse remark.

Cost Auditor

In terms of Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, M/s. Rao, Murthy & Associates, Cost Accountants, Bangalore have been appointed as Cost Auditors of the Company for the Financial Year 2015-16.

Disclosure

Extract of the Annual Return

In accordance with Section 134(3) (a) of the Companies Act, 2013, an extract of the Annual Return in the prescribed format is appended as Annexure 1 to the Boards' Report.

Number of Board Meetings

The Board met four times during the Financial Year 2014-2015 the details of which are given in the Corporate governance report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act, 2013.

Particulars of Contracts or Arrangements

Particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act, 2013, in the prescribed Form AOC-2, is appended as Annexure 3 to the Boards' Report.

Conservation of Energy, Research and Development, Technology Absorption, Foreign Exchange Earnings and Outgo

The particulars as prescribed under Sub-section (3) (m) of Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014, are enclosed as Annexure 4 to the Boards' Report.

Particulars of Loans, Guarantees or Investments

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 also form part of the notes to the financial statements provided in this Annual Report:-

Nature of transaction Date of Board Date of Resolution transaction

Loan 12.02.2014 11.04.2014

Loan 12.02.2014 15.05.2014

Loan 12.02.2014 25.06.2014

Loan 21.05.2014 02 06 2014

Loan 11.02.2015 05.03.2015

Corporate Guarantee 11.02.2015 30.03.2015

Corporate Guarantee 11.02.2015 30.03.2015

Corporate Guarantee 11.02.2015 27.02.2015

Nature of Name of the person to Amount transaction whom it is made

Loan TD Power Systems (USA) Inc. USD 100,000

Loan TD Power Systems (USA) Inc. USD 100,000

Loan TD Power Systems (USA) Inc. USD 100,000

Loan TD Power Systems Japan Limited JPY 30,000,000

Loan TD Power Systems (USA) Inc. USD 100,000

Corporate To ICICI Bank Ltd. on behalf Guarantee DF Power Systems Private Limited Rs.620,000,000

Corporate To Bank of Baroda on behalf Guarantee DF Power Systems Private Limited Rs.300,000,000

Corporate To Standard Chartered Bank on behalf Guarantee DF Power Systems Private Limited Rs.500,000,000

Particulars of employees

A table containing the names and other particulars of employees in accordance with the provisions of Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is appended as Annexure 5 to the Boards' Report.

A statement containing the names of every employee employed throughout the financial year and in receipt of remuneration of Rs. 6,000,000 or more per annum or employed for part of the year and in receipt of Rs. 500,000 or more per month, in terms of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is enclosed as Annexure 6 to the Boards' Report.

CSR Committee

In terms of the requirements of the Companies Act, 2013, a Corporate Social Responsibility committee (CSR Committee) has been formed which has approved a CSR policy for the Company which is available on the website of the Company. The annual report on CSR is annexed as Annexure 7 to the Boards' Report.

Audit Committee

The composition and function of the Audit committee of the Board of Directors of the Company is disclosed in the Report on Corporate Governance forming part of this report.

General

Your Directors state as follows

1. No significant or material orders were passed by the Regulators or Courts or Tribunals impacting the going concern status and Company's operations in future.

2. There was no issue of equity shares with differential rights, as to voting, dividend or otherwise.

3. There was no issue of shares including as sweat equity shares or employee stock options.

4. There were no deposits covered under Chapter V of the Companies Act, 2013.

5. No money has been provided by company for purchase of its own shares by employees or by trustees for the benefit of employees.

6. No subsidiary has paid remuneration to Managing Director except DF Power Systems Private Limited (Rs. 1,851,500).

7. The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. During the year under review there were no cases filed pursuant to the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013.

Acknowledgement

Your Directors place on record their appreciation of the contribution and support of the employees at all levels. They also place on record their appreciation of the continued support and faith extended during the year by the Company's customers, suppliers, bankers and shareholders.

For and on behalf of the Board of Directors

Bangalore Mohib N. Khericha May 20, 2015 Chairman




Mar 31, 2013

Dear Members,

The Directors have pleasure in presenting the Fourteenth Annual Report together with the audited Financial Statements of the Company for the year ended March 31, 2013.

