Mar 31, 2016
The Directors are pleased to present the 41st Annual Report, with the statement of the audited accounts for the financial year ended 31st March, 2016.
1. Financial Performance
The standalone and consolidated audited financial results for the year ended 31st March, 2016 are as follows:
[Rupees in lacs]
Particulars |
Standalone |
Consolidated |
||
2015-16 |
2014-15 |
2015-16 |
2014-15 |
|
Sales and Other Income |
4,173 |
6,937 |
9,967 |
12,658 |
Earnings before interest, Depreciation and Tax (EBIDTA) |
(223) |
(226) |
704 |
530 |
Depreciation |
731 |
734 |
1,942 |
2,051 |
Interest |
2,732 |
2,599 |
2,799 |
2,645 |
Profit / (Loss) before tax & Exceptional Items |
(3,686) |
(3,559) |
(4,037) |
(4,166) |
Exceptional Items |
801 |
(601) |
(802) |
(601) |
Profit / (Loss) before Tax |
(4,487) |
(4,160) |
(4,839) |
(4,766) |
Provision for Taxation |
- |
430 |
- |
430 |
Net Profit / (Loss) |
(4,487) |
(3,730) |
(4,839) |
(4,336) |
Minority Interest |
- |
- |
- |
288 |
Net Profit / (Loss) after taxes, minority interest |
(4,487) |
(3,730) |
(4,839) |
(4,049) |
Performance review amidst challenging times
The complex nature of the legacy issues of the power sector is daunting the economy in more ways than one. Recasting the mammoth Rs.4.3 trillion of debt is huge task for the Government. Different states have been suffering from a combination of problems, including low tariffs, high technical losses and high percentage of subsidized consumers and so on. All this combined factors have impacted fresh investments in the T&D sector.
Most of the State Electricity Boards and the Discoms are struggling with insurmountable financial losses aggregating close to US$ 60 billion. They are in a position whereby they are unable to purchase power or pay Gencos and equipment suppliers. Such bottlenecks have deeply impacted T&D sector. With the launch of the Ujwal Discom Assurance Yojana (UDAY) scheme, the Government is trying to address this issue.
Your Company has been facing losses for last three years which is mainly attributable due to macro economic factors as stated hereinabove apart from a combination of factors namely, delay in commissioning of projects by some State Electricity Boards due to which reason the working capital cycle got affected. These factors have adversely affected the profitability of the Company. In spite of the adversities, the Company is still an accredited contractor to major State Electricity Boards and will no sooner or later win over their confidence.
With the ongoing dialogue with the bankers and investors, the imbroglio will end soon and the Company will come out of the impasse to win orders from domestic and overseas customers. The Company is leaving no stone unturned to reduce its losses in the immediate financial year and in the subsequent year thereafter, should turnaround. A detailed note on funding is given elsewhere in this Report.
Future beholds promises
There is plenty of optimism in the current financial year with internal and external factors which would contribute towards the turnaround. The key drivers of the growth from an internal perspective would be expanded product lines in Relays, in Primary & Secondary Switchgear and Automation. From a macro economic perspective, the thrust given by the present Government in debottlenecking stalled projects, increased investments in renewable energy would fuel growth.
As far as external factors are concerned, the Companyâs inherent strength viz., its overseas operations especially Middle East and African markets looks promising. In this direction, the Company has entered into a Partnership with Saudi Transformer Company, the largest transformer manufacturer in the Middle East to assemble ERL range of secondary Switchgears locally. In addition to this, ERLPhase Products has been approved by SEC, Saudi Arabia during July, 2016. With this, ERLPhase products are approved in majority of Middle East Markets.
2. Dividend
Your Directors do not recommend payment of dividend for the year under review on equity shares in view of the loss incurred.
3. Management Discussions and Analysis:
a. Industry Overview and Developments
The year 2015-16 continued to be quite difficult like the preceding three to four years due to low investments, slow execution of projects and poor cash flow. The opportunity was primarily driven by Central and State Utilities, while Power Generation, Industries and Infrastructure sectors continue to be affected. Owing to the economic slowdown in the past years, the ratio of bad loans or NPAs at the Indian banks has increased exponentially forcing the RBI to tighten the liquidity and funding norms of banks limiting their exposure to industry and infrastructure projects. Thus, the overall investment climate, in power generation, industry and infrastructure sectors remains cautious and suppressed. Consequently, market witnessed a phase of consolidation and asset sale by struggling private developers in order to avoid Non Performing assets (NPAs) with Banks & Financial Institutions.
Most of the State T&D network infrastructure is in poor condition leading to congestion of power flow in the States due to under investment in the T&D network over the last decade. Only few States are investing in the State T&D network to unblock T&D network congestion to improve power flow. Many State electricity boards / Discoms, continue to struggle with huge financial losses significantly affecting the entire value chain of the Power and T&D Sectors.
All these market uncertainties impacted the sales plan and cash flow of your Company. However, on the positive side, the present govt. has undertaken significant measures to energise the power sector. One of the significant initiatives of Central Government has been the launch of UDAY Scheme & amendments in National Tariff Policy (NTP) which will aid in improving operational efficiency, reducing the cost of power purchase and enforcing fiscal discipline on various state Discoms.
Thus the year 2016-17 is expected to improve the market conditions based on the implementation of the reforms process.
b. Opportunities and Threats
India is the worldâs second fast growing major economy @ 7.56% and is keen to achieve a growth rate up to 9%. In the next two decades, current size of economy of USD five trillion is expected to grow four to five times as per various studies and estimates. Being the second most populous country in the world, the hunger for power is definitely going to be more in coming five years for India. All the factors indicate potential for high growth of power demand consequently high market demand for T&D products & solutions. Power generation and T&D sectors are the key pillars to achieve this accelerated GDP growth. Indiaâs per capita electricity consumption is at a very low level of 1048 kwh. Ministry of Power (MoP) is keen to double the consumption level over the next 5 to 6 years. This would require strong investment growth in the Power and T&D domains.
The Central Government of India has initiated several reforms to unclog the power sector bottlenecks and facilitate investments in the power and T&D sectors. New initiatives like Ujwal Discom Assurance Yojana (UDAY) scheme for Discoms, ramp up in Solar power generation, Integrated Power Distribution Scheme (IPDS), Deen Dayal Upadhaya Gram Jyoti Yojna (DDUGJY), Power for All (PFA) , Power System Development Fund(PSDF) for strengthening of transmission and sub-transmission network are moves in the right direction and expected to deliver opportunities for equipment manufacturers.
Further, significant attempts are being made by the Govt. of India to improve the efficiency of power consumption through National Mission on Energy Efficiency (PAT, DELP and SLNP scheme) and modernize the distribution grid through the Smart Cities Mission, the National Mission on Electric Mobility and the National Smart Grid Mission (NSGM). The concept of Smart Cities and the first list of chosen 20 smart cities will see augmentation of the energy infrastructure and automation of Grid in these 20 cities. Further 40 cities are expected to be selected in Phase II of the Smart city program. Smart city ecosystem will demand the latest grid efficiency, protection & automation as well as introduction of new technologies to deal with the challenges of alternative energy grid integration to ensure the efficient, sustainable and reliable dispatch ability of clean power.
Power Grid and various state Discoms are also planning to introduce new technologies such as Wide Area monitoring systems (WAMS), Energy Storage and Renewable control and asset management solutions in the national network. Given our robust & advanced product line, eventually this will benefit ERL in the form of upcoming future business opportunities.
Developers of Power Plants have been facing numerous constraints like coal/gas allocation, environmental clearance, land acquisition, financing and funds tie-ups etc, for the last 4 years. This has resulted in only very few new projects coming up and the demand for T&D products considerably reduced.
The declined growth of the core industries has remained a drag on industrial production. Eight core industries consisting 38% in Index of Industrial production have decelerated further after registering only 3.59%, the lowest in the last five years, due to a decline in crude oil, natural gas production and steel.
c. Segment-wise or Product-wise performance
Given the dynamic market shifts in current power sector eg. capacity addition in alternative power/energy sources, power deficit vs power availability, energy-efficient programmes like NEEAPP & NEEFP implementation of discom beneficial/revival initiatives like NSGM, UDAY, DDUGJY PFA, DEEP e-bidding etc., ERL is totally dedicated towards developing customer-oriented power solutions providing substantial growth and extending the foothold it has in the power sector. ERLâS R&D team are strongly focused at improving the performance and efficiency of the existing products as well as aimed at developing new products using state-of-the-art technologies meeting the challenges in day-to-dayâs activities.
d. Outlook
ERL has significant presence in the field of Power Protection & Automation in India and abroad with a wide range of products and solutions. Industrial power demand is also expected to pick up with signs of revival visible in the economic growth rate and index of industrial production. As per business point of view, sustained & productive improvement will be seen in this financial year.
