Directors' report To the members, Your Directors have the pleasure in presenting the 28th Annual Report together with the audited financial statements of the Company for the financial year ended March 31, 2015. Operations and Performance On consolidated basis for the year 2014-15, your company achieved total revenue of Rs. 345,852 million resulting in a growth of about 14% over its revenue of Rs. 304,279 million of the previous financial year ended March 31, 2014. Net profit for the year at Rs. 8,625 million was higher by 13% over the previous year's net profit of Rs. 7,650 million. On standalone basis, your company achieved total revenue of Rs. 49,850 million resulting in a growth of about 10% over its total revenue of Rs. 45,245 million of the previous financial year ended March 31, 2014. The profit after tax for the year ended March 31, 2015 at Rs. 5,149 million was lower by 4% from the previous financial year ended March 31, 2014 at Rs. 5,351 million. The operational performance of the Company has been comprehensively covered in the Management Discussion and Analysis, which forms part of the Directors' Report. Dividend The Directors are pleased to recommend for approval of the members payment of dividend of Rs. 3/- per share on the share capital of the Company for the financial year ended March 31, 2015 (previous year Rs. 2.50 per share) to the equity shareholders. The dividend, if approved by the members would involve total cash outflow of Rs. 3,184 million, including dividend tax, resulting in a payout of 62% of the standalone profits of the Company and 37% of the consolidated profits of the Company. Transfer to Reserves The Company proposes to transfer Rs. 60 million to the General Reserve out of the current year Profit. Credit Rating The Company continues to enjoy "A1+" rating by ICRA for its Commercial Paper / Short-Term Debt Program of Rs. 1,500 million. During the year, CRISIL has assigned its Corporate Credit Rating of 'CCR AA-' and a short term rating of 'CRISIL A1+' for its Commercial Paper Program of Rs. 1,500 million. Further, the Company's long term rating was upgraded to [ICRA] AA- from [ICRA]A+ with outlook "Positive" for Rs. 1,145.1 crore Lines of Credit (LOC) . The strong credit ratings by leading agencies reflect the Company's established market position in the automotive components industry, its well-diversified customer base across geographies and product segments and its healthy relationships with leading global original equipment manufacturers (OEMs). Fixed Deposits The Company has neither invited nor accepted any deposits from the public during the year. There is no unclaimed or unpaid deposit lying with the Company. Consolidated Financial Statements In accordance with the Accounting Standard - 21 on Consolidated Financial Statements read with Accounting Standard - 23 on Accounting for Investments in Associates and Accounting Standard - 27 on Financial Reporting of Interests in Joint Venture in Consolidated Financial Statements, your Directors have the pleasure in attaching the Consolidated Financial Statements which form a part of the Annual Report. The performance of the Company on consolidated basis is discussed at length in the Management Discussion and Analysis. Subsidiaries, Joint Ventures and Associate Companies During the year under review, name of the companies which have become / ceased to be Company's subsidiaries, joint ventures or associate companies are as below : 1. Companies which have become subsidiaries (direct and indirect) during the financial year 2014-15 : - Samvardhana Motherson Polymers Management Germany GmbH - Samvardhana Motherson Plastic Solutions GmbH & Co. KG - MSSL Consolidated Inc. - MSSL Wiring System Inc. - MSSL Overseas Wiring System Ltd. - Alphabet de Mexico, S.A. de C.V. - Alphabet de Mexico de Monclova, S.A. de C.V. - Alphabet de Saltillo, S.A. de C.V. - MSSL Wirings Juarez, S.A. de C.V. - Samvardhana Motherson Innovative Autosystems B.V. & Co. KG - Samvardhana Motherson Innovative Autosystems Holding Company BV - SM Real Estate GmbH - Kunstsoff-Technik Trier de Mexico S.A de C.V. (name changed to Samvardhana Motherson Innovative Autosystems de Mexico, S.A. de C.V.) - Property Holdings Trier de Mexico S.A. de C.V. (name changed to Samvardhana Motherson Real Estate Unit de Mexico, S.A. de C.V.) - Administrative Services Trier de Mexico S.A. de C.V. (name changed to SMIA de Mexico Administrative Services, S.A. de C.V.) 2. Companies which ceased to be subsidiaries during the financial year 2014-15 : - MSSL Handels GmbH (liquidated on July 23, 2014) - SMP Tecnologia Parachoques S.A. de C.V.* - SMP Shock Absorber Fabrication Mexico S.A. de C.V.* * Merged into SMP Automotive Systems Mexico S.A. de C.V. retrospectively as on 01.04.2014. 3. No Company has become / ceased to be a joint venture or associates during the financial year 2014-15. In accordance with Section 129(3) of the Companies Act, 2013, we have prepared consolidated financial statements of the Company and all its subsidiaries, associate and joint venture companies, which form part of the Annual Report. Further, a statement containing the salient features of the financial statement of the Company's subsidiaries, associate and joint venture companies in Form AOC-1, which form a part of the Annual Report. Details of subsidiaries of the Company and their performance are covered in the Management Discussion and Analysis Report forming part of the Annual Report. Exports The Company's exports during the year were Rs. 7,412 million as against Rs. 6,975 million in the previous financial year. The Company continues