The Company''s working has resulted in:

For the year For the year ended ended March 31,2013 March 31,2012 (Rs. in Lakhs) (Rs. in Lakhs]

Revenue from operations & other Income 44,963.46 64,089.41

Operating Profit (EBITDA) 6,951.54 8,939.25

Finance cost 341.50 656.79

Depreciation & amortization 1,225.38 899.87

Profit before Tax (PBT) 5,384.66 7,382.59

Tax expense 1,817.22 2,400.77

Profit after Tax (PAT) 3,567.44 4,981.81

Add: Surplus brought forward from the Previous Year 15,959.34 12,086.39

Available for appropriati on 19,526.78 17,068.20

Appropriations

Provision for Dividends and Tax thereon 747.14 723.92

Transfer to General Reserves 307.67 384.94

Surplus carried to Balance Sheet 18,471.97 15,959.34

OPERATIONS

The highlights of the Company''s performance for the year are as under:

- Revenue from operations and other income was lower by 30% at Rs 44,963.46 Lakhs (Rs. 64,089.41 Lakhs]

- 273 (308) Generators of various ranges up to 52 MW were manufactured.

- Earnings Before interest, tax, depreciation & amortization (EBITDA) lower by 22.71% at Rs. 6,951.54 Lakhs (Rs. 8,939.25 Lakhs)

- Profit after tax decreased by 29 % to Rs. 3,567.44 Lakhs (Rs. 4,981.82 Lakhs)

The negative macroeconomic environment including slowdown of the economy, liquidity contraction, rising interest rates and the resulting slowdown in investment, resulted in lower order book and revenues.

Expected improvements in markets during the last quarter January to March 2013 were belied. It is expected that the capex cycle will revive if there is a cut in the interest rates by the Reserve Bank of Indiat The pending orders as of March 2013 is about Rs. 31,500 Lakhs which is expected to improve significantly on the back of both domestic and overseas orders resulting from successful qualification as vendors to large overseas electrical equipment manufacturers which will enable the company to sustain its top line and maintain margins in the financial year 2013-14.

Manufacture of new generation generators

During the year, the Company, has commenced construction of a manufacturing facility in close proximity to the existing facility, which will manufacture new generation generators with a capacity of 54 to 200 MW. The manufacturing facility is expected to be completed during December 2013 and is expected to be commissioned in the last quarter of this financial year.

DIVIDENDS

Your Directors have recommended a dividend of Rs. 2.00 per equity share for the financial year ended March 31, 2013 amounting to Rs. 664.75 Lakhs subject to approval of the shareholders at the Annual General meeting. This dividend payout is based on Company''s policy to pay sustainable dividends and meet long term growth objectives out of internal cash accruals.

MANAGEMENT DISCUSSION & ANALYSIS

Pursuant to clause 49 of the listing agreement with the stock exchanges, the Management Discussion & Analysis report covering operations, performance and outlook of the company is annexed as Annexure-III.

UTILISATION OF IPO PROCEEDS

The shareholders of the Company at the Annual general meeting held on July 12, 2012, approved that the IPO proceeds relating to certain objects of issue may be utilized for objects other than the said objects, including setting up of a new manufacturing facility for manufacture of advanced AC generators-2pole. The company has commenced deployment of the funds accordingly in setting up a manufacturing facility near the current facility. The following is the statement of utilization of the IPO proceeds:

[Rs. in Lakhs] SI. Objects IPO Proceeds Unutilized Utilization Balance No. (Total as of June 30,2012 & as of to be estimated Transfer to Object No. 6 31.3.2013 utilized cost) (Refer Note below)

1 2 3 4 5 6 (Rs.) (Rs.) (Rs.) (Rs.)

1 Finance the expansion of our manufacturing plant in Dabaspet 10,273.60 __ 10,095.62 177.98

2 Construction of a project office in Bangalore city 2,890.90 2,890.90* __ __

3 Repayment of debt 3,280.70 539.13* 2,741.57## __

4 Funding working capital requirements of our Company 4,000.00 4,000.00* __ __

5 General corporate purposes 2,254.80 863.98* 1,390.82** __

6 Finance our manufacturing facility for 2 Pole generators ranging from 55 MW to 200 MW __ 8,294.01** 2,257.95 6,036.06

Total of SI. No. lto5 22,700.00 16,485.96 6,214.04



Note:

1. ® The balance in the IPO proceeds have been in the interim invested in term deposit with nationalized Bank.

2. * Amount completely un-utilized as on June 30, 2012.

3. * Amount representing savings from stated objects transferred to 6.

4. ** Amounts utilized as of June 30, 2012.