To maintain and enhance its presence in the T&D segment, ERL has taken some concrete steps for improving the performance parameters of existing products.
e. Risks and Concerns
ERL has in place a Board approved Risk Management Policy, which provides over all frame work for Risk Management in the company.
Some of the key risks the company faces:
- Increasing competition
- Delayed delivery of products leading to LDs, penalties and customer dis-satisfaction
- Rising debtors may lead to working capital pressure
Company has competitive manufacturing facilities. We are always upgrading our technologies and product mix in accordance with market requirements, which will help us to reduce our burdens at large extent.
f. Internal Control Systems and their adequacy
The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit (IA) function is defined in the Internal Audit Charter. To maintain its objectivity and independence, the Internal Audit function reports to the Audit Committee.
The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company and its subsidiaries. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.
The Company has in place adequate internal financial controls with reference to financial statements and other matters.
g. Discussion on financial performance with respect to operational performance
On a standalone basis, the Company achieved revenue from operations of Rs.3,503.61 Lacs and EBIT of Rs.(954.21 Lacs) as against Rs.6,241.42 Lacs and Rs.(959.17 Lacs) respectively in the previous year. Net loss for the year is Rs.4,487.38 Lacs as compared to net loss of Rs.3,729.33 Lacs in the previous year. The increase in loss during the year compared to previous year is primarily due to slow collection from the projects and the Government sector undertakings, the working capital cycle got affected due to the lack of working capital, the existing orders got backlog and delayed in executions. Hence the company turnover not achieved the expected breakeven to absorb the admin and other overheads.
On consolidated basis, the Group achieved revenue from operations of Rs.9,288.37 lacs and EBIT of Rs.1239.91 lakhs as against Rs.11,793.10 lakhs and Rs.1,520.41 lakhs respectively in the previous year. Net loss for the year is Rs.4,839.22 lakhs as compared to loss of Rs.4,048.66 Lacs in the previous year.
h. Material developments in Human Resources / Industrial Relations front, including number of people employed
There is no increase in number of people except replacement of any resignation/ retirements. During the year no strikes or lock-outs and the industrial relations is cordial. Due to cost reduction, we have reduced the manpower cost during the current year.
4. Human Resource Development
During the year, employee relations at all the Units remained cordial. This has helped your Company to build robust and motivated workforce inspite of adversities. The Company is continuously striving to improve employees skill sets through adequate training and development programs.
5. Material changes and commitments affecting the financial position of the Company which have occurred between 31st March, 2016 and 17th August, 2016 (date of the Report)
There were no material changes and commitments affecting the financial position of the Company between the end of financial year (31st March, 2016) and the date of the Report (17th August, 2016).
6. Internal Control Systems and their Adequacy
The Company has an Internal Control Framework which is commensurate with the size, scale and complexity of its operations. This framework ensures adequate safeguards and processes to address the evolving business requirements. Key controls have been identified along with risks and mitigation processes covering major areas. The details in respect of internal financial control and their adequacy are included in the Management Discussion & Analysis, which forms part of this report.
The Company is in the process of implementing the new financial controls in terms of Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 and is in the process of engaging an external agency to undertake this exercise.
7. Subsidiary Companies and Consolidated Financial Statements
The Company has 7 subsidiaries, which includes six step-down subsidiaries as on 31st March, 2016. There are no associate companies within the meaning of Section 2(6) of the Companies Act, 2013 (âActâ). There has been no material change in the nature of the business of the subsidiaries.
Pursuant to Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, the statement containing salient features of the financial statements of the Companyâs Subsidiaries, (in Form AOC-1) is attached to the financial statements as Annexure-D.
Pursuant to the provisions of section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the Company.
8. Deposits from public
The Company did not invite or accept any fixed deposit pursuant to provisions of Section 76 of the Companies Act, 2013. During the year no amount either on interest or principal, remained outstanding as on the date of the Balance Sheet.
9. Corporate Governance Report
As has been the ethos of the Company, it strives to maintain high standards of Corporate Governance practices. Pursuant to regulation 34 (3) read with Schedule V of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Reports on Management Discussion and Analysis and on Corporate Governance have been included elsewhere in this Report as separate sections. A certificate from Statutory Auditors regarding compliance of conditions of Corporate Governance as stipulated in regulation 34 (3) read with Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 has also been included in the Annual Report.
10. Auditors
M/s. Brahmayya & Co., Chartered Accountants and M/s R Subramanian & Co., Chartered Accountants, Joint Statutory Auditors of the Company, retire at the forth coming Annual General Meeting and are eligible for re-appointment.
The Company has received confirmation from M/s. Brahmayya & Co., and M/s R Subramanian & Co regarding their consent and eligibility under Sections 139 and 141 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 for appointment as the joint auditors of the Company.
The Audit Committee and the Board of Directors have recommended the re-appointment of M/s. Brahmayya & Co. and M/s R Subramanian & Co, Chartered Accountants as joint auditors for the year 2016-17. The necessary resolution is being placed before the shareholders for approval.
11. Secretarial Audit
Pursuant to provisions of Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, your Company engaged the services of Mr. S. Viswanathan, Company Secretary in Practice, Bangalore to conduct the Secretarial Audit of the Company for the financial year ended 31st March, 2016. The Secretarial Audit Report (in Form MR-3) is attached as Annexure - C to this Report.
12. Management reply to the Statutory Auditorâs & Secretarial Auditorâs Report
The explanations and comments by the Board on qualifications made by Statutory Auditors is attached as Annexure - G to this Report.
13. Extract of Annual Return
An extract of Annual Return in Form MGT-9 as on 31st March, 2016 is attached as Annexure-F to this Report.
14. Directors and Key Managerial Personnel
In compliance with Section 149 of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors of the Company appointed Ms. Sweta Mandora Prajapati as Additional Director and Woman Director of the Company in the capacity of âNon-Executive Independent Directorâ effective from 22nd January, 2016. In accordance with Section 161 of the Companies Act, 2013, she will hold office of Director up to date of ensuing Annual General Meeting. The Company has received requisite notice in writing from a member proposing her candidature for office of Director.
The resolution seeking approval of the Members for the appointment of Ms. Sweta Mandora Prajapati for a term of 3 years, have been incorporated in the notice of the forthcoming Annual General Meeting of the Company.
The brief resume and other details relating to the Directors who are proposed to be appointed / re-appointed, as required to be disclosed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, forms part of the Corporate Governance Report.
The terms and conditions of appointment of independent directors are as per Schedule IV of the Act. They have submitted a declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Act and there has been no change in the circumstances which may affect their status as independent director during the year. Mr Hari Eswaran, Director retires by rotation and being eligible and has offered himself for re-appointment. A brief background of Mr Hari Eswaran, Director is given in the Corporate Governance Report.
During the year under review,
(1) Mr P Chandrasekaran, CFO has resigned the company and in his place, Mr Raj H Eswaran, Managing Director has been appointed as CFO w.e.f. 3rd June, 2016.
(2) Mr. Praveen Hegde, Company Secretary has resigned and in his place Mr. Sudhir Anand has joined as Head - Legal & Company Secretary cum Compliance Officer.
Declaration by Independent Directors
All the Independent Directors of your Company have made declaration to the Company that they meet all the criteria of independence laid down under section 149(6) of Companies Act, 2013 and regulation 16(1) (b) of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Familiarization Programme for Independent Directors
Your Company has during the year under review has taken steps to apprise the Independent Directors on macro-economic environment, market scenario, regulatory updates, business operations, operations, financial statements, update on statutory and legal compliances for Board members, etc.
15. Policy on Directorsâ appointment and remuneration and other details
The Companyâs policy on Directorsâ appointment and remuneration and other matters provided in Section 178(3) of the Act has been disclosed in the corporate governance report, which forms part of the Directorsâ Report.
A statement containing the details of the Remuneration of Key Management Personnel as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in the Corporate Governance report, which forms part of the Directorsâ Report.
16. Number of Meetings of the Board
Four meetings of the board were held during the year. For details of the meetings of the board, please refer to the corporate governance report, which forms part of this report.
17. Board evaluation
The Board of directors has carried out an annual evaluation of its own performance, Board committees and individual directors pursuant to the provisions of the Act and the corporate governance requirements as prescribed by SEBI (Listing Obligations and Disclosure Requirements) LODR Regulations, 2015 under Regulation No.17(10).
The performance of the Board was evaluated by the Board after seeking inputs from all the directors on the basis of the criteria such as the Board composition and structure, effectiveness of board processes, information and functioning, etc.
The performance of the committees was evaluated by the Board after seeking inputs from the committee members on the basis of the criteria such as the composition of committees, effectiveness of committee meetings, etc.
