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Directors Report of Thejo Engineering Ltd.

Mar 31, 2015

Dear Members,

The Directors have pleasure in presenting their 29th Annual Report together with Audited Accounts for the year ended 31st March, 2015. The summarized financial results for the year are given below:

Rs.in Lakhs

Standalone

Year Ended Year Ended 31st March, 31st March, 2015 2014

Profit before Exceptional Items, Interest, 1,774.59 2,067.52

Depreciation and Tax

Less : Exceptional Item - 24.74

Profit before Interest, Depreciation and Tax 1,774.59 2,042.78

Less : Interest 516.68 450.22

Profit before Depreciation and Tax 1,257.91 1,592.56

Less : Depreciation 452.59 274.94

Net Profit before Taxes 805.32 1,317.62

Less : Taxation (Including Deferred Tax) 258.65 446.57

Net Profit After Tax before Transfer to 546.67 871.05

Minority Interest

Less : Transfer to Minority Interest - -

Net Profit After Tax and Transfer to Minority 546.67 871.05

Interest

Add: Brought forward from previous year 3,355.78 2,712.43

Balance Available for Appropriations 3,902.45 3,583.48

Appropriations:

Adjustments relating to Fixed Assets 60.54 -

Transfer to General Reserve 54.67 87.11

Proposed Dividend 120.17 120.17

Dividend Distribution Tax 24.46 20.42

Acquisition by minority interest shareholders - -

Foreign Currency Translation Reserve - -

Balance Carried over to Balance Sheet 3,642.61 3,355.78

Rs.in Lakhs

Consolidated

Year Ended Year Ended 31st March, 31st March, 2015 2014

Profit before Exceptional Items, Interest, 1,204.18 1,480.58

Depreciation and Tax

Less : Exceptional Item - 24.74

Profit before Interest, Depreciation and Tax 1,204.18 1,455.84

Less : Interest 563.04 451.55

Profit before Depreciation and Tax 641.12 1,004.29

Less : Depreciation 621.11 370.42

Net Profit before Taxes 20.01 633.87

Less : Taxation (Including Deferred Tax) 248.67 501.57

Net Profit After Tax before Transfer to (228.66) 132.30

Minority Interest

Less : Transfer to Minority Interest (205.56) (181.14)

Net Profit After Tax and Transfer to Minority (23.10) 313.44

Interest

Add: Brought forward from previous year 2,631.87 2,493.94

Balance Available for Appropriations 2,608.77 2,807.38

Appropriations:

Adjustments relating to Fixed Assets 60.54 -

Transfer to General Reserve 54.67 87.11

Proposed Dividend 120.17 120.17

Dividend Distribution Tax 24.46 20.42

Acquisition by minority interest shareholders - (59.54)

Foreign Currency Translation Reserve (7.49) 7.35

Balance Carried over to Balance Sheet 2,356.42 2,631.87

REVIEW OF FINANCIAL PERFORMANCE AND THE STATE OF COMPANY'S AFFAIRS STANDALONE

The Company's sales turnover in the year ended 31st March, 2015 amounted to Rs. 16,854.97 lakhs, up by 13.23% over the previous year (Rs. 14,885.98 lakhs), on which it made an EBITDA of Rs. 1,774.59 lakhs (Previous Year: Rs. 2,067.52 lakhs) and a net profit (excluding exceptional item) of Rs. 546.67 lakhs as against Rs. 895.79 lakhs in 2013-14.

CONSOLIDATED

The Company's consolidated sales turnover in the year under review aggregated Rs. 18,552.20 lakhs, up by 16.60% over the previous year (Rs. 15,910.89 lakhs), on which it made an EBITDA of Rs. 1,204.18 lakhs (Previous Year: Rs. 1,480.58 lakhs) and a net loss (after transfer to Minority Interest) of Rs. 23.10 lakhs as against net profit (excluding exceptional item) of Rs. 338.18 lakhs in 2013-14 and the small loss was mainly on account of the initial promotional expenses and the time taken for achieving breakthrough in the expansion of business overseas.

DIVIDEND

Your Directors are pleased to recommend payment of dividend of 35% i.e. Rs. 3.50 per Equity Share of Rs. 10 each for the Financial Year ended 31st March, 2015 (same as in the previous year). The dividend amount of Rs. 120.17 lakhs (same as in the previous year) together with dividend distribution tax of Rs. 24.46 lakhs (Rs. 20.42 lakhs in the previous year) will absorb a sum of Rs. 144.63 lakhs (Rs. 140.59 lakhs in the previous year).

TRANSFER TO RESERVES

Your Directors propose to transfer Rs. 54.67 lakhs to the General Reserve (i.e., 10% of Net Profit after Tax). Surplus retained after Appropriations amounts to Rs. 3,642.61 lakhs (Rs. 3,355.78 lakhs).

EMPLOYEES STOCK OPTION SCHEME

Your Directors have proposed to introduce Stock Based Compensation Plan to the employees by way of Employees Stock Option Scheme (ESOP), subject to the provisions of Section 62(1)(b) read with Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014 of Chapter IV of the Companies Act, 2013 (including any statutory modification or re-enactment thereof from time to time), Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and the approval of the Members at the ensuing Annual General Meeting vide Items 9 and 10 of the Notice dated 27th May, 2015 convening the Meeting.