5. ** Total of 2 to 5 in column 4.

SUBSIDIARIES

During the year ended March 31, 2013, the performance of the Company''s wholly owned subsidiary DF Power Systems Private Limited was impacted due to the weakness in order inflow resulting in lower revenues and profits for the year ended March 31, 2013. The Gross Profit for the year under report is Rs. 1,393.25 Lakhs as against Rs. 2,609.11 Lakhs in the previous year and the net profit is Rs. 922.42 Lakhs as compared to Rs.1,732.31 Lakhs for the previous year.

The directors of the subsidiary company have recommended a dividend of Rs 3.00 per share for the financial year ended March 31,2013 amounting to Rs. 180.00 Lakhs subject to approval of the shareholders at its Annual General meeting.

US Subsidiary

A wholly owned subsidiary in the name TD Power Systems (USA) Inc. has been incorporated on February 20, 2013 as a Delaware corporation in the United States of America (USA).The operations of the company shall be located at Richfield, OHIO which is strategically located to the major industrial areas as well as the highways network.

Japan Subsidiary

A wholly owned subsidiary in the name TD Power Systems Japan Limited has been incorporated on March 19, 2013 in Tokyo, Japan.

Both the US and Japan subsidiaries are yet to commence business operations.

GREEN INITIATIVE

The Ministry of Corporate Affairs, Government of India has vide circular no 2/2011 dated February 8, 2011 granted a general exemption to Companies under section 212(8) of the Companies Act, 1956 (the Act) from attaching the documents referred to in section 212(1) of the Act pertaining to its subsidiaries subject to approval of the Board of Directors of the company and furnishing certain information in the Annual Report.

The Board of Directors at its meeting held on May 22 2013 passed necessary resolution for complying with all the conditions enabling circulation of the Annual Report of the Company without attaching Annual accounts of the Company''s subsidiaries. Accordingly, the Annual Report of the Company does not contain the individual financial statements of the subsidiary but contains the audited consolidated financial statements of the Company and the said subsidiary. The Annual Accounts of the Subsidiary Company, along with the related information are available for inspection at the Company''s registered office during the business hours on any working day and copies of the same will be made available on request.

The disclosure of information relating to subsidiaries under Section 212(8) of Companies Act, 1956 pursuant to the said circular has been attached with the Consolidated Balance Sheet of the Company.

A statement referred to in Clause (e) of sub section 1 of Section 212 of the Act disclosing the Company''s interest in subsidiaries is attached.

CONSOLIDATED FINANCIAL STATEMENTS

As required in terms of the Listing Agreement with the Stock Exchanges, the consolidated Financial Statements of the Company prepared as per Accounting standard AS21 consolidating the company''s accounts with its subsidiaries forms part of this Annual Report.

DIRECTORS

Mr Hitoshi Matsuo ceased to be the Managing Director of the Company on completion of his term on September 30 2012. The Board of Directors place on record it''s appreciation of Mr. Matsuo''s invaluable contribution to the company''s growth since inception. With a view to develop the overseas markets including Japan which has become imperative to participate in the emerging opportunities in Japan, South East Asia and other parts of the world, it was thought necessary to continue to avail the services of Mr. Hitoshi Matsuo, who has spearheaded the growth of the Japan branch since its inception in 1999. Accordingly, Mr Hitoshi Matsuo has been appointed as a Whole-time Director, designated as Director - International, to be located at Tokyo, Japan, for a further period of 2 (two) years from October 1, 2012 to September 30, 2014.

Mr. Nikhil Kumar, Joint Managing Director has been redesignated as Managing Director effective October 1,2012 in place of Mr. Hitoshi Matsuo.

Mr. Salil Baldev Taneja has resigned as Director of the company effective May 17, 2013 owing to professional pre occupation.

Mr. Nithin Bagamane and Mr. Mohib N. Khericha, Directors retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for reappointment. The Board of Directors of the Company commends their respective re-appointments.

A brief resume of the Directors proposed to be re-appointed, nature of their expertise in specific functional areas, names of companies in which they hold directorships and memberships/chairmanships of Board Committees, shareholding and relationships between directors inter-se as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, are provided in the Report on Corporate Governance forming part of the Annual Report

CORPORATE GOVERNANCE

A separate report on Corporate Governance is included in the Annual Report as Annexure-IV. The certificate from Mr. SudhirV. Hulyalkar, Practicing Company Secretary, Bangalore, confirming the compliance of conditions on Corporate Governance as stipulated in Clause 49 of the Listing Agreement with Stock Exchanges forms part of the said report.