The Board and the Nomination and Remuneration Committee (âNRCâ) reviewed the performance of the individual directors on the basis of the criteria such as the contribution of the individual director to the Board and committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc.
In addition, the Chairman was also evaluated on the key aspects of his role. In a separate meeting of independent Directors, performance of non-independent directors, performance of the board as a whole and performance of the Chairman was evaluated, taking into account the views of executive and non-executive directors.
18. Directorsâ Responsibility Statement
As required under Section 134(5) of the Companies Act, 2013, the Directors of the Company hereby state and confirm that:
(i) in the preparation of Annual Accounts for the year, applicable Accounting Standards have been followed along with proper explanations relating to material departures;
(ii) the Directors have 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 as at the end of the financial year and of the profit and loss of the Company for the year under review;
(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and
(iv) the Directors have prepared the Annual Accounts on a going concern basis.
(v) That proper internal financial control was followed by the Company and that such internal financial control are adequate and were operating effectively
(vi) 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
19. Audit committee
The details pertaining to composition of audit committee are included in the Corporate Governance Report, which forms part of this report.
20. Particulars of Loans, Guarantees and Investments
The particulars of Loans, Guarantees and Investments have been disclosed in the financial statements.
21. Particulars of Employees
There are no employees whose remuneration exceeds the limits specified under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules.
22. Vigil Mechanism / Whistle Blower Policy
Pursuant to Section 177(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 22 of SEBI LODR Regulations, 2015, the Board of Directors had approved the Policy on Vigil Mechanism / Whistle Blower and the same was hosted on the website of the Company. This Policy inter-alia provides a direct access to the Chairman of the Audit Committee. Your Company hereby affirms that no Director/ employee has been denied access to the Chairman of the Audit Committee and that no complaints were received during the year. The policies have been uploaded on the Companyâs website, under the web link: http://easunreyrolle.com/ investors_codeconduct.php
23. Related Party Transactions
In terms of Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, your Company has a Related Party Transactions Policy on dealing with Related Party Transactions. The policy may be accessed under the Corporate Governance section of the website http://www.easunreyrolle.com. All related party transactions during the year under review were on armâs length basis and in the ordinary course of business. There were no material related party transactions made by the Company which could be considered material in accordance with Related Party Transactions Policy of the Company. The details of related party transactions are set out in the notes to the financial statements as well as Form AOC-2 is attached as Annexure - E to this Report.
24. Risk management
The Board of the Company has formed a risk management committee to frame, implement and monitor the risk management plan for the Company. The committee is responsible for reviewing the risk management plan and ensuring its effectiveness. The audit committee has additional oversight in the area of financial risks and controls. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. The development and implementation of risk management policy has been covered in the management discussion and analysis, which forms part of this report.
25. Environment, Health and Safety
The Company follows all the laws on Environment, Health, Safety (EHS) in all its operations. Occupational injury frequency rate remained almost NIL during the year under review. No severe accident was recorded for your Company employees.
26. Corporate social responsibility
Your Company is not under the purview of the Section 135 of the Companies Act, 2013 as Company having less Net worth or Turnover or Net profit as specified in the Section.
27. Policy on Prevention of Sexual Harassment
The Company has in place a Policy for prevention of sexual harassment at workplace. This inter alia provides a mechanism for the resolution, settlement or prosecution of acts or instances of Sexual Harassment at work and ensures that all employees are treated with respect and dignity. During the year under review, there were no complaints received by the Company.
28. Disclosure requirements
As per Clause 49 of the listing agreement and SEBI (LODR) Regulations, corporate governance report with auditorsâ certificate and as per Regulation 15(2) of SEBI LODR, Regulations 2015, is attached which forms part of this report.
Policy on dealing with related party transactions is available on the website of the Company (URL: www.easunreyrolle.com/investors).
The Company has formulated and published a Whistle Blower Policy to provide Vigil Mechanism for employees including directors of the Company to report genuine concerns. The provisions of this policy are in line with the provisions of the Section 177(9) of the Act and Regulations 22 of SEBI LODR, Regulations 2015 with stock exchanges (URL: www.easunreyrolle.com/investors).
29. Particulars of Research and Development, Conservation of Energy, Technology Absorption, and Foreign Exchange Earnings/Outgo:
Information required under Section 134 of the Companies Act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules, 2014, is attached as Annexure B and forms part of this Report.
30. Cautionary Statement
Statements in this report, particularly those which relate to Management Discussion & Analysis, describing the Companyâs objectives, projections, estimates and expectations may constitute âforward looking statementsâ within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied.
31. Change in nature of Business of the Company
There is no change in nature of Business during the year compared to earlier year.
32. Concluding Remarks
The Directors wish to sincerely express their appreciation to all employees of the Company for their dedicated services during the year amidst tough times. The Directors take this opportunity to express their gratitude to all Shareholders, Bankers, Vendors and other Stakeholders who have reposed trust and extended their constant support.
For and on behalf of Board of Directors
Hari Eswaran
Chairman
(DIN No. 00196760)
Place: Chennai
Date: 17th August, 2016
Mar 31, 2015
Dear Members,
The Directors of your Company present the 40th Annual Report, with the
statement of the audited accounts for the financial year ended 31st
March, 2015.
1. Financial Performance
The standalone and consolidated audited financial results for the year
ended 31st March, 2015 are as follows:
[Rupees in lacs]
Standalone
Particulars
2014-15 2013-14
Sales and Other Income 6,937 18,434
Earnings before interest, Depreciation and (226) 710
Tax (EBIDTA) (226) 710
Depreciation 734 802
Interest 2,599 2,749
Profit / (Loss) before tax & Exceptional Items (3,559) (2,841)
Exceptional Items (601) (369)
Profit / (Loss) before Tax (4,160) (3,210)
Provision for Taxation 430 -
Net Profit / (Loss) (3,730) (3,210)
Consolidated
Particulars
2014-15 2013-14
Sales and Other Income 12,658 26,557
Earnings before interest, Depreciation and
Tax (EBIDTA) 530 2,988
Depreciation 2,051 2,623
Interest 2,645 3,023
Profit / (Loss) before tax & Exceptional Items (4,166) (2,658)
Exceptional Items (601) (369)
Profit / (Loss) before Tax (4,766) (3,026)
Provision for Taxation 430 84
Net Profit / (Loss) (4,336) (3,110)
2. Dividend
Your Directors do not recommend payment of dividend for the year under
review on equity shares in view of the loss incurred.
3. Fund Raising - Equity - Rights Issue
During the year under review, your Company successfully placed
99,87,127 equity shares of Rs.2 each at a price of Rs.59 aggregating to
Rs.5892 lacs to existing shareholders on rights basis in the Ratio of
12:25.
The proceeds received through Rights issue were utilised for the
purpose for which it was raised.
Consequent to the above, the paid up value of the equity share capital
of the Company stands increased from Rs.4.16 crores to 6.15 crores.
5. Human Resource Development
The CompanyÂs industrial relations remained peaceful at all factories
and establishments during the financial year. The Company is
continuously improving employees skill sets through training and
personality development programs.
6. Material changes and commitments affecting the financial position
of the Company which have occurred between March 31, 2015 and 29th May,
2015 (date of the Report) There were no material changes and
commitments affecting the financial position of the Company between the
end of financial year (March 31, 2015) and the date of the Report
(29.05.2015)
7. Internal Control Systems and their Adequacy
The details in respect of internal financial control and their adequacy
are included in the Management Discussion & Analysis, which forms part
of this report.
8. Subsidiary Companies and Consolidated Financial Statements:
The Company has 7 subsidiaries as on March 31, 2015. There are no
associate companies within the meaning of Section 2(6) of the Companies
Act, 2013 (ÂActÂ). There has been no material change in the nature
of the business of the subsidiaries.
Pursuant to Section 129(3) of the Companies Act, 2013 read with Rule 5
of the Companies (Accounts) Rules, 2014, the statement containing
salient features of the financial statements of the CompanyÂs
Subsidiaries, (in Form AOC-1) is attached to the financial statements
as Annexure - D.
Pursuant to the provisions of section 136 of the Act, the financial
statements of the Company, consolidated financial statements along with
relevant documents and separate accounts in respect of subsidiaries,
are available on the website of the Company.
9. Deposits from public
The Company did not invite or accept any fixed deposit pursuant to
provisions of Section 76 of the Companies Act, 2013. During the year no
amount either on interest or principal, remained outstanding as on the
date of the Balance Sheet.
10. Corporate Governance Report
Your Company has been practicing the principle of good Corporate
Governance over the years and ensures to comply with the provisions of
Clause 49 of the Listing Agreement with Stock Exchanges. A detailed
report on the Corporate Governance Code and practices of the Company
along with a certificate from the statutory Auditor regarding
compliance of the conditions of Corporate Governance as stipulated
under the Listing Agreement is attached as Annexure - A to this Report.