CREDIT RATING

CRISIL has given your Company a rating of SME IER which reflects the strong fundamentals of the Company:

Current Market Price Date Nature of Report Fundamental Grade (on the Grade date of report)

09th May, 2014 Detailed Report 5/5 3/5

27th June, 2014 H2FY14 Result Update 5/5 3/5

08th December, 2014 Detailed Report 5/5 4/5

Fundamentals Grading: 5/5 - Excellent Fundamentals Valuation Grading: 4/5 - Upside (10-25% from CMP)

INTERNAL FINANCIAL CONTROL SYSTEM

The Company has in place adequate internal financial controls with reference to Financial Statements. During the year, such controls were tested and no reportable material weaknesses were observed.

SUBSIDIARY COMPANIES

As on date of this Report, the Company has four subsidiaries, namely, Thejo Hatcon Industrial Services Company, Kingdom of Saudi Arabia (Thejo Hatcon) with 51% shareholding, Thejo Australia Pty Ltd., Australia (Thejo Australia) with 74% shareholding, Thejo Brasil Comercio E Servicos Ltda, Brazil (Thejo Brazil) with 99.99% shareholding and Thejo Engineering LatinoAmerica SpA, Chile (Thejo Chile) with 97.50% shareholding.

The Audited Consolidated Financial Statements of the Company for the year ended 31st March, 2015 are annexed to the Financial Statements. These Statements have been prepared as per Accounting Standard 21 issued by the Institute of Chartered Accountants of India.

PERFORMANCE OF SUBSIDIARY COMPANIES

Thejo Hatcon Industrial Services Company (Thejo Hatcon) is engaged primarily in rubber lining and related industrial services activities. During the period 01st April, 2014 to 31st March, 2015, Thejo Hatcon achieved a turnover of SAR 3.01 million (Rs. 490.38 lakhs) with a loss of SAR 0.48 million (Rs. 75.07 lakhs).

Thejo Australia Pty Ltd (Thejo Australia) is a servicing Company, primarily engaged in belt splicing, belt jointing and related activities. During the period 01st April, 2014 to 31st March, 2015, Thejo Australia achieved a turnover of AUD 2.78 million (Rs. 1,434.64 lakhs) with a loss of AUD 1.22 million (Rs. 645.89 lakhs).

Thejo Brasil Comercio E Servicos Ltda (Thejo Brazil) is primarily engaged in selling of bulk material handling products. During the period 08th September, 2014 (date of incorporation) to 31st March, 2015, Thejo Brazil is yet to commence the business operations and it incurred a loss of BRL 0.14 million (Rs. 31.58 lakhs).

Thejo Engineering LatinoAmerica Spa (Thejo Chile) is primarily engaged in selling bulk material handling products. The Company was incorporated on 14th November, 2014 and as on 31st March, 2015, it had not yet commenced business operations and had incurred a loss of USD 0.06 million (Rs. 34.53 lakhs).

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

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

CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

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

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

During the Financial Year, on the recommendation of the CSR Committee, the Board of Directors approved expenditure of Rs. 27.01 lakhs on CSR Schemes, more than fulfilling the prescribed target of Rs. 26.94 lakhs being 2% of its average net profits of the last three Financial Years. The Annual Report on the Company's CSR activities is attached as Annexure 2 forming part of the Board's Report.

EXTRACT OF ANNUAL RETURN

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

NUMBER OF MEETINGS OF BOARD

The Board of Directors met five times during the Financial Year 2014-15. Further details are given in the Corporate Governance Report forming part of the Board's Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Your Directors state that:

a) in the preparation of the annual accounts for the year ended 31st March, 2015, the applicable accounting standards have been followed and there are no material departures from the same;

b) the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2015 and of the profit of the Company for the year ended on that date;

c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors have prepared the annual accounts on a 'going concern' basis;

e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

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

AUDITORS' REPORT

The Auditors' Report for the year ended 31st March, 2015 does not contain any qualification.

AUDITORS

M/s. Joseph & Rajaram, Chartered Accountants, Chennai, retire at ensuing Annual General Meeting and are eligible for re-appointment.

SECRETARIAL AUDIT

The Board appointed Mr. G. Porselvam, Practising Company Secretary, to conduct Secretarial Audit for the Financial Year 2014-15. The Secretarial Audit Report of Mr. G. Porselvam for the Financial Year is attached as Annexure 4 to the Board's Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