to make its efforts towards achieving higher growth by providing cost competitive quality solutions to its customers. In addition, the Company has facilities mainly in Europe, to constantly service the customers as well as scan the market for growth. Strategic Acquisition During the year 2014-15, the Company has made the following acquisition : Acquisition of Wiring Harness Business of Stoneridge Inc. : During the year, the Company entered into Asset Purchase Agreement with Stoneridge Inc. for purchase of Wiring harness business on May 26, 2014. The transaction which included manufacturing facilities located in Portland (USA ) , and in Mexico at Chihuahua Saltillo and Monclova as well as an engineering and administrative center located at Warren, ( Ohio, USA ) was completed on August 1, 2014. Acquisition of assets of Minda Schenk Group, Germany : The Company through its step down subsidiary, has purchased assets from the administrator of Minda Schenk Plastic Solutions GmbH, Germany with effect from October 1, 2014, pursuant to a Trade Agreement signed by MSSL Advanced Polymers s.r.o. (Company's 100% sept down subsidiary) and Daimler AG. This Company is engaged in the business of interior & exterior plastic parts with presence in Germany. Acquisition of assets of Scherer & Trier group, Germany : The Company through its step down subsidiaries, has acquired the assets of Scherer & Trier group (S&T), Germany from its administrator on January 30, 2015. This Company is engaged in the business of Extrusion Profiles & Hybrid parts and presence in Germany and Mexico. Post Balance Sheet Event The Company has exited from the following Joint Venture companies with Woco Franz Josef Wolf Holding GmbH, Germany (Woco) on May 28, 2015 : • Woco Motherson Elastomer Ltd. • Woco Motherson Advanced Rubber Technologies Ltd. • Woco Motherson Limited (FZC), Directors and Key Managerial Personnel As per provisions of the Companies Act 2013, Mr. Toshimi Shirakawa and Mr. Laksh Vaaman Sehgal, Directors of the Company, retire by rotation in the ensuing Annual General Meeting and being eligible, seek re-appointment. The Board of Directors recommends their re-appointment. Brief resume of the above Directors, nature of their expertise in functional areas and the name of the public companies in which they hold the Directorship and the Chairmanship/Membership of the Committees of the Board, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchange, are given as Annexure to the Notice convening the Annual General Meeting. During the year under review, the members approved the appointment of Ms. Noriyo Nakamura as a non-executive Director who is liable to retire by rotation and of Maj. Gen. Amarjit Singh (Retd.), Mr. S.C. Tripathi, IAS (Retd.), Mr. Arjun Puri, Mr. Gautam Mukherjee and Ms. Geeta Mathur as Independent Directors who are not liable to retire by rotation.The members had also re-appointed Mr. Pankaj Mital as Whole-time Director designated as Chief Operating Officer of the Company. Pursuant to the provision of Section 203 of the Companies Act, 2013, the appointment of Mr. Pankaj Mital as whole-time Director and Mr. G.N. Gauba as Chief Financial Officer & Company Secretary were formalized as the Key Managerial Personnel of the Company. The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 and under Clause 49 of the Listing Agreement with the Stock Exchanges. 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 matters provided under sub-section (3) of section 178 of the Companies Act, 2013, adopted by the Board are covered in Corporate Governance Report which forms part of this Report. Further, the policy also indicates the manner of performance evaluation of Independent Directors, Board, committees and other individual Directors which includes criteria for performance evaluation of the non-executive directors and executive directors. Directors' Responsibility Statement Pursuant to Section 134(3)(c) of the Companies Act, 2013 and subject to disclosures in the Annual Accounts, Your Directors state as under :- a) That in the preparation of the annual accounts for the financial year ended 31st March, 2015, the applicable Accounting Standards have been followed and their are no material departures. b) That the Directors have selected appropriate Accounting Policies and applied them consistently and made judgment and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 31st March, 2015 and of the profit of the Company for that period. c) 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, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. d) That the Directors have prepared the annual accounts on a going concern basis. e) That 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. f) That the Directors have devised proper system to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. Auditors and Auditors' Report Statutory Auditors At the Annual General Meeting held on August 25, 2014 M/s. Price Waterhouse Chartered Accountants LLP [M/s. Price Waterhouse converted into a Limited Liability Partnership (LLP)], were appointed as Statutory Auditors of the Company to hold office till the conclusion of the Annual General Meeting to be held in the year 2017. In terms of the provision of Section 139 of the Companies Act, 2013, the appointment of the auditors shall be placed for ratification at every Annual General Meeting. Accordingly the appointment of M/s. Price Waterhouse Chartered Accountants LLP (Firm Registration No.