11. Auditors
M/s. Brahmayya & Co., Chartered Accountants and M/s R Subramanian &
Co., Chartered Accountants, Joint Statutory Auditors of the Company,
retire at the forthcoming Annual General Meeting and are eligible for
re-appointment. The Company has received confirmation from both the
firms regarding their consent and eligibility under Sections 139 and
141 of the Companies Act, 2013 read with the Companies (Accounts)
Rules, 2014 for appointment as the Auditors of the Company.
As required under Clause 41 of the Listing Agreement, the Auditors have
also confirmed that they hold a valid certificate issued by the Peer
Review Board of the Institute of Chartered Accountants of India.
The Audit Committee and the Board of Directors recommended their
re-appointment for the year 2015-16. The necessary resolution is being
placed before the shareholders for approval.
12. Secretarial Audit
Pursuant to provisions of Section 204 of the Companies Act, 2013 read
with Rule 9 of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules 2014, your Company engaged the services of
Mr. S. Viswanathan, Company Secretary in Practice, Bangalore to conduct
the Secretarial Audit of the Company for the financial year ended March
31, 2015. The Secretarial Audit Report (in Form MR-3) is attached as
Annexure - C to this Report.
13. Management reply to the Statutory AuditorÂs & Secretarial
AuditorÂs Report
The explanations and comments by the Board on qualifications made by
Statutory Auditors and Secretarial Auditor is attached as Annexure - G
to this Report.
14. Extract of Annual Return
An extract of Annual Return in Form MGT-9 as on March 31, 2015 is
attached as Annexure - F to this Report.
15. Directors and Key Managerial Personnel
During the year under review, Mr JDN Sharma, Non-Executive Director and
Mr M Raman, Independent Director stepped down from the Board. The Board
wishes to place on record its deep sense of appreciation for the
valuable contributions made by them to the Board and the Company during
their tenure as Directors.
Pursuant to the provisions of Section 149 of the Act, which came into
effect from April 1, 2014, Dr William Stanley Jones and Mr Rakesh Garg
were appointed as independent directors at the annual general meeting
of the Company held on 29th September, 2014. The terms and conditions
of appointment of independent directors are as per Schedule IV of the
Act. They have submitted a declaration that each of them meets the
criteria of independence as provided in Section 149(6) of the Act and
there has been no change in the circumstances which may affect their
status as independent director during the year.
Mr Hari Eswaran, Director retire by rotation and being eligible, have
offered himself for re-appointment. A brief background of Mr Hari
Eswaran, Director is given in the Corporate Governance Report.
Pursuant to the provisions of Section 203 of the Act, which came into
effect from April 1, 2014, the appointments of Mr P Chandrasekaran,
Chief Financial Officer, as key managerial personnel of the Company
were formalised and Mr Praveen Hegde appointed as Company Secretary and
Compliance officer in the month of September, 2014.
16. Policy on Directors appointment and remuneration and other
details
The CompanyÂs policy on Directors appointment and remuneration and
other matters provided in Section 178(3) of the Act has been disclosed
in the corporate governance report, which forms part of the
directors report.
A statement containing the details of the Remuneration of KMPÂs as
required under Section 197(12) of the Companies Act, 2013 read with
Rule 5 of the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014 is given in the corporate governance report,
which forms part of the directors report.
17. Number of Meetings of the Board
Five meetings of the board were held during the year. For details of
the meetings of the board, please refer to the corporate governance
report, which forms part of this report.
18. Board evaluation
The board of directors has carried out an annual evaluation of its own
performance, Board committees and individual directors pursuant to the
provisions of the Act and the corporate governance requirements as
prescribed by Securities and Exchange Board of India (ÂSEBIÂ) under
Clause 49 of the Listing Agreements (ÂClause 49Â).
The performance of the Board was evaluated by the Board after seeking
inputs from all the directors on the basis of the criteria such as the
Board composition and structure, effectiveness of board processes,
information and functioning, etc.
The performance of the committees was evaluated by the board after
seeking inputs from the committee members on the basis of the criteria
such as the composition of committees, effectiveness of committee
meetings, etc.
The Board and the Nomination and Remuneration Committee (ÂNRCÂ)
reviewed the performance of the individual directors on the basis of
the criteria such as the contribution of the individual director to the
Board and committee meetings like preparedness on the issues to be
discussed, meaningful and constructive contribution and inputs in
meetings, etc.
In addition, the Chairman was also evaluated on the key aspects of his
role. In a separate meeting of independent Directors, performance of
non-independent directors, performance of the board as a whole and
performance of the Chairman was evaluated, taking into account the
views of executive and non-executive directors.
19. Directors Responsibility Statement
As required under Section 134(5) of the Companies Act, 2013, the
Directors of the Company hereby state and confirm that:
(i) in the preparation of Annual Accounts for the year, applicable
Accounting Standards have been followed along with proper explanations
relating to material departures;
(ii) the Directors have 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 as at the end of the financial year and of the profit
and loss of the Company for the year under review;
(iii) the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 2013, for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities; and
(iv) the Directors have prepared the Annual Accounts on a going concern
basis.
(v) That proper internal financial control was followed by the Company
and that such internal financial control are adequate and were
operating effectively.
(vi) 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.
20. Audit committee
The details pertaining to composition of audit committee are included
in the Corporate Governance Report, which forms part of this report.
21. Particulars of loans, guarantees and investments
The particulars of loans, guarantees and investments have been
disclosed in the financial statements.
22. Vigil Mechanism / Whistle Blower Policy
Pursuant to Section 177(9) of the Companies Act, 2013 read with Rule 7
of the Companies (Meetings of Board and its Powers) Rules, 2014 and
Clause 49 of the Listing Agreement, the Board of Directors had approved
the Policy on Vigil Mechanism/ Whistle Blower and the same was hosted
on the website of the Company. This Policy inter-alia provides a direct
access to the Chairman of the Audit Committee. Your Company hereby
affirms that no Director/ employee has been denied access to the
Chairman of the Audit Committee and that no complaints were received
during the year. The policies have been uploaded on the CompanyÂs
website, under the web link: http://www.easunreyrolle.com/
policy-final.pdfuploads/investorrels/2014/12/13918511951418634190
ERL%20-%20whistle-blower-
23. Related Party Transactions
There have been no materially-significant related party transactions
made by Company with the promoter, the Directors, the Key managerial
personnel which may be in conflict with the interest of the Company at
large. All related party transactions as placed before the Audit
Committee has also received approval from the Board. The policy on
related party transactions as approved by the Board can be accessed on
the Company website :
http://www.easunreyrolle.com/uploads/investorrels/2015/8/137862789514392
65073 Final-Policy%20on%20related%20party%20transactions.pdf
The details of related party transactions are set out in the notes to
the financial statements, as well as form AOC-2 is attached as
Annexure-E to this report.
24. Risk management
The Board of the Company has formed a risk management committee to
frame, implement and monitor the risk management plan for the Company.
The committee is responsible for reviewing the risk management plan and
ensuring its effectiveness. The audit committee has additional
oversight in the area of financial risks and controls. Major risks
identified by the businesses and functions are systematically addressed
through mitigating actions on a continuing basis. The development and
implementation of risk management policy has been covered in the
management discussion and analysis, which forms part of this report.
25. Corporate Social Responsibility
Your Company has not come under the purview of the Section 135 of the
Companies Act, 2013 as Company having less Net worth or Turnover or Net
profit as specified in the Section.
26. Disclosure requirements
As per Clause 49 of the listing agreements entered into with the stock
exchanges, corporate governance report with auditors certificate
thereon and management discussion and analysis are attached, which form
part of this report.
As per Clause 55 of the listing agreements entered into with the stock
exchanges, a business responsibility report is attached and forms part
of this annual report.
Policy on dealing with related party transactions is available on the
website ofthe Company (URL:
http://www.easunreyrolle.com/uploads/investorrels/2015/8/137862789514392
65073 Final-Policy%20on%20related%20party%20transactions.pdf).
The Company has formulated and published a Whistle Blower Policy to
provide Vigil Mechanism for employees including directors of the Company
to report genuine concerns. The provisions of this policy are in line
with the provisions of the Section 177(9) of the Act and the revised
Clause 49 of the Listing Agreements with stock exchanges (URL:
http://www.easunreyrolle.com/uploads/investorrels/2014/12/13918511951418
634190 ERL%20-%20whistle-blower-policy-final.pdf).
27. Particulars of Research and Development, Conservation of Energy,
Technology Absorption, and Foreign Exchange Earnings/Outgo:
Information required under Section 134 of the Companies Act, 2013 read
with Rule 8 (3) of the Companies (Accounts) Rules, 2014, is attached as
Annexure B and forms part of this Report.