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

PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

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

COMMITTEES OF THE BOARD

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

Name of the Committee Composition of the Committee

Audit Committee Mr. M.P. Vijay Kumar

Mr. N. Ganga Ram

Mr. A. Satyaseelan

Nomination and Remuneration Mr. N. Ganga Ram

Committee *** Mr. V.K. Srivastava

Mr. M.P. Vijay Kumar

Corporate Social Responsibility Mr. V.K. Srivastava

Committee Mr. K.J. Joseph

Mr. Thomas John

Mr. V.A. George

Shareholders' and Investors' Dr. C.N. Ramchand

Grievance Committee Mr. V.K. Srivastava

Mr. K.J. Joseph

Mr. Thomas John

Name of the Committee Status

Audit Committee Independent Director, Chairman

Independent Director, Member

Independent Director, Member

Nomination and Remuneration Independent Director, Chairman

Committee *** Independent Director, Member

Independent Director, Member

Corporate Social Responsibility Independent Director, Chairman

Committee Non-executive Director, Member

Non-executive Director, Member

Managing Director, Member

Shareholders' and Investors' Independent Director, Chairman

Grievance Committee Independent Director, Member

Non-executive Director, Member

Non-executive Director, Member

*** The Committee has since been re-designated as "Compensation/Nomination & Remuneration Committee." All the recommendations made by the Audit Committee were accepted by the Board of Directors, without any exception.

VIGIL MECHANISM

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

DIRECTORS AND KEY MANAGERIAL PERSONNEL

On the recommendation of the Compensation / Nomination and Remuneration Committee, Mrs. Sujatha Jayarajan was appointed by the Board as Additional Director with effect from 06th March, 2015. As per Section 161 of Companies Act, 2013, Mrs. Sujatha Jayarajan will hold office upto the date of the ensuing Annual General Meeting. The Members may consider Mrs. Sujatha Jayarajan for appointment as Independent Director under Sections 149, 152 read with Schedule IV and all other applicable provisions, if any, of the Companies Act, 2013, for a term upto 31st March, 2020 vide Item 6 of the Notice dated 27th May, 2015 convening the ensuing Annual General Meeting. None of the Company's Directors have any family relationships with Mrs. Sujatha Jayarajan.

On the recommendation of the Compensation / Nomination and Remuneration Committee, Mr. Manoj Joseph was reappointed by the Board as Whole-time Director for a period of five years with effect from 20th June, 2015, subject to the approval of the Members at the ensuing Annual General Meeting vide Item 7 of the Notice dated 27th May, 2015 convening the ensuing Annual General Meeting. None of the Company's Directors have any family relationship with him, save and except that Mr. K.J. Joseph and Mr. Manoj Joseph are related as father and son.

Mr. K.J. Joseph, Chairman, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment.

Mr. Rajesh John, Director - Sales, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment.

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

The Company has received declarations from all the Independent Directors of the Company, confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 and Clause 52 of the SME Listing Agreement.

None of the Independent Directors will retire by rotation at the ensuing Annual General Meeting.

On the recommendation of the Audit Committee, Mr. M.D. Ravikanth was appointed as CFO & Secretary by the Board of Directors at their meeting held on 20th May, 2015.

BOARD EVALUATION

A formal annual evaluation is required to be made by the Board of its own performance and that of its Committees and individual Directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of the Independent Directors is to be done by the Board of Directors, excluding the Director being evaluated.

Accordingly, the performance evaluation was done by the Board of Directors during the year under review. Similarly, the performance of the Non-Independent Directors and of the Board as a whole was evaluated by the Independent Directors at a separate Meeting held by them. The evaluation of all the Directors made was on the basis of the criteria and framework adopted by the Compensation / Nomination and Remuneration Committee.

PERSONNEL

In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said Rules is attached as Annexure 7a to the Board's Report.

Disclosures pertaining to the remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as Annexure 7b to the Board's Report.

CORPORATE GOVERNANCE

Your Company has complied with the requirements of Corporate Governance stipulated under Clause 52 of the SME Listing Agreement entered into with the National Stock Exchange of India Ltd. (NSE). A report on Corporate Governance is attached as Annexure 8 to the Board's Report.

The Statutory Auditors of the Company have examined the requirements of Corporate Governance stipulated under Clause 52 of the SME Listing Agreement, and have certified due compliance with the requirements by the Company. The Certificate of the Auditors is reproduced in the Corporate Governance Report forming part of the Board's Report.

GENERAL

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

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

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

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

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

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

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

ACKNOWLEDGEMENT

The Directors wish to thank the Company's Bankers for their continued support. The Directors also wish to thank the Company's customers and stake-holders for their patronage.

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

For and on behalf of the Board

THOMAS JOHN V.A. GEORGE MANOJ JOSEPH Place: Chennai Vice Chairman Managing Director Director Date : 27th May, 2015 DIN 00435035 DIN 01493737 DIN 00434579


Mar 31, 2014

Dear Members,

The Directors have pleasure in presenting their 28th Annual Report together with Audited Accounts for the year ended 31st March, 2014. The summarized financial results for the year are given below :

Amount Rs in lakhs Year Ended Year Ended

31-03-2014 31-3-2013

Profit before Exceptional Items, Interest, Depreciation and Tax 2,067.52 2,020.66

