DIRECTORS' REPORT

TO  

THE MEMBERS,

Your Directors have pleasure in presenting the Thirtieth (30th) Annual Report on the business and Operations of the Company together with the Audited Accounts for the year ended on 31st March 2015.

DIVIDEND

Your Directors are pleased to recommend a total dividend of Rs. 10 per Equity Share i.e. @ 100% on the paid-up Equity Share Capital of the Company for the year ended 31st March 2015, this includes an interim dividend of Rs. 5 per Equity Share i.e. @50% on the Paid-up Equity Share Capital of the Company paid during the year under review.

Final dividend of Rs. 5 per Equity Share, if approved at the ensuing Annual General Meeting, shall be paid out of the profit of the Company to those share holders whose name appear on Register of Member on 19th August' 2015. In respect of the shares held in dematerialized form, the dividend will be paid to members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited as beneficial owners as on that date.

The Cash outflow on account of dividend including interim dividend on equity share capital will be Rs. 714.96 Lacs including dividend tax of Rs. 120.32 Lacs.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The existing composition of the Company's Board is fully in conformity with the applicable provisions of the Companies Act 2013 and Listing Agreement. Your Company has Nine (9) Directors consisting of Three (3) Independent Directors, Three (3) Non-Executive Directors, Three (3) Whole time Executive Directors including Managing Director as on 31st March, 2015.

Shri Ajay Relan, Managing Director, Shri Pradeep Rastogi, President Legal & CFO and Shri Nitin Vishnoi, Company Secretary of the Company are the Key Managerial Personnel as per the provisions of the Companies Act, 2013 and were already in office before the commencement of the Companies Act, 2013.

In terms of the provisions of Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a company shall have at least one Woman Director on its Board. Smt. Sharda Relan is the Woman Director on the Board who is the Non-Executive Director.

Pursuant to the provisions of Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement with stock exchange, Shri Kishan N. Parikh, Shri O. P. Khaitan and Prof. Ashok Kumar Bhattacharya were appointed as Independent Directors at the Annual General Meeting of the Company held on 3rd September 2014. The terms and conditions of appointment of independent directors are as per the applicable laws.

Further, all the Independent Directors have declared and affirmed their compliance with the independence criteria as prescribed in Section 149(6) of the Companies Act, 2013 and clause 49 of the listing agreement in respect of their position as an "Independent Director" of the Company.

During the year under review Shri Bireswar Mitra (DIN 06958002), was appointed as an additional director w.e.f. 7th August' 2014 and on 3rd September' 2014, also designed as an Executive Director of the Company. Further in November' 2014, members of the Company had accorded their consent through postal ballot and appointed him as a rotational Director and also an Executive Director.

Shri Udayan Banerjee (DIN No 00339754) resigned as whole-time director with effect from 1st October' 2014. The Board places on record its appreciation for the services rendered by Shri Udayan Banerjee during his tenure with the Company.

In terms of Section 152 of the Companies Act, 2013, Shri R P Chowdhry (DIN: 00337775) and Smt. Sharda Relan (DIN: 00252181), Directors of the Company are liable to retire by rotation and being eligible offer themselves for re-appointment at the ensuing Annual General Meeting.

A brief profile of the above-named Directors seeking reappointment at the ensuing Annual General Meeting of the Company has been provided in the notice of the Annual General Meeting.

The Board met five (5) times during the financial year, the detailed information on which is given in the Report on Corporate Governance that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act, 2013.

BOARD LEVEL PERFORMANCE EVALUATION

The Board of Directors has carried out an annual evaluation of its own performance and that of its committees and individual directors pursuant to the provisions of the Companies Act, 2013 and the Clause 49 of the Listing Agreement.

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, contribution towards development of the strategy 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 in consultation with Nomination and Remuneration Committee ("NRC") 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, contribution at the meetings and otherwise, independent judgment, etc.

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 directors and non-executive directors. The same was discussed in the board meeting that followed the meeting of the independent Directors, at which the performance of the Board, its committees and individual directors was also discussed.