28. Concluding Remarks
The Directors wish to express their appreciation to all employees of
the Company for their sincere and dedicated services during the year.
The Directors take this opportunity to express their gratitude to all
Shareholders, Bankers, Vendors and other Stakeholders who have reposed
trust and extended their constant support.
For and on behalf of Board of Directors
Hari Eswaran
Place : Chennai Chairman
Date : 29th May, 2015 (DIN No. 00196760)
Mar 31, 2014
To the Members
The Directors of your Company present the 39th Annual Report, with the
statement of the audited accounts for the financial year ended 31st
March, 2014.
1. Financial Performance
The standalone and consolidated audited financial results for the year
ended 31st March, 2014 are as follows:
[Rupees in lacs]
Standalone
Particulars
2013-14 2012-13
Sales and Other Income 18,434 24,467
Earnings before interest, Depreciation, 710 3,076
Tax, Amortization and Exceptional Items
(EBIDTAE)
Depreciation 802 717
Interest 2,749 2,159
Profit / (Loss) before tax & Exceptional Items (2,841) 200
Exceptional Items (369) -
Profit / (Loss) before Tax (3,210) 200
Provision for Taxation - 187
Net Profit / (Loss) (3,210) 12
Particulars Consolidated
2013-14 2012-13
Sales and Other Income 26,557 31,397
Earnings before interest, Depreciation, 2,988 4,476
Tax, Amortization and Exceptional Items
(EBIDTAE)
Depreciation 2,623 2,302
Interest 3,023 2,342
Profit / (Loss) before tax & Exceptional Items (2,658) (168)
Exceptional Items (369) -
Profit / (Loss) before Tax (3,026) (168)
Provision for Taxation 84 189
Net Profit / (Loss) (3,110 (357)
2. Dividend
The Company''s cash generation is inadequate to support a reasonable
dividend at this juncture, therefore the Directors with regret have to
recommend that we do not pay any dividend for the financial year
2013-14.
3. Operations Review:
The performance of your Company on a standalone basis and of the
various operating subsidiaries is as follows:
ERLPhase Power
Easun Reyrolle Technologies ERL Marketing Int.
Ltd India Ltd.Canada FZE Sharjah
(Rs.In lacs) (000 USD) (000 USD)
Particulars 13-14 12-13 13-14 12-13 13-14 12-13
Sales 18,218 22,045 8,252 7,508 1,725 1,115
EBIDTA 341 3,076 2,034 1,323 6 (340)
PBT (3,210) 200 (281) (736) (30) (372)
PAT (3,210) 12 (281) (736) (30) (372)
Particulars Switchcraft Europe Electrical Distribution
GmbH, Germany Solutions Pty Limited
(000 Euro) (000 USD)
13-14 12-13 13-14 12-13
Sales 651 349 313 -
EBIDTA 955 759 (87) -
PBT 257 53 (95) -
PAT 257 51 (95) -
Note: Effective from 1st April, 2012, considering the reduced business
opportunity, the Company suspended operations of Switchcraft Limited,
Hong Kong.
4. Management Discussions and Analysis:
The operating and financial review is intended to convey the
management''s perspective on the financial condition and on the
operating performance of the Company as at the end of the Financial
Year 2013-14.
This Financial year was yet another challenging year for the Indian
economy. The Company''s growth was affected by many factors like
volatility in commodity prices, exchange cost, higher interest cost,
etc., The uncertain macro-economic environment also affected the
company, especially in the power sector. Even though the order growth
was reasonable, revenues declined and the profitability was also
impacted due to high project cost and delay in payments.
Due to the poor financial position of most of the electrical utilities
in India, there is an impact in the performance of the electrical
industries, which has resulted in higher receivables, cost over runs
and higher finance cost.
Considering the performance of subsidiary companies, all the four
subsidiaries have shown positive and satisfactory turnover. It is
important to note that most of the subsidiaries PBT is showing an
improved figure in comparison with the previous years.
In July, 2013, your company has invested 82% equity and ownership in
Electrical Distribution Solutions Pty Limited (EDS) Australia. EDS, is
a Private Limited Company registered under the Australian Corporations
Act, 2001. The Company is a distributor of electrical equipment for
Australian utilities and is operating in Brisbane, Queensland,
Australia for over 5 years. EDS has developed a wide range of products
and having well established manufacturing facility at Brisbane. This
strategic acquisition would help ERL India and its other overseas
subsidiaries to establish and hold presence in prospering Australian
power transmission and distribution market.
During the year, your company started supplying of Ring Main Units from
Global Manufacturing facility Plant to the Australian Utility, M/s
Energex Limited. The Company is taking all efforts to complete the
execution of US$ 84 Million order in 7 years. The Company has also made
inroads in a number of export markets in conjunction with ERL
Switchcraft Europe GmbH, its German Subsidiary.
On May, 2014 your company has successfully completed the fund raising
exercise (fully subscribed) and raised paid up capital by way of
allotting 99,87,127 Equity Shares of Rs.2 each at a price of Rs.59
aggregating to Rs.5892 Lacs to existing Shareholders on Rights Basis in
the Ratio of 12:25. The Company has realised Rs.2912 Lacs from Public &
Financial Institutions and Rs. 2980 Lacs by way of adjusting the
Promoter''s loan.
To improve margins in coming years, your company is taking all efforts
to increase its efficiency by way of cost reduction, selection of
orders with good margins and Exports Orders, etc.,
5. Subsidiary Companies and Consolidated Financial Statements:
There has been no material change in the nature of the business of the
subsidiaries.
In accordance with the Statement of Accounting Standard on Consolidated
Financial Statements (AS21) issued by the Institute of Chartered
Accountants of India, Financial Statements of Company''s subsidiaries
have been considered in the accompanying Consolidated Financial
Statements of the Company. As per guidance given in the circular issued
by Ministry of Corporate Affairs, the Board of Directors has consented
for sending annual financial accounts
of the Company without attaching the Balance Sheets of the subsidiary
companies. Shareholders who wish to have a copy of the full report and
accounts of the subsidiary companies will be provided on receipt of a
written request from them. The above documents will also be available
for inspection by any shareholder at the registered office of the
Company as well as registered office of the subsidiary company, on any
working day during the business hours.
6. Human Resource Development
The Company''s industrial relations remained peaceful at all factories
and establishments during the financial year. The Company is
continuously improving employees skill sets through training and
personality development programs.
Employee strength as on 31st March, 2014 was 367 as compared to 385 in
the previous year.
7. Fixed Deposit
The Company did not invite or accept any fixed deposit pursuant to
provisions of Section 58A of the Companies Act, 1956. During the year
no amount either on interest or principal, remained outstanding as on
the date of the Balance Sheet.
8. Corporate Governance Report
Your Company has been practicing the principle of good Corporate
Governance over the years and ensures to comply with the provisions of
Clause 49 of the Listing Agreements with Stock Exchanges. A detailed
report on the Corporate Governance Code and practices of the Company
along with a certificate from the Auditors of the Company regarding
compliance of the conditions of Corporate Governance as stipulated
under the Listing Agreements are given in a separate section in this
Annual Report (Annexure  A).
9. Directors
Mr Hari Eswaran, Director retire by rotation and being eligible for
re-appointment, have offered himself for re-appointment.
In terms of Sections 149, 150, 152, and other applicable and related
provisions of the Companies Act, 2013 read with Rules made thereunder,
retirement by rotation shall not apply to Independent Directors. In
order to comply with the statutory requirements, your company being
recommended for appointment of Dr William Stanley Jones, Mr Rakesh Garg
and Mr M Raman as Independent Directors for a term upto five
consecutive years effective from 29th September, 2014 to September,
2019 on a non-rotational basis.
Details of the proposals of appointment or re-appointment as applicable
are mentioned in the Explanatory Statement under Section 102 of the
Companies Act, 2013 in the Notice to the 39th Annual General Meeting.
Necessary resolutions are being placed before the shareholders for
approval.
10. Directors'' Responsibility Statement
As required under Section 217(2AA) of the Companies Act, 1956, the
Directors of the Company hereby state and confirm:
(i) that in the preparation of Annual Accounts for the year, applicable
Accounting Standards have been followed along with proper explanations
relating to material departures;
(ii) that the Directors have 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 as at the end of
the financial year and of the profit of the Company for the year under
review;
(iii) 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; and
(iv) that the Directors have prepared the Annual Accounts on a going
concern basis.