Less : Exceptional Item 24.74 0.00

Profit before Interest, Depreciation and Tax 2,042.78 2,020.66

Less : Interest 450.22 380.16

Profit before Depreciation and Tax 1,592.56 1,640.50

Less : Depreciation 274.94 202.87

Net Profit before Taxes 1,317.62 1,437.63

Less : Taxation (Including Deferred Tax) 446.57 462.85

Net Profit After Tax 871.05 974.78

Add : Brought forward from previous year 2,712.43 1,935.57

Balance Available for Appropriations 3,583.48 2,910.35

Appropriations

Transfer to General Reserve 87.11 97.49

Proposed Dividend 120.17 85.84

Dividend Distribution Tax 20.42 14.59

Balance Carried over to Balance Sheet 3,355.78 2,712.43

REVIEW OF FINANCIAL PERFORMANCE

The Company''s Sales turnover in the year under review aggregated Rs. 14885.98 lakhs, up by 11.60% over the previous year (Rs.13338.12 lakhs), on which it made a net profit (excluding exceptional item) of Rs.895.79 lakhs as against Rs.974.78 lakhs in 2012-13. Your Company has more or less maintained the profit level in the face of economic uncertainty compared to the last financial year.

DIVIDEND AND ISSUE OF BONUS SHARES

Your Directors are pleased to recommend payment of dividend of 35% i.e. Rs.3.50 per Equity Share of Rs.10 each for the financial year ended 31st March, 2014 (50% in the previous year) with the bonus shares issued in the ratio of 1:1 in September, 2013 being eligible for dividend for the full year. The dividend amount of Rs.120.17 lakhs (Rs.85.84 lakhs in the previous year) together with dividend distribution tax of Rs.20.42 lakhs (Rs.14.59 lakhs in the previous year) will absorb a sum of Rs.140.59 lakhs (Rs.100.43 lakhs in the previous year).

During the year 2013 -14, the Company issued and allotted bonus shares in the ratio of one fully paid equity share for every one fully paid equity share held in the Company as on record date.

SUBSIDIARY COMPANIES

As on date of this Report, the Company has two subsidiaries, namely, Thejo Hatcon Industrial Services Company LLC, Kingdom of Saudi Arabia (Thejo Hatcon) in which the Company has 51% shareholding and Thejo Australia Pty Ltd., Australia (Thejo Australia) in which the Company has 74% shareholding. Both the subsidiaries have obtained all the statutory approvals and have commenced their operations.

As mentioned earlier, Bridgestone Engineered Products of Asia Sdn Bhd (Bridgestone), a wholly owned subsidiary of Bridgestone Corporation, Japan, acquired 26% stake in the share capital of Thejo Australia Pty Ltd. We believe that the arrangement with Bridgestone will contribute to the growth of Thejo Australia Pty Ltd as Bridgestone has a sizeable market share in Australia''s conveyor market and the tie-up will enable Thejo Australia Pty Ltd., to bag product and service contracts including that of splicing materials.

The Audited Consolidated Financial Statements of the Company for the year ended 31st March, 2014 are annexed to its Financial Statements. These Statements have been prepared as per Accounting Standard 21 issued by the Institute of Chartered Accountants of India.

PERFORMANCE OF SUBSIDIARY COMPANIES

Thejo Hatcon Industrial Services Company LLC (Thejo Hatcon) is engaged primarily in rubber lining and related industrial services activities. During the period 01st April, 2013 to 31st March, 2014, Thejo Hatcon achieved a turnover of SAR 24.91 lakhs ('' 379.72 lakhs) with a loss of SAR 2.70 lakhs ('' 33.01 lakhs).

Thejo Australia Pty Ltd. (Thejo Australia) is a servicing Company, primarily engaged in belt splicing, belt jointing and related activities. During the period, 01st April, 2013 to 31st March, 2014, Thejo Australia achieved a turnover of AUD 14.49 lakhs ('' 813.25 lakhs) with a loss of AUD 11.27 lakhs ('' 634.48 lakhs).

INFORMATION AS PER SECTION 217(1) (e) OF THE COMPANIES ACT, 1956

Your Company is doing its best to consciously utilize the energy optimally, avoiding any known wastages.

The Company does not fall under any of the industries listed under Rule 2 of The Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988 and hence, disclosure as per Form A is not applicable.

TECHNOLOGY ABSORPTION

a) Specific areas in which R & D carried out by the Company

- Development of new innovative products

- Evaluation and usage of new raw materials

- Development of methods to achieve uniformity and consistency in product quality and performance by improved process controls.

- Productivity improvement and methods for reduction in energy consumption.

b) Benefits derived as a result of R&D

- Meeting the ever-changing product performance requirements of the market by developing suitable products to cater to these stringent requirements on a continuous basis.

- Improving the field service performance of existing products to surpass the quality of competitive products.

- Evaluating new and innovative raw materials for possible adoption and incorporation into the relevant products.

- Introduction of new methods and systems for improved productivity and reduction in energy consumption.

c) Future plan of action

- Develop new products in the field of seismic protection to buildings, products for construction and infrastructure development.

- Develop environment-friendly materials and eliminate usage of hazardous chemicals.

- Develop applications for the cellulosic nano materials from waste agricultural produce.

- Adoption and usage of solar energy for reduced costs.

- Joint collaborative projects with relevant specialized Universities to carry out specific development projects in Engineering, Metallurgy, Materials and Bonding Systems.

- Utilization of the CSIR Laboratories for collaborative development projects.