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

Information as required under section 217(l)(e)of the Companies Act 1956 read with Companies (Disclosure of particulars in the report of the Board of Directors) Rules, 1988 has been given in Annexure-I to this report.

PARTICULARS OF EMPLOYEES

During the period under review, the statement of employees who were in receipt of remuneration requiring disclosure in terms of Section 217(2A) of the Companies Act, 1956 has been given in Annexure-II to this report.

AUDITORS

The Statutory Auditors M/s. B. K. Ramadhyani & Co., Chartered Accountants, Bangalore, hold office until the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for reappointment. A certificate has been received from them to the effect that their reappointment, if made, would be within the prescribed limit under Section 224(1B) of the Companies Act, 1956.

COST AUDITORS

The Company is covered by Cost Audit requirements w.e.f. April 1, 2012 (FY 2013) under the heading "Engineering Machinery (including electrical & electronic products)" in terms of order of the Ministry of Corporate Affairs (MCA) dated January 24, 2012. Accordingly, pursuant to Section 233B of the Companies Act, 1956 read with the directions issued by the Ministry of Corporate Affairs M/s. Rao, Murthy & Associates, Cost Accountants, Bangalore have been appointed as Cost Auditors for the Financial year ended March 31, 2013 to conduct the audit of its manufacturing operations (manufacture of generators).

As required in terms of the Companies (Cost Accounting Records) Rules 2011, the Cost compliance report for the financial year ended March 31, 2012 duly certified by a Cost Accountant has been filed with the Ministry of Corporate Affairs within the due date on December 13, 2012.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the companies Act 1956 with respect to Directors'' responsibility statement, it is hereby confirmed:

- that in the preparation of the accounts for the financial year ended 31st March 2013, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any.

- that the Directors have selected such accounting policies and applied them consistently and made judgments and the estimates that are reasonable and prudent so as to give true and fare view of the state of affairs of the Company at the end of the financial year and are the profit or loss of the Company for the year under review.

- that the Directors have taken proper and sufficient care 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.

- thatthe Directors have prepared the accounts for the financial year ended March 31, 2013 on a ''going concern'' basis.

ACKNOWLEDGEMENT

Your Directors place on record their appreciation for the cooperation and continued supportextended by the shareholders, suppliers, customers, technology partners, Banks and all employees of the company during the year under report.



For and on behalf of the Board of Directors



Bangalore Mohib N. Khericha May 22,2013 Chairman


Mar 31, 2011

Dear Members,

The Directors have pleasure in presenting the Twelfth Annual Report and the Audited Statement of Accounts for the financial year ended 31st March 2011.

The Company converted into a Public Limited Company by passing necessary Shareholders resolution on January 11 2011 and received the fresh Certificate of Incorporation consequent upon change of Name on conversion to a Public Limited Company on February 4, 2011

WORKING RESULTS

The Company's working has resulted in: -

For the Current Year For the Previous Year Particulars ended March 31, 2011 ended March 31, 2010 (Rs. in lacs) (Rs. in lacs)

Gross Profit amounting to 7,060.46 5,778.96

Less:

Depreciation_ 789.11 553.14

Loss on Sale of Asset 3.64 2.65

Provision for Taxation 2,076.45 1,600.94

Deferred Tax (Net) 27.21 314.94

Net Profit for the Year 4,164.03 3,302.30

Add:

Surplus brought forward from the Previous Year 10,429.75 7860.26

Less: Capitalisation of Reserves during the year 1,624.69

Available for appropriation 12,969.09 11,162.56

Appropriations:

Provision for Dividends and Tax thereon 568.36 371.08

Transfer to General Reserves 314.34 361.72

Surplus carried to Balance Sheet 12,086.39 10,429.76

OPERATIONS

Your Company has achieved a turnover of Rs.48,788.02 lakhs for the year ended March 31, 2011. During the year 341 Generators of various ranges up to 52 MW were manufactured by the Company.

The Gross Profit for the year under report is Rs.7,060.46 lakh as against Rs.5,778.96 Lakh in the previous year and the net profit is Rs.4,164.03 Lakhs as compared Rs.3,302.30 Lakhs for the previous year.