11. Auditors
M/s Brahmayya & Co., Chartered Accountants and M/s R Subramanian & Co.,
Chartered Accountants Joint Statutory Auditors of the Company, retire
at the forth coming Annual General Meeting and are eligible for
re-appointment. The Audit Committee and the Board of Directors
recommended their re-appointment for the year 2014-15. The necessary
resolution is being placed before the shareholders for approval.
12. Cost Auditor
The Company has appointed Mr Rajesh Sai Iyer, Chennai as Cost Auditor
for conducting Audit of Company''s cost records for the financial year
2013-14. The due date for filing the Cost Audit Report for the
financial year ended 31st March 2014 is 30th September 2014.
13. Particulars of Employees
Information required to be furnished under Section 217 (2A) of the
Companies Act, 1956 read with the Companies (Particulars of Employees)
Rules, 1975 are annexed to this Report, and they form part of this
Report. However, as provided in Section 219 (1) (b) (iv) of the
Companies Act, 1956, the Annual Report and Accounts are being sent to
the Members of the Company, excluding statement containing particulars
of employees under Section 217(2A) of the Act. Any Member interested in
obtaining such particulars, may write to the Company at the Registered
Office.
14. Particulars of Research and Development, Conservation of Energy,
Technology Absorption, and Foreign Exchange Earnings/Outgo:
Information required under Section 217(1)(e) of the Companies Act, 1956
read with the Companies (Disclosure of Particulars in the Report of
Board of Directors) Rules, 1988, is attached as Annexure - B and forms
part of this Report.
15. Concluding Remarks
The Directors convey their appreciation to all employees of the Company
for their sincere and dedicated services during the year. The Directors
take this opportunity to express their gratitude to all Shareholders,
Bankers, Vendors and other Stakeholders who have reposed trust and
extended their constant support.
For and on behalf of Board of Directors
Place: Chennai Hari Eswaran
Date: 13th August, 2014 Chairman
Mar 31, 2012
The Directors present the 37th Annual Report of your Company together
with the audited accounts for the financial year ended 31st March 2012
1. Financial Performance
The standalone and consolidated audited financial results for the year
ended 31st March 2012 are as follows: [Rs in lacs]
Particulars Standalone Consolidated
2011-2012 2010-2011 2011-2012 2010-2011
Sales and
Other Income 29,602 26,983 34,522 30,255
Earnings before
interest,
Depreciation
and Tax (EBIDTA) 3,340 2,508 3,421 1,755
Depreciation 521 468 1,464 1,082
Interest 1,805 894 2,384 990
Profit/(Loss)
before tax &
Exceptional Items 1,014 1,146 (427) (317)
Exceptional Items - - - -
Profit/(Loss)
before tax 1,014 1,146 (427) (317)
Provision for tax 84 312 298 405
Share of Loss /
Profit of Associates - - (24) -
Net Profit/(Loss) 930 834 (701) (722)
2. Dividend
After making significant investments over the last few years in
globalising the Company's business and also in creating a global
manufacturing base in India, your company now needs to focus on
successfully taking its entire range of new products to various markets
and on ramping up the volumes. Hence there is a need to balance,
conserve the resources of the company and to satisfy the shareholders
expectations. Keeping in mind these factors your Directors have
proposed to pay a dividend of 10% on Equity Shares at Re.0.20 per share
of Rs.2 each for the financial year 2011-12 and are hopeful of
returning to more substantial dividend payouts in the future.
3. Operations Review
The performance of your company on a standalone basis and of the
various operating subsidiaries is as follows:
Easun
Reyrolle ERL
Phase
Power
Limited,
India Technology,
Canada
Particulars (Rs. in Lacs) (,000 USD)
11-12 1041 1142 10-11
Sales 29,602 26,983 8,200 5,564
EBIDTA 3,340 2,508 347 (1,092)
PBT 1,014 1,146 192 (1,245)
PAT 930 834 192 (1,245)
ERL
Marketing Switchcraft Europe Switchcraft Ltd
Int., Sharjah GmbH, Germany Hongkong
(,000 USD) (,000 Euro) (,000 USD)
Particulars 11-12 10-11 11-12 1041 11-12 10-11
Sales 6,011 2,706 715 166 136 91
EBIDTA 179 2 (849) (581) (43) (698)
PBT 77 (70) (2,151) (1,147) (141) (763)
PAT 77 (70) (2,471) (1,150) (141) (763)
As can be seen from the above figures, on a standalone basis, the
company has achieved a growth of 10% on sales and other income and 5%
on the Post tax profit. All the company's subsidiaries in Canada,
Sharjah and Germany has shown substantial improvement in their sales
and other income and except for Switch craft (Germany and Hong Kong),
all other subsidiaries have moved into profit zone.
5. Preparation of Financial Statements in consonance with revised
Schedule VI of the Companies Act, 1956
Company has prepared and presented the Financial Statements for the
year under review in accordance with the revised Schedule VI of the
Companies Act, 1956, as notified by the Ministry of Corporate Affairs.
Accordingly, previous year's figures have been regrouped / re-stated
wherever necessary to conform to the classification in the current
year.
6. Subsidiary Companies and Consolidated Financial Statements
There has been no material change in the nature of the business of the
subsidiaries.
In accordance with the Statement of Accounting Standard on Consolidated
Financial Statements (AS 21) issued by the Institute of Chartered
Accountants of India, Financial Statements of Company's subsidiaries
have been considered in the accompanying Consolidated Financial
Statements of the Company. As per guidance given in the circular issued
by Ministry of Corporate Affairs, the Board of Directors has consented
for sending annual financial accounts of the company without attaching
the Balance Sheets of the subsidiary companies. Shareholders who wish
to have a copy of the full report and accounts of the subsidiary
companies will be provided on receipt of a written request from them.
The above documents will also be available for inspection by any
shareholder at the registered office of the Company as well as
registered office of the subsidiary company, on any working day during
the business hours.
7. Human Resource Development
During the year under review, your Company continued to have cordial
relations with all employees at all the units. The Company recognizes
the importance of human capital and strives to enrich professional and
technical skills within the organization. Your Directors recognize the
team's valuable contribution and place on record their appreciation
for the employees across the organization.
Employee strength as on 31st March 2012 was 398 as compared to 432 in
the previous year.
8. Employee Stock Option Scheme
The Company introduced an Employee Stock Option Scheme for the benefit
of its executives effective from 29th September, 2010.
Details of the stock options granted under the Employee Stock Option
Scheme, 2009 are disclosed in compliance with Clause 12 of the
Securities and Exchange Board of India (Employee Stock
Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and
set out in Annexure A of this Report.
9. Fixed Deposits
Your Company did not invite or accept any fixed deposit pursuant to
provisions of Section 58A of the Companies Act, 1956. During the year
no amount either on interest or principal, remained outstanding as on
the date of the Balance Sheet.
10. Corporate Governance Report
Your Company has been practicing the principle of good Corporate
Governance over the years and ensures to comply with the provisions of
Clause 49 of the Listing Agreements with Stock Exchanges. A detailed
report on the Corporate Governance Code and practices of the Company
along with a certificate from the Auditors of the Company regarding
compliance of the conditions of Corporate Governance as stipulated
under the Listing Agreements are given in a separate section in this
Annual Report.
11. Directors
Mr. Hari Eswaran, Chairman and Dr W SJones, Director retire by rotation
and being eligible, have offered themselves for re-appointment. A brief
background of both the Directors is given in the Corporate Governance
Report.
The Board of Directors, at its meeting held on 31st March, 2012,
appointed, subject to the approval of the Members at the Annual General
Meeting, Mr. Raj H Eswaran as the Managing Director of the Company, on
a 5-year-term with effect from 1st April, 2012. Members may please
refer Item No.7 in the accompanying Notice of the Annual General
Meeting for the terms of appointment and remuneration of Mr. Raj H
Eswaran.
Mr.J D N Sharma, after serving your Company as Chief Executive for 16
years, retired on 31st March 2012. Directors place on record his
significant contributions made towards the progress of the Company. To
take advantage of his knowledge gained during the last 16 years the
Board invited Mr. J D N Sharma to become a Director and he has accepted
to join the Board as Additional Director. Mr. J D N Sharma vacates
office as Additional Director and is eligible for appointment as
Director at the ensuing General Meeting.
12. Directors' Responsibility Statement
As required under Section 217(2AA) of the Companies Act, 1956, the
Directors of the Company hereby state and confirm:
(i) that in the preparation of Annual Accounts for the year, applicable
Accounting Standards have been followed along with proper explanations
relating to material departures;
(ii) that the Directors have 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 as at the end of the financial year and of
the profit of the Company for the year under review;
(iii) 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 and
(iv) that the Directors have prepared the Annual Accounts on a going
concern basis.