- 012754N/N500016), as Statutory Auditors of the Company, is placed for ratification by the shareholders. The Company has received letters from them to the effect that their re-appointment, if made, would be within the prescribed limits under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for re-appointment. The observations of the Auditors and the relevant notes on the accounts are self-explanatory and therefore do not call for any further comments. The Auditors' Report does not contain any qualification, reservation or adverse remark. Further, during the year, in the course of the performance of their duties as auditor, no fraud were reported by them which they have reason to believe that an offence involving fraud has been committed against the Company by officers or employees of the Company. Cost Auditor The Board of Directors has appointed M/s. M.R. Vyas and Associates, Cost and Management Accountants as Cost Auditor for conducting the audit of cost records of the Company for the financial year 2014-15 only for Rubber Compound/Rubber component, as applicable. Secretarial Auditor The Board of Directors has appointed M/s. SGS Associates, Company Secretaries in Practice to conduct Secretarial Audit for the financial year 2014-15. The Secretarial Audit Report for the financial year ended March 31, 2015 is annexed herewith which form a part of this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. Audit Committee The Audit Committee comprises Mr. S. C. Tripathi, IAS (Retd.) (Chairman), Mr. Arjun Puri, Mr. Gautam Mukherjee, Ms. Geeta Mathur as Independent Directors and Mr. Toshimi Shirakawa, Mr. Laksh Vaaman Sehgal as other Members. Awards & Recognitions During the year, the Company has been awarded "Company of the year" from Business Standard. Further, the Company has also received various awards and recognitions, some of which are given below: Wiring Harness Division (WHD): The division has been awarded following appreciations by Customers during the year: - WHD has received "Superior Performance in Human Relations", "Award for Overall Excellence" and "Certificate of Appreciation for Design and Development" from Maruti Suzuki. - WHD has received "Supplier of the Year - Silver (Wiring harness)", "Best Performer Service Parts" and "Best Kaizen Award" from Toyota. - WHD has received "Certificate of Appreciation for Supporting Due Date Delivery Operation" from Honda Motor Private Ltd. - WHD has received "Best Supplier Overall Performance" and "Special Citation of Distinction" from Tata Motors Limited and "GM Supplier Quality Excellence Award" from General Motors. - WHD has received "Award for New Development" from Suzuki Motorcycle and "Appreciation Award for Quality and Velocity in the supply of NPI Proto Harness" from Caterpillar. Polymer Division (MATE): Polymer division of the Company has been awarded with following appreciations by Customers during the year: - MATE received "Toyota Regional Contribution Award" and "Supplier of the Year - Gold (Polymer)" and "Zero Defect Supplies" from Toyota. - MATE received "Bronze Award in the Category of Spare Parts" from Honda Motor Private Ltd., "Bronze Award for Delivery" and "Best Kaizen - Delivery" from Honda Cars India Limited. Number of Meetings of the Board The Board of Directors met five times during the financial year 2014-15, the details of which are given in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act, 2013. Particulars of Loans Given, Investment Made, Guarantee Given and Securities Provided Particulars of loans given, investment made, guarantees given and securities provided along with the purpose for which loan or guarantee or security is proposed to be utilized by the recipient are provided in the standalone financial statement (please refer to Note 14, 15, 17 and 33 to the standalone financial statement). Particulars of Contracts or Arrangements with Related Parties All contracts/ arrangements/ transactions entered by the Company during financial year with related parties were on an arm's length basis and were in the ordinary course of business. During the year, the Company had not entered into any contract / arrangement/ transaction with related parties which could be considered material for which shareholders' approval is required in accordance with the policy of the Company on materiality of related party transactions. Thus provisions of Section 188(1) of the Companies Act, 2013 are not applicable to the Company. As per listing agreement, all related party transactions are placed before the Audit Committee for approval. Prior omnibus approval of the Audit Committee has been obtained for the transactions which are of foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval are presented to the Audit Committee by way of a statement giving details of all related party transactions . The Company has developed a Related Party Transactions Manual, Standard Operating Procedures for purpose of identification and monitoring of such transactions. The policy on Related Party Transactions as approved by the Board has been uploaded on the Company's website. Your Directors draw attention of the members to Note 45 to the financial statement which sets out related party disclosures. Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo Information under section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of Companies (Accounts) Rules, 2014 is given in Annexure - A to this Report. Particulars of Employees and Related Disclosures Disclosure pertaining to remuneration and other details as required under Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in this Report as Annexure - B. The Statement Containing Particulars of employees as required under section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rule, 2014 is provided in a separate annexure forming part of this report. Further in terms of Section 136 of the Act, the Report and accounts are being sent to the members excluding the aforesaid annexure. The said annexure is available for inspection at the registered office of the Company during the working hours and any member interested in obtaining a copy of the same may write to the Company Secretary and the same will be furnished on request. Corporate Governance A separate section on Corporate Governance, forming a part of the Director's Report and the certificate from the Company's Auditors confirming compliance of conditions on Corporate Governance as stipulated in Clause 49 of the Listing Agreement, is included in the Annual Report. Listing Equity shares of your Company are listed at National Stock Exchange of India Limited, BSE Limited, Delhi Stock Exchange Limited and Ahmedabad Stock Exchange Limited. The listing fees for the year 2014-15 have been paid to the said Stock Exchanges except Delhi Stock Exchange Limited (DSE) as the Securities and Exchange Board of India (SEBI) on November, 19, 2014 has withdrawn the recognition granted to DSE. Internal Control The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee. Details about Internal controls is set out in the Management Discussion & Analysis Report which forms part of this report. Risk Management Pursuant to the requirement of Clause 49 of the Listing Agreement, the Company has constituted a Risk Management Committee comprising Ms. Geeta Mathur, Independent Director, Mr. L. V. Sehgal, Non-executive Director, Ms. Noriyo Nakamura, Non-executive Director, Mr. Pankaj Mital, Whole-time Director & Chief Operating Officer (COO) , Mr. Bimal Dhar, CEO, SMP and Mr. G. N. Gauba, CFO & Company Secretary. The Risk Management Committee has been entrusted with the responsibility to assist the Board Members about the risk assessment and its minimization procedures. Details of the Risk Management is set out in the Management Discussion & Analysis Report which forms part of this report Significant and Material Orders passed by the Regulators or Courts There are no significant material orders passed by the Regulators/ Courts which would impact the going concern status of the Company and its future operations. Corporate Social Responsibility (CSR) As per Section 135 of the Companies Act, 2013, a CSR committee has been formed by the Company. The CSR Committee comprises of Mr. V.C. Sehgal (Chairman), Mr. Arjun Puri, Independent Director and Mr. L.V. Segal, non-executive Director. The CSR Committee has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board and has been uploaded on the Company's website. The Company has identified the following focus areas for CSR activities which are specified in Schedule VII of the Companies Act, 2013 i) Skill Development and Vocation based education; ii) Livelihood enhancement; iii) Waste management and Sanitation; iv) Environmental sustainability; v) Women and youth empowerment; vi) Disaster relief; and vii) National Missions projects The Company is in the process of further formalizing the CSR spend. The Company has contributed Rs. 1.5 million on promotion of girls education during the year as against Rs.117 million required to be spent in accordance with Section 135 of the Act. The Annual Report on CSR activities is annexed herewith and marked as Annexure - C. Vigil Mechanism/ Whistle Blower Policy The Company has established a vigil mechanism (which incorporates a whistle blower policy in terms of listing agreement) for directors and employees to report their genuine concerns. The objective of the Policy is to create a window for any person who observes an unethical behavior, actual or suspected fraud, or violation of the Company's code of conduct or ethics policy (hereinafter "Unethical and Improper Practices"), either organizationally or individually to be able to raise it. Thought Arbitrage Consultancy has been appointed by the Board of Directors as an independent external ombudsman under this Whistle-blower mechanism. Protected Disclosure can be made by a Whistle Blower through an email, or dedicated telephone line or a letter to the Thought Arbitrage Consultancy or to the Ethics Officer or to the Chairman of the Audit Committee. The policy on vigil mechanism and whistle blower policy may be access on the Company's website. Extract of the Annual Return In accordance with Section 134(3)(a) of the Companies Act, 2013, an extract of the annual return in Form MGT-9 is annexed herewith as Annexure - D to this report. Human resources The relations with the employees and associates continued to remain cordial throughout the year. The Directors of your Company wish to place on record their appreciation for the excellent team spirit and dedication displayed by the employees of the Company. Acknowledgement Your Board of Directors would like to place on record their sincere appreciation for the wholehearted support and contributions made by all the employees of the Company as well as customers, suppliers, bankers and other authorities. The Directors also thank the Government of various countries, Govt. of India, State Governments in India and concerned Government Departments/Agencies for their co-operation. Last but not the least the Board of Directors wish to thank all the stakeholders of the Company and the collaborator Sumitomo Wiring Systems Limited, Japan for its continuous support. For and on behalf of the Board for Motherson Sumi Systems Limited V. C. Sehgal Chairman Place : Noida Date : June 10, 2015 |