The following are the highlights of the Company's achievements for the year:

- Siemens, Erfurt design of 52MW AC Generator has been successfully tested & dispatched on 14/09/10.

- 11.764MW, 13.8kV, 60Hz, 0.85pf, 600rpm AC Generator order received for VOITH-TDPS design a/c Cubujuqui in Costa Rica.

Prestigious order from OMPL (ONGE Mangalore Petrochemicals Ltd., - Aromatic Complex) for 28MW Steam Turbine Generator set.

- New order received from ITC - Specialty Paper Division for 29.62MW Steam Turbine Generator set.

- New Order received from Jamkhandi Sugars for 27.3 7MW Steam Turbine Generator set.

- Repeat order received from Vasavadatta Cements, Sedam Plant for 18.2MW Steam Turbine Generating set.

- New order received from Voith - Norway for 7.7MW, 6.3kV, 50Hz, 0.8pf, 750rpm AC Generator suitable for Static excitation

- Breakthrough order received from Mecamidi - France for 2 Nos. 3.55MW, 6.3kV, 12P Generators for Hydro application a/c Kasba Zidania - Morocco, Africa project.

- Breakthrough order from Dresser-Rand - UK for 30MW, 1lkV AC Generator a/c Sulphuric Acid Plant, Jordan project.

- Breakthrough order from KOHLER - Singapore for 2000kVA, 1lkV AC Generator for their prestigious project in CISCO, Bangalore.

- Participated in ELASIA- Exhibition organized by Electrical consultant of India Ltd., (ELCA) - From 07/01/11 to 10/01/11 & bagged 3rd Best Stall award

DIVDEND

The Directors are pleased to recommend payment of Dividend on Equity shares at the rate of Rs.2 subject to approval by the shareholders at the Annual General Meeting.

CAPITAL

The Authorised Capital of the Company was increased to Rs.35, 00,00,000 to enable capital raising efforts being pursued by the Company. During the year under review, the Paid up Capital increased from Rs. 6,34,35,670 to Rs.24,37,04,010 as on 31st March 2011 comprising of 2,43,70,401 Equity Shares of Rs.10.00 each fully paid up consequent to issue of Shares including Bonus Shares.

CURRENT YEAR

The country continues to face shortage in peak demand with almost all states in deficit and load shedding continuing in many parts of the country. The continuing power shortage scenario reflects a failure of the Policy initiatives to create optimum capacity in last three 5 year plans. About 25% of the capacity in the pipeline is said to be through private Independent Power Producers (IPP).

Although, a general slowdown is being reported in the Capital goods industry, the demand for plants for captive generation of power continues to be robust from sectors like Steel, Cement, and Sugar etc. because of the imperative need to achieve sustainable power quality and cost reduction.

The Company's order book continues to be encouraging and stands at Rs 49604.70 lacs as on March 31, 2011. The Company has received orders for manufacture of High end rating generators. Several developmental and certification initiatives are in progress which will enable the Company to continue to grow as a major manufacturer of generators in the world with an increased geographical reach.

These initiatives will result in growing orders for supply of generators for various applications like Steam, Hydro wind, Gas, and diesel, to cater to which the manufacturing facilities have to be expanded and enhanced enabling production of High quality and efficient generators. In order to fund the proposed expansion plans including enhancement of manufacturing facilities, fund working capital requirements, repayment of debt and other purposes the Company is exploring various options including Capital raising up to Rs.250.00 crores.

The management team continues to focus on providing strategic and operational directions to all the businesses where it has invested.

Considering the overall market scenario, the order book and the Company's capability in meeting with delivery schedules and barring unforeseen circumstances your Directors are hopeful of a good performance during the current year.

INTERNAL CONTROL SYSTEMS

Your Company maintains an adequate and effective internal control system, commensurate with its size and complexity. Your Company believes that these internal control systems provide a reasonable assurance that the Company's transactions are executed with management authorization and that they are recorded in all material respects to permit preparation of financial statements in conformity with established accounting principles and that the assets of the Company are adequately safeguarded against significant misuse or loss.

SUBSIDIARY COMPANY

The Company's subsidiary DF Power Systems Private Limited has recorded an impressive performance for the year ended March 31 2011 with a turnover of Rs.3,758.45 lacs and a net profit of Rs.1,508.51 lacs.

The Company acquired 16,99,998 Equity Shares of Rs.10/- each of the subsidiary Company as a result of which the subsidiary Company turned into a wholly owned subsidiary Company of w.e.f October 1st 2010.