13. Auditors
The Statutory Auditors of the Company, M/s Brahmayya & Co., Chartered
Accountants and M/s R Subramanian & Co., Chartered Accountants retire
at the ensuing Annual General Meeting
and have confirmed their eligibility for re-appointment in terms of
Section 224 (1B) of the Companies Act, 1956.
The Audit Committee and the Board of Directors recommend appointment of
M/s Brahmayya & Co., Chartered Accountants and M/s R Subramanian & Co.,
Chartered Accountants as Statutory Auditors of the Company from the
conclusion of ensuing Annual General Meeting up to the conclusion of
the next Annual General Meeting of the Company.
14. Particulars of Employees
The information required under Section 217 (2A) of the Companies Act,
1956, read with the Companies (Particulars of Employees) Rules, 1975,
are annexed to this Report, and they form part of this Report. Having
regard to the provisions of Section 219(1)(b)(iv) of the Companies Act,
1956, the Annual Reports together with Accounts, are being sent to the
members of the Company, excluding statement of Particulars of Employees
under Section 217(2A) of the Act. Any Member interested in receiving
copy of the Particulars of Employees, may write to the Company at the
Registered Office
15. Particulars of Research and Development, Conservation of Energy,
Technology Absorption and Foreign Exchange Earnings / Outgo
Information required under Section 217(1) (e) of the Companies Act,
1956, read with the Companies (Disclosure of Particulars in Report of
the Board of Directors) Rules, 1988, is attached as Annexure - C and
forms part of this Report.
16. Acknowledgement
The Directors accept and convey their sincere appreciation to all
employees of the Company for their continued commitment towards
achieving company's goal. The Directors also acknowledge and are
grateful to the Bankers, Shareholders, Vendors and other Stakeholders
for their continued confidence, co-operation and support.
For and on behalf of
Board of Directors
Place: Chennai Hari Eswaran
Date: 14th August 2012 Chairman
Mar 31, 2011
To the Members
The Directors are pleased to present the Annual Report along with the
Audited Financial Statements for the period from 1st April 2010 to 31st
March 2011.
1. Financial Results
Highlight of Financial Results for the year are as under:
[Rupees in lacs]
2010-11 2009-10
Particulars Standalone Consolidated Standalone Consolidated
Sales 26,833 29,761 21,585 25,717
Other Income 150 494 388 572
Total Income 26,983 30,255 21,973 26,289
Total Expenditure 24,556 28,581 20,217 25,262
Profit/(Loss) before
depreciation, interest
and Exceptional Items 2,427 1,674 1,750 1,027
Depreciation 468 1,082 455 766
Interest 812 909 581 604
Profit/(Loss) before
Exceptional Items 1,147 (317) 720 (343)
Exceptional Items - - - -
(i) Surplus on FCCB Buyback - - 6,113 6,113
(ii) Net Foreign Exchange
Fluctuation - - (158) (1,58)
Profit/(Loss) before Tax 1,147 (317) 6,674 5,612
Provision for Taxation 312 405 1,084 1,101
Adjustment for Minority
Interest - - - (15)
Net Profit/(Loss) 835 (722) 5,590 4,496
2. Dividend
Directors are pleased to recommend a dividend of Rs. 1.20 per equity
share of the face value of Rs.2 for the year ended 31st March, 2011
(Previous year Rs.4 per share, including Rs.3 per share as one-time
special dividend on account of exceptional items). This dividend,
subject to the approval at the AGM on August 29lh 2011 will be paid to
the shareholders whose names appear on the Register of Members as on
23rd August 2011. The dividend will absorb Rs.291 lacs including
dividend tax.
3. Performance:
During the year under review, the Company has achieved revenue on
consolidated basis at Rs.303 Crores compared to previous year's revenue
of Rs.263 Crores. The pre-tax loss (without considering the exceptional
items) was reduced from Rs.3.43 crores during 2009-10 to Rs.3.17 crores
during 2010-11.
4. Management Discussions and Analysis
(i) Industry Environment and outlook for the future:
During the year 2010 -11 electrical equipment industry has experienced
sustained growth momentum with a growth rate of approximately 14%. The
overall outlook for the industry future continues to be healthy.
While the general picture is thus fairly rosy, there are a number of
factors that continue to cause concern; addressed in a focused manner,
can brighten the picture even further. The large gap between the
budgeted capacity addition during the fifth plan and the reality till
date indicates that the shortfall in the planned capacity addition will
be substantial. Same is the case with respect to investments in
transmission and distribution sector through RAPDRP Schemes as well as
other initiatives. 2011 -12 being the last year of the
fifth-five-year-plan is expected to see the usual last minute efforts
to reduce this gap resulting in increased opportunities. However, what
is required is sustained level of high investment in these areas if
India were to address its power needs efficiendy and eliminate the
scourge of power shortages in the near future.
International markets for power system equipment which your Company is
addressing also show sustained growth, with the utilities in USA
increasing their spend under various government initiatives and various
countries in Europe particularly Eastern Europe and Russia drawing up
plans for substantial increase in their investments in modernization of
power sector. Green initiatives across the Western Europe are also a
cause for optimism. African market, in the long term has a huge
potential for growth.
Thus the overall outlook for various products, systems, solutions and
projects in which your company is engaged in remains healthy. However,
substantial capacity additions and fairly large gap between the plans
and achievements with respect to capacity additions and other
investments in this sector, particularly in India, would also mean
continued pressure on margins.
(ii) Overall Company strategy:
Since its inception as a joint venture, the company had an arrangement
of receiving its technology from its JV partner and addressing
primarily the Indian market. Since 2003 the company started branching
out into lines of business other than those of its JV and developing its
own technology for these business lines.
Exit of its the then JV partner from the company in 2006 gave your
company the freedom and an opportunity to grow in the global markets
and at the same time the challenge of self reliance in the field of
technology was posed. Your company accepted this challenge of ensuring
that all its product lines offer the state-of-the-art-technology
acceptable across the global markets and consequendy the opportunity of
being able to address the global markets for its rapid and sustained
growth.
Towards this your company has invested significantly in acquiring and
strengthening high technology companies in Canada and in Germany and in
establishing significant R&D facilities in India. This strategy has now
enabled the company to be able to offer, starting from the year
2011-12, an array of new products and technologies in the global
markets, which will propel the growth of the company in the future.
In parallel, the company has put in place a strategy of backward
integration to capture the value chain in the manufacturing activity
through significant investments in world class manufacturing facilities
- mainly in India for basic manufacturing and in other countries in
local manufacturing as appropriate. This will not only allow us to
offer competitive products across the global markets but will also help
in improving margins.
The twin strategies of ownership of state-of-the-art-technology and the
related IPs in all its core activities and capturing significant parts
of the value chain will be the foundation of your company's march
towards sustained and rapid growth in the future.
(iii) Operations:
During the year 2010-11, the Indian operations of the Company have
grown satisfactorily both in terms of sales as well as profits. Sales
have shown a growth of 24% which is ahead of the market growth and the
profits from ordinary operations (without considering the exceptional
items) at EBIDTA level have grown by 50% over the year 2009 -10. The
growth of order book is also generally satisfactory though the Company
has consciously stayed away from low profitability opportunities
particularly in the area of Turnkey projects. Considering the healthy
order book and the expected growth of the industry in the coming year,
your company expects to grow significantly during the year 2011-12.
The Company's international operations continue to gain strengths as
the Company is gradually moving from investment phase into market
realization phase. Thus the Company's Canadian operations at ERL Phase
have shown a 20% increase in order input, its international sales and
marketing operations at ERLMINT has doubled its Order intake and
Switch craft Europe GmbH in Germany has seen the first orders from the
European markets. As these subsidiaries in Canada and Germany complete
their new product introduction, which have been somewhat delayed,
during 2011-12 the international operations are expected to show
considerable growth during 2011-12 and sustained growth at higher
levels thereafter.
In order to counter the pressures on the margins and to be able to
cater to the expected growth in global demand through its various
international operations, the Company has initiated major investments
in manufacturing and backward integration with a new manufacturing base
at Harohalli, near Bangalore. The first phase of the investment is
likely to be completed and the commercial production of the same will
be commenced during the second half of the current financial year. This
coupled with growth of the business and various odier actions being
taken by your Company to reduce costs, would address the issues
concerning the pressure on the margins and the results from the same
can be expected from the year 2012-13 onwards.
5. Subsidiary Companies and Consolidated Financial Statements:
There has been no material change in the nature of the business of the
subsidiaries.
Consolidated Accounts in accordance with the requirements of Accounting
Standards AS 21 (read with AS 23) issued by the Institute of Chartered
Accountants of India, the Consolidated Accounts of the Company and its
subsidiaries are annexed to this Annual Report. A statement pursuant to
Section 212 of the Companies Act, 1956, relating to subsidiaries in
India and abroad, is attached to mis Report. The annual accounts of
these subsidiaries and the related detailed information will be made
available to any Member of the Company/its subsidiaries seeking such
information. Annual Accounts of the subsidiary companies will also be
available for inspection by any Member of the Company/its subsidiaries
at the Registered Office of the Company.