- Develop specialty chemicals as a part of the effort for import substitution.

d) Expenditure on R&D

Particulars 2013-14 (Rsin lakhs)

Capital 7.08

Revenue (excluding depreciation) 75.32

Total 82.40

Total R&D expenditure as a % of total turnover 0.55%

FOREIGN EXCHANGE EARNINGS AND OUTGO '' Rs in Lakhs

a) Payments in foreign currency towards Imports Imports at CIF Value 2013-14 2012-13

Raw Materials and Traded goods 602.73 386.46

Capital goods 124.99 286.31

b) Payments in foreign currency towards Expenditure

Expenditure in Foreign currency 2013-14 2012-13

Royalty - 11.82

Commission paid - 15.84

Professional and consultation fees 78.75 29.58

Foreign Tour 17.64 10.53

Advertisement & Sales promotion/ Seminar - 13.02

c) Earnings in foreign currency on Accrual basis Earnings in foreign currency 2013-14 2012-13

Exports - Products 1149.18 1592.74

Exports - Services 106.95 52.12

Sale of Fixed Asset 24.78 -

d) Net Gain or Loss on Foreign Currency Translation

Description 2013-14 2012-13

Profit on Foreign Currency Translation 52.13 86.62

DIRECTORS

Mr. V.K. Srivastava, Non-executive Independent Director, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. Mr. Srivastava may be considered by the Members for reappointment as Independent Director under Sections 149, 152 read with Schedule IV and all other applicable provisions, if any, of the Companies Act, 2013, for a term upto 31st March, 2019. A Resolution for his election as Independent Director of the Company is included in the Notice dated 2nd July, 2014 convening the Annual General Meeting.

Mr. A. Satyaseelan, Non-executive Independent Director, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. Mr. Satyaseelan may be considered by the Members for reappointment as Independent Director under Sections 149, 152 read with Schedule IV and all other applicable provisions, if any, of the Companies Act, 2013, for a term upto 31st March, 2019. A Resolution for his election as Independent Director of the Company is included in the Notice dated 2nd July, 2014 convening the Annual General Meeting.

Mr. M.P. Vijay Kumar, Non-executive Independent Director, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. Mr. Vijay Kumar may be considered by the Members for reappointment as Independent Director under Sections 149, 152 read with Schedule IV and all other applicable provisions, if any, of the Companies Act, 2013, for a term upto 31st March, 2019. A Resolution for his election as Independent Director of the Company is included in the Notice dated 2nd July, 2014 convening the Annual General Meeting.

Dr. C.N. Ramchand, Non-executive Independent Director, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. Dr. Ramchand may be considered by the Members for reappointment as Independent Director under Sections 149, 152 read with Schedule IV and all other applicable provisions, if any, of the Companies Act, 2013, for a term upto 31st March, 2019. A Resolution for his election as Independent Director of the Company is included in the Notice dated 2nd July, 2014 convening the Annual General Meeting.

Mr. N. Ganga Ram, Non-executive Independent Director was appointed as Director of the Company subject to retirement by rotation at the 27th Annual General Meeting. Mr. Ganga Ram may be considered by the Members for appointment as Independent Director under Sections 149, 152 read with Schedule IV and all other applicable provisions, if any, of the Companies Act, 2013, for a term upto 31st March, 2019. A Resolution for his election as Independent Director of the Company is included in the Notice dated 2nd July, 2014 convening the Annual General Meeting.

The Company has received declarations from all the above mentioned Independent Directors of the Company, confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 and Clause 52 of the SME Listing Agreement.

A brief resume of these Directors and related information are given in the Notice convening the Annual General Meeting. The Directors recommend their appointment / re-appointment as Directors of the Company.

CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

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

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

The Committee has since formulated the CSR policy of the Company.

DIRECTORS'' RESPONSIBILITY STATEMENT

The Directors confirm —

i. that in the preparation of the accounts for the year ended 31st March, 2014, the applicable Accounting Standards have been followed and there has been no material departure;

ii. that the Directors have selected such accounting policies (as mentioned in Significant Accounting Policies under Note 2 of the Annual Accounts) 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 31st March, 2014 and profit of the Company for the year ended on that date;

iii. that 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. that the annual accounts for the year ended 31st March, 2014, have been prepared on a going concern basis.

PERSONNEL

In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees covered therein are to be set out in the annexure to the Directors'' Report. Having regard to the provisions of Section 219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the Members of the Company and others entitled thereto and if interested in obtaining the information, they may write to the Company Secretary at the Registered Office of the Company.

AUDITORS'' REPORT

The Auditors'' Report for the year ended 31st March, 2014 does not contain any qualification.

AUDITORS

M/s. Joseph & Rajaram, Chartered Accountants, Chennai, retire at the ensuing Annual General Meeting and are eligible for re-appointment.

CORPORATE GOVERNANCE

Your Company has complied with the requirements of Corporate Governance stipulated under Clause 52 of the SME Listing Agreement entered into with the National Stock Exchange of India Ltd. (NSE). A report on Corporate Governance forms part of this Report.