As per Section 212(1) of the Companies Act, 1956, the Company is required to attach to its Accounts the Directors' Report, Balance Sheet and Profit and Loss Account of each of the subsidiaries. The Ministry of Corporate Affairs, GOI has vide circular no 2/2011 dated April 8, 2011 granted a general exemption to Companies in respect of this requirement. Accordingly, the Annual Report of the Company does not contain the individual financial statements of the Company's subsidiary, but contains the audited consolidated financial statements of the Company and the said subsidiary. The annual accounts of these subsidiary Company, along with the related information, is available for inspection at the Company's registered office and copies will be provided on request. The statement containing the following information for the subsidiary namely (a) capital (b) reserves (c) total assets (d) total liabilities (e) details of investment (f) turnover (g) profit before taxation (h) provision for taxation (i) profit after taxation (j) proposed dividend is disclosed in the consolidated Balance sheet annexed to the annual accounts of the Company

AUDIT COMMITTEE

Your Company has constituted an Audit Committee of the Board, in terms of Section 292A of the Company Act 1956 comprising of the four Independent Directors as members with Mr. Nitin Bagamane as Chairman of the Committee. Members of Audit Committee consist of Dr. Arjun Kalyanpur, Mr. Salil BaldevTaneja and Mr. Mohib IM. Khericha.

DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to the requirement under Section 217(2AA) of the companies Act 1956 with respect to Directors' responsibility statement, it is hereby confirmed: -

1. that in the preparation of the accounts for the financial year ended 31st March 2011, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any.

2. that the Directors have selected such accounting policies and applied them consistently and made judgments and the estimates that are reasonable and prudent so as to give true and fare view of the state of affairs of the Company at the end of the financial year and are the profit or loss of the Company for the year under review.

3. that the Directors have taken proper and sufficient care 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.

4. that the Directors have prepared the accounts for the financial year ended March 31, 2011 on a' going concern' basis.

DIRECTORS

During the year under review, Dr. Arjun Kalyanpur, Mr. Salii Baldev Taneja, Mrs. Nandita Lakshmanan and Mr. Nitin Bagamane were appointed as Directors of the Company wef 13th January 2011. Mr. Mohib N. Khericha and Mrs. Nandita Lakshmanan retire by rotation and being eligible offer themselves for re-appointment.

STATUTORY AUDITORS

Your Company's Auditors M/s. B. K. Ramadhyani & Co, Chartered Accountants, Bangalore, hold office until the conclusion of the ensuing Annual General Meeting. They have shown their willingness to accept the office as Statutory Auditors, if appointed. Your Company has received a written certificate from the Auditors to the effect that their reappointment, if made, would be within the prescribed limit under Section 224(1B) of the Companies Act, 1956.

DISCLOSURE UNDER THE COMPANIES DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS RULES, 1988

a. Particulars in respect of Rule 'A' & 'B' (Conservation of energy and Technology Absorption) - as per Annexure 'A'.



PARTICULARS OF EMPLOYEES

During the period under review, the statement of employees who were in receipt of remuneration requiring disclosure in terms of Section 217(2A) of the Companies Act, 1956 is enclosed as Annexure B.

HUMAN RESOURCE DEVELOPMENT

Creativity, quality and dedication of all our employees represent the most precious asset of the Company. For the growth of any organization, the human resource function has an important role to play not only in identifying and recruiting suitable individuals but also in developing and rewarding them suitably, so as to retain them for a longer period. Your Company believes that Human Capita! has economic value, directly impacting organizational productivity and profitability.

The Company has remained focused on strengthening human capital through continuous developmental programmes and by upgrading skills of employees to meet the Company's objectives.

Two Teams from the Company won the Excellence award at the 24th National Quality Circle convention on Quality Concepts 2010 conducted by QCFI (Quality Circle forum of India) in December 2010

ACKNOWLEDGEMENT:

The success achieved by your Company and the progress made by it are due to co-operation, efforts and Commitment of all concerned with its affairs, including various customers and suppliers, Banks, Shareholders, Directors, officers and Employees of your Company. The management expresses gratitude to all for their co-operation especially to the employees for their dedicated services without which the good results would not have been possible.

for and on behalf of the Board Of Directors

Place: Bangalore MOHIB N. KHERICHA

Date : May 30, 2011 Chairman

 
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