6. Human Resource Development
During the year under review, a number of HR and training initiatives
were taken to supplement the Company's effort towards business
sustainability and growth. On the industrial relations front, your
Company has a cordial relationship with its employees and union.
The total number of employees as at 31st March 2011 was 432.
7. Employee Stock Option Scheme:
The Company introduced an Employee Stock Option Scheme for the benefit
of its executives effective from 29th September 2010.
Details of the stock options granted under the Employee Stock Option
Scheme, 2009 are disclosed in compliance with Clause 12 of the
Securities and Exchange Board of India (Employee Stock Option Scheme
and Employee Stock Purchase Scheme) Guidelines, 1999 and set out in
Annexure A of this Report
8. Fixed Deposit
The Company has not accepted any public deposit and, as such, no amount
on account of principal or interest on public deposits was outstanding
as on the date of the Balance Sheet.
9. Corporate Governance Report
Reports on Corporate Governance in accordance with Clause 49 of the
Listing Agreements with Stock Exchanges, along with Auditors Report
thereon are given separately as Annexure B in this Annual Report.
10. Directors
Mr Hari Eswaran and Mr Rakesh Garg, Directors retire by rotation and
being eligible have offered themselves for re-appointment. A brief
background of both the directors is given in the Corporate Governance
Report.
11. Directors' Responsibility Statement
As required under Section 217(2AA) of the Companies Act, 1956, the
Directors of the Company hereby state and confirm:
(i) that in the preparation of Annual Accounts for the year, applicable
Accounting Standards have been followed along with proper explanations
relating to material departures;
(ii) that the Directors have 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 as at the end of the financial year and of
the profit of the Company for the year under review;
(iii) 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; and
(iv) that the Directors have prepared the Annual Accounts on a going
concern basis.
12. Auditors
M/s. Brahmayya & Co., Chartered Accountants and M/s R Subramanian &
Co., Chartered Accountants, the joint statutory auditors of the
Company, hold office upto the conclusion of the forthcoming Annual
General Meeting and are eligible for re-appointment.
13. Particulars of Research and Development, Conservation of Energy,
Technology Absorption, etc:
The particulars as prescribed under section 217(l)(e) of the Act, read
with the Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988, are set out in Annexure C to this Report.
14. Particulars of Employees
The information required to be furnished under Section 217 (2 A) of the
Companies Act, 1956 read with the Companies (Particulars of Employees)
Rules, 1975 is set out in the annexure to the Directors' Report. Having
regard to the provisions of Section 219 (1) (b) (iv) of the Companies
Act, the Annual Report together with Accounts, is being sent to the
Members of the Company, excluding statement of particulars of employees
under Section 217(2A) of the Act. Members desiring to have a copy of
the same may write to the Registered Office of the Company.
15. Acknowledgement
Your Directors thank all its valued customers, suppliers and other
business associates. They appreciate continued support from Banks and
look forward to their co-operation in the future.
Your Directors place on record their appreciation of the dedicated
efforts put in by the employees at all levels and wish to thank the
Shareholders for their unstinted support and co-operation.
For and on behalf of Board of Directors
Place: Chennai Hari Eswaran
Date: 25th July, 2011 Chairman
Mar 31, 2010
The Directors are pleased to present the Annual Report along with the
Audited Financial Statements for the period from 1st April 2009 to 31st
March 2010.
1. Financial Results
Highlight of Financial Results for the year are as under:
2009-10
Particulars
Standalone Consolidated
Sales 21,585 25,717
Other Income 388 572
Total Income 21,973 26,289
Total Expenditure 20,217 25,262
Profit before depreciation,
interest and
Exceptional Items 1,756 1,027
Depreciation 455 766
Interest 581 604
Profit / (Loss) before
Exceptional Items 720 (343)
Exceptional Items - -
(i) Surplus on FCCB Buyback 6,113 6,113
(ii) Net Foreign Exchange
Fluctuation (158) (158)
Profit before Tax 6,674 5,612
Provision for Taxation 1,084 1,101
Adjustment for Minority Interest - (15)
Net Profit 5,590 4,496
Add: Balance Brought forward 184 649
Profit available for Appropriation 5,774 5,145
Less: Proposed dividend on
equity shares 831 831
Less:Tax on dividends 141 141
Less:Transfer to General Reserve 4,000 4,000
Surplus carried to Balance Sheet 802 173
[Rupees in lacs]
Particulars 2008-09
Standalone Consolidated
Sales 13,840 16,042
Other Income 804 1,190
Total Income 14,644 17,232
Total Expenditure 12,912 15,863
Profit before depreciation, 1,732 1,369
interest and Exceptional Items
Depreciation 364 514
Interest 467 488
Profit/
Exceptional Items - -
<1> Surplus on FCCB Buyback - -
<11> Net Foreign Exchange Fluctuation - -
Profit before Tax 901 366
Provision for Taxation 148 138
Adjustment for Minority Interest - 43
Net Profit 753 271
Add: Balance Brought forward 167 1,113
Profit available for Appropriation 920 1,385
Less: Proposed dividend on equity
shares 415 415
Less: Tax on dividends 71 71
Less: Transfer to General Reserve 250 250
Surplus carried to Balance Sheet 184 649
2. Dividend
Based on the CompanyÃs performance, the Directors are pleased to
recommend for approval of the members a dividend of Rs.4 per share (
200% on the par value of Rs.2) for the financial year, out of which
Rs.3 per Equity Shares is one-time special divided on account of
exceptional items. The total cash outflow of dividend including
dividend tax on equity shares of the company for the year 2009-10 would
aggregate to Rs.972 lacs.
3. Performance:
During the year under review, the Company has achieved consolidated
revenue at Rs.25,717 lacs compared to previous yearÃs revenue of
Rs.16,042 lacs. The profit after tax including extraordinary items is
Rs.4,496 lacs compared to Rs.271 lacs for the previous year. The
Earnings before interest and Depreciation (EBIDTA) from the
consolidated operations, excluding other income is Rs.455 lacs as
compared to Rs.209 lacs the previous year. As a result of the
significant investments made in the subsidiary companies, the other
income has dropped to Rs.572 lacs from Rs.1,190 lacs in the earlier
year and also resulted increased depreciation and interest costs,
leading to a loss of Rs.343 lacs in consolidated accounts as against a
profit of Rs.366 lacs during the last year.
9. Corporate Governance Report
A report on Corporate Governance prepared in pursuance to Listing
Agreement with the Stock Exchanges is attached to this Report.
10. Directors
Dr W S Jones and Mr Raj H Eswaran, Directors retire by rotation and
being eligible have offered themselves for re-appointment. A brief
background of both these directors is given in the Corporate Governance
Report.
11. Directors Responsibility Statement
As required under Section 217(2AA) of the Companies Act, 1956, the
Directors of the Company hereby state and confirm that :
(i) in the preparation of Annual Accounts for the year, applicable
Accounting Standards have been followed along with proper explanations
relating to material departures;
(ii) 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 the end of the financial year and of
the profit of the Company for the year under review;
(iii) 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; and
(iv) the Directors have prepared the Annual Accounts on a going concern
basis.
12. Auditors
M/s. Brahmayya & Co., Chartered Accountants and M/s R Subramanian &
Co., Chartered Accountants, who are the statutory auditors of your
company, retire at the ensuing Annual General Meeting. They are
eligible for re-appointment.
13. Particulars of Research and Development, Conservation of Energy,
Technology Absorption, etc:
Particulars required under Section 217 (1) (e) of the Companies Act,
1956 read with Rule 2 of the Companies (Disclosure of Particulars in
the Report of Board of Directors) Rules, 1988 are provided in the
annexure to this Report.
14. Particulars of Employees
The information required to be furnished under Section 217 (2A) of the
Companies Act, 1956 read with the Companies (Particulars of Employees)
Rules, 1975 is set out in the annexure to the Directorsà Report.
However, having regard to the provisions of Section 219 (1) (b) (iv) of
the Companies Act, the Annual Report excluding the aforesaid
information is being sent to all the members of the Company. Any
member interested in obtaining such particulars may write to the
Company at the registered office.
15. Acknowledgement
Your Directors express their appreciation for assistance and
co-operation received from Bankers, Government Authorities, Customers,
Vendors and Members during the year. They place on record their sense
of appreciation for the committed services by executives, staff and
workers of the Company.
For and on behalf of Board of Directors
Place : Chennai Hari Eswaran
Date : 21st August, 2010 Chairman
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