The Statutory Auditors of the Company have examined the requirements of Corporate Governance stipulated under Clause 52 of the SME Listing Agreement, and have certified the compliance. The certificate is reproduced in the Corporate Governance Report.

ACKNOWLEDGEMENT

The Directors wish to thank the Company''s bankers for their continued support. The Directors also wish to thank the Company''s customers and stake-holders for their patronage.

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

For and on behalf of the Board Place: Chennai V.A. GEORGE THOMAS JOHN K.J. JOSEPH Date : 2nd July, 2014 Managing Director Vice Chairman Chairman


Mar 31, 2013

The Directors have pleasure in presenting their 27th Annual Report together with Audited Accounts for the year ended 31st March, 2013. The summarized financial results for the year are given below:

Amount Rs. in lakhs

Year Ended Year Ended 31-03-2013 31-03-2012

Profit before Exceptional Items, Interest, Depreciation and Tax 2,020.66 1,529.81

Add: Exceptional Item 0.00 284.00

Profit before Interest, Depreciation and Tax 2,020.66 1,813.81

Less: Interest 380.16 367.07

Profit before Depreciation and Tax 1,640.50 1,446.74

Less: Depreciation 202.87 161.48

Net Profit before Taxes 1,437.63 1,285.26

Less: Taxation (Including Deferred Tax) 462.85 384.65

Net Profit After Tax 974.78 900.61

Add: Brought forward from previous year 1,935.57 1,180.27

Balance Available for Appropriations 2,910.35 2,080.88

Appropriations

Transfer to General Reserve 97.49 90.23

Proposed Dividend 85.84 47.39

Dividend Distribution Tax 14.59 7.68

Balance Carried over to Balance Sheet 2,712.43 1,935.57

REVIEW OF FINANCIAL PERFORMANCE

The Company''s Sales turnover in the year under review aggregated Rs. 13,338.12 lakhs, constituting a growth of 15.62% over the previous year (Rs. 11,536.44 lakhs), on which it made a net profit (excluding exceptional item) of Rs. 974.78 lakhs, up by 45% (over Rs. 671.83 lakhs in 2011-12).

DIVIDEND

The Directors are pleased to recommend payment of dividend of 50% i.e. Rs. 5 per Equity Share of Rs. 10 each for the financial year ended 31st March, 2013 (40% in the previous year), subject to the approval of the Members at the ensuing Annual General Meeting. The dividend amount of Rs. 85.84 lakhs together with dividend distribution tax of Rs. 14.59 lakhs will absorb a sum of Rs. 100.43 lakhs.



REPORT ON MANAGEMENT DISCUSSION AND ANALYSIS

Industry Structure and developments

Global Rubber production increased by 1.03 % in 2012 against 6.62 % in 2011. The total rubber production was 26.477 million tonnes in 2012 compared to 26.135 million tonnes in 2011. Synthetic rubber production at 15.094 million tonnnes in 2012 marginally dipped by 0.07% compared to 15.104 million tones in 2011. Natural Rubber production increased by 3.19% in 2012 against 5.78 % in 2011.

India''s GDP growth rate which in 2011-12 was 6.50% declined in 2012-13 to 5%, much lower than projected. The rate of inflation also continued to be high in the year 2012-13. The manufacturing sector grew by a mere 1% in 2012- 13 as against 4.4% in 2011-12.

India''s Natural Rubber production increased marginally by 0.9% to 0.91 million tonnes in 2012-13 from 0.90 million tonnes in 2011-12. Consumption edged up slightly (0.8%) to 0.97 million tonnes in 2012-13 as against 0.96 million tonnes in the previous year. The weather conditions worsened the situation, damaging rubber trees in many parts of Kerala, which accounts for around 92 per cent of the country''s production.

The uncertainty witnessed across the regions in the year 2012-13 and the slow recovery are likely to continue during the year 2013-14 and is expected to impact a number of sectors.

Company Performance and Key developments

As the Members are aware, the Company is engaged in manufacturing, marketing and servicing activities, all under one roof. The services business caters to Belt Splicing, Pulley Lagging, Belt Conveyor Maintenance, Installation of Belt Conveyors, Belt Reconditioning, Rubber Lining etc., and products business to design, development, manufacture and supply of Rubber and Polyurethane based engineered products for belt cleaning, spillage control, flow enhancement, impact & abrasion protection and screening applications. In the Financial Year 2012-13, products and services contributed 55 % and 45 %, respectively to the Company''s total income.

Listing of Equity Shares in SME Platform of National Stock Exchange

During the year 2012-13, the Company raised Rs. 21 Crore by way of fresh issue of Equity Shares, of which Rs. 1.99 Crore was raised under Pre- IPO Placement to SIDBI Trustee Company Limited A/c India Opportunities Fund and the balance amount of Rs. 19 Crore under Initial Public Offer (IPO). The Equity Shares issued under IPO was oversubscribed by 1.53 times, thanks to the robust response from retail investors.

On 18th September, 2012, Union Finance Minister, Mr. P. Chidambaram launched ''EMERGE'', a dedicated new NSE platform and the Company''s Equity Shares got listed on the platform with his ceremonial ringing of the Bell at the special event organized in New Delhi.

Status of utilization of Proceeds raised from IPO:

The funds raised from IPO are to be utilized for the following purposes (apart from meeting General corporate needs and IPO expenses):

Setting up of in-house R&D Center

Setting up of Polyurethane Unit

Investment in Wholly-Owned Subsidiary in Australia

Setting up of Lining Unit

Expansion of existing manufacturing Unit

The current status of uitilization is as follows:

Setting up of in-house R&D Center:

R&D Center has been completed and has commenced its activities. The Company has applied for approval from DSIR for the Center. As indicated in the Red Herring Prospectus ("RHP"), it has been funded from IPO proceeds to the extent of Rs. 283.06 lakhs.

Setting up of Polyurethane Unit:

Polyurethane Unit has been set up and commissioned. The total project cost is Rs. 68.28 lakhs and the Company has utilized Rs. 60.71 lakhs from the IPO proceeds as on 30th June, 2013. One machine has been purchased on deferred payment scheme in terms of which about Rs. 5 lakhs is to be paid.

Investment in Wholly-Owned Subsidiary in Australia:

The subsidiary has been incorporated and has commenced operations. As on 31st March, 2013, the Company has invested Rs. 802.54 lakhs with Rs. 642 lakhs from IPO proceeds and the balance from internal accruals.

Setting up of Lining Unit:

An independent Lining unit is being set up on leased land. The project is funded from the IPO proceeds to the extent of Rs. 169.02 lakhs. The project implementation is expected to be completed by the middle of August 2013. As on 30th June, 2013, the Company has utilized Rs. 149.93 lakhs from the IPO proceeds on the Unit.

Expansion of existing manufacturing Unit:

The Company has selected the machineries to be installed to balance the capacity and enhance the manufacturing operations. Orders have been placed for these equipments and advance has been paid. Work is also in progress to enhance the area of the factory, finished goods store, office space etc. This is to be funded from the IPO proceeds to the extent of Rs. 686.61 lakhs. As on 30th June, 2013, the Company has utilized Rs. 142.72 lakhs from the IPO proceeds for the acquisition of equipments.

Thus, the Company has utilized Rs. 1530.10 lakhs out of the IPO proceeds of Rs. 1900.66 lakhs plus pre-IPO placement of Rs. 199.99 lakhs, as summarized in the table below:

Amount Rs. in lakhs

Projects As per RHP Utilized upto Balance as on 30-6-2013 30-6-2013

PU Unit 68.28 60.71 7.57

Expansion of Unit I 686.61 142.72 543.89

R&D Center 283.05 283.05 0.00

Lining Plant 169.02 149.93 19.09

Thejo Australia Pty Ltd 642.00 642.00 0.00

General Corporate Purposes 71.14 71.14 0.00

IPO Expenses* 180.55 180.55 0.00

Total 2100.65 1530.10 570.55

* As per RHP.

The unutilized balance of Rs. 570.55 lakhs has been gainfully invested.

Research and Development:

During the year 2012-13, the Company has set up a separate Research and Development Center, independent of the manufacturing unit, at Ponneri, near Chennai. The R&D Center will focus on developing products that meet the needs of the customers. Prior to the setting up of R&D Center, the Company had been carrying out Research & Development activities within the manufacturing unit. The sustained efforts of Research and Development team helped the Company to develop diverse product ranges under varied conditions such as rubberizing of T 72 battle tank tyres, mill liners, high tension belt spilicing compounds that can withstand some of the hardest working conditions in leading mines. The Company has formed an Expert Advisory Committee for R&D headed by Dr. P.M. Bhargava, former Member of National Knowledge Commission and coordinated by Mr. Zachariah George, former Head of R&D at MRF, who is currently heading our R&D initiatives. The Company has applied for the recognition of its R&D Center by the Department of Scientific & Industrial Research, Ministry of Science & Technology, Government of India.

SUBSIDIARY COMPANIES

As on date of this Report, the Company has two subsidiaries, namely, Thejo Hatcon Industrial Services Company LLC, Kingdom of Saudi Arabia and Thejo Australia Pty Ltd, Australia. Thejo Hatcon in which the Company has 51% shareholding, has obtained all the statutory approvals and has commenced its operations. Thejo Australia is a Wholly-Owned Subsidiary in which the Company has invested Rs. 8.02 Crore as at 31st March, 2013 - Rs. 6.42 Crore from the funds raised under IPO and the balance of Rs. 1. 6 Crore from internal accruals. Thejo Australia has obtained all the statutory approvals and has commenced its operations.

The Annual Report of the Company includes the Audited Consolidated Financial Statements of the Company for the year ended 31st March, 2013. The same has been prepared as per Accounting Standard 21 issued by the Institute of Chartered Accountants of India.

In terms of the general exemption granted by the Central Government under Section 212(8) of the Companies Act, 1956 vide General Circular No. 2/2011 in File No. 51/12/2007-CL-III dated 8th February, 2011, the Company has complied with the conditions stipulated therein and has not attached copies of Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies to the Balance Sheet of the Company. The Company will make available these documents and other related information upon request by any Member of the Company. If any Member wishes to inspect the same, it will be available at the Registered Office of the Company during the business hours of any working day of the Company.

PERFORMANCE OF SUBSIDIARY COMPANIES

Thejo Hatcon Industrial Services Company LLC (Thejo Hatcon) is engaged primarily in rubber lining and related industrial services activities. During the period January 2012 to March 2013, Thejo Hatcon achieved a turnover of SAR 21.50 lakhs (Rs. 307.70 lakhs) with a profit of SAR 0.25 lakh (Rs. 3.54 lakhs).

Thejo Australia Pty Limited is a servicing Company, primarily engaged in belt splicing, belt jointing and related activities. Thejo Australia was incorporated in February 2012. During the period from the date of incorporation upto 31st March, 2013, Thejo Australia achieved a turnover of AUD 3.76 lakhs (Rs. 205.46 lakhs) with a loss of AUD 3.85 lakhs (Rs. 205.32 lakhs).

INFORMATION AS PER SECTION 217(1) (e) OF THE COMPANIES ACT, 1956

Your Company is making every effort to utilize energy optimally, avoiding any known wastages. The Company does not fall under any of the industries listed under Rule 2 of The Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988 and hence, disclosure as per Form A is not applicable.

There is no technological absorption by the Company during the year under review.

DIRECTORS

Mr. V.A. George was appointed by the Board as Additional Director with effect from 15th July, 2013. As per Section 260 of Companies Act, 1956, Mr. George will hold office upto the date of the ensuing Annual General Meeting (AGM). A Resolution for his election as Director of the Company is included in the Notice dated 15thJuly, 2013 convening the Annual General Meeting.

Mr. George has been appointed by the Board as Managing Director for a period of five years with effect from 15th July, 2013 on the terms recommended by the Remuneration Committee, subject to the approval of the Members. Accordingly, a Resolution for obtaining such approval is included in the Notice dated 15th July, 2013, convening the AGM.

Mr. Thomas John, Vice Chairman, retires by rotation at the ensuing AGM and being eligible, offers himself for reappointment.

Mr. Manoj Joseph, Director Marketing, retires by rotation at the ensuing AGM and being eligible, offers himself for reappointment.

Mr. N. Ganga Ram, Non-Executive Independent Director, retires by rotation at the ensuing AGM and being eligible, offers himself for reappointment.

A brief resume of these Directors and related information are given in the notice convening the AGM. The Directors recommend their appointment / re-appointment as Directors of the Company.

DIRECTORS'' RESPONSIBILITY STATEMENT

The Directors confirm —

i. that in the preparation of the accounts for the year ended 31st March, 2013, the applicable Accounting Standards have been followed and there has been no material departure;

ii. that the Directors have selected such accounting policies (as mentioned in Significant Accounting Policies under Note 2 of the Annual Accounts) 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 31st March, 2013 and profit of the Company for the year ended on that date;

iii. that 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. that the annual accounts for the year ended 31st March, 2013, have been prepared on a going concern basis

PERSONNEL

In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees covered therein are to be set out in the annexure to the Directors'' Report. Having regard to the provisions of Section 219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the Members of the Company and others entitled thereto and if interested in obtaining the information, they may write to the Company Secretary at the Registered Office of the Company.

AUDITORS'' REPORT

The Auditors'' Report for the year ended 31st March, 2013 does not contain any qualification.

AUDITORS

M/s. Joseph & Rajaram, Chartered Accountants, Chennai, retire at the ensuing Annual General Meeting and are eligible for re-appointment.

COST AUDITORS

The Ministry of Corporate Affairs vide its order No. 52/26/CAB-2010 dated 6th November, 2012 has made it mandatory for companies which are listed on stock exchange or with turnover of more than Rs. 100 crores during the previous financial year and manufacturing any of the products mentioned in the Order to get their cost accounting records audited by a Cost Accountant. As the Order covers engineering machinery (including electrical and electronic products), the Company is required to get its cost accounting records audited by a Cost Accountant or firm of Cost Accountants from the Financial Year commencing on or after 1st January, 2013.

Based on the recommendation of the Audit Committee, the Board at its meeting held on 10th May, 2013 has approved the appointment of M/s. S. Gopalan and Associates as the Cost Auditor of the Company for the Financial Year 2013-14.

CORPORATE GOVERNANCE:

Your Company has complied with the requirements of Corporate Governance stipulated under Clause 52 of the SME Listing Agreement entered into with the National Stock Exchange of India Ltd. (NSE). A report on Corporate Governance forms part of this Report.

The Statutory Auditors of the Company have examined the requirements of Corporate Governance with reference to Clause 52 of the SME listing agreement, and have certified the compliance. The certificate is reproduced in the Report on Corporate Governance.

ACKNOWLEDGEMENT

The Directors wish to thank the Company''s bankers for their continued support. The Directors also wish to thank the Company''s customers and stake-holders for their patronage.

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

For and on behalf of the Board

Place : Chennai V.A. GEORGE THOMAS JOHN K.J. JOSEPH

Date : 15th July, 2013 Managing Director Vice Chairman Chairman

 
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