COMPANY'S POLICY ON DIRECTOR'S APPOINTMENT AND REMUNERATION INCLUDING CRITERIA FOR DETERMINING QUALIFICATION, ATTRIBUTES, INDEPENDENCE, ETC.

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, is appended as Annexure I to this Report.

AUDIT COMMITTEE

The Audit Committee of the Company is constituted in line with the provisions of the Companies Act, 2013 & Clause 49 of the Listing Agreement. The Audit Committee at present comprises one Non-Executive Director viz. Smt. Sharda Relan and two Independent Directors viz. Shri O.P. Khaitan (Committee's Chairman) and Shri Kishan N Parikh. All three members of Committee have adequate financial & accounting knowledge and background.

SECRETARIAL AUDIT

The Board has appointed M/s V. K. Chaudhary & Co. (Company Secretaries in practice holding CP. No 4548) 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 marked as Annexure II to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

AUDITORS & AUDITORS' REPORT

M/s. S.R. Dinodia & Co. LLP (Formerly Known as M/s S.R. Dinodia & Co.), Chartered Accountants (holding Registration No. 001478N/ N500005), Statutory Auditors of the Company will retire at the conclusion of the forthcoming Annual General Meeting ("AGM") and being eligible, offers themselves for re-appointment, The Company has received the consent from the Auditors and confirmation to the effect that they are not disqualified to be appointed as the Auditors of the Company in terms of the provisions of the Companies Act 2013 ("Act") and rules made thereunder and that their appointment, if made, will be within the prescribed limits under the Act. Accordingly the Audit Committee and the Board of Directors has recommended the re-appointment of M/s. S.R. Dinodia & Co. LLP (Formerly Known as M/s S.R. Dinodia & Co.), Chartered Accountants as the Statutory Auditors of the Company to hold office from the ensuing AGM till the conclusion of the next AGM on remuneration to be decided by the Board or Committee thereof to the shareholders for approval.

Auditors' report is self-explanatory and therefore does not require further comments and explanation.

COST AUDITORS

The Company appointed M/s Gurdeep Singh & Associates as Cost Auditors for the financial year 2014-15, though it was not applicable for that year. Based on the recommendation of Audit Committee, M/s Gurdeep Singh & Associates( holding M No. 9967), Cost Accountants, 3238, Ranjit Nagar, Near Metro Station, Patel Nagar, New Delhi-110008, India, being eligible have been appointed by the Board as the Cost Auditors of the Company for the Financial Year 2015-16 subject to ratification of remuneration by the Members. The Company has received a letter from them to the effect that their reappointment would be within the limits prescribed under Companies Act, 2013 and that they are not disqualified for such re-appointment within the meaning of section 141 of the Companies  Act, 2013.

CORPORATE SOCIAL RESPONSIBILITY

A Corporate Social Responsibility Committee was constituted on 22nd May, 2014 comprising of Shri N.D. Relan as Chairman, Smt. Sharda Relan and Shri Kishan N Parikh, as members of the Committee. The Committee met once during the year on 10th February' 2015 to inter-alia finalize the Corporate Social Responsibility Policy ("CSR Policy").

The terms of reference of the Corporate Social Responsibility Committee, number and dates of meetings held, attendance of the Directors are given separately in the attached Corporate Governance Report.

The Company recognizes that its operations impact a wide community of stakeholders, including investors, employees, customers, business associates and local communities and that appropriate attention to the fulfillment of its corporate responsibilities can enhance overall performance. In structuring its approach to the various aspects of Corporate Social Responsibility, the Company takes into account the guidelines and statements issued by various regulatory bodies.

As per the requirements of Section 135 of the Companies Act, 2013, the Company was required to spend at least two per cent of its average net profits of immediate three preceding financial years, in pursuance of its Corporate Social Responsibility (CSR) Policy. Accordingly, the Company had to spend a minimum of Rs. 59.44 Lacs during the current financial year towards CSR activities. During the current year, the Company has adopted a strategy whereby certain long term programmes will be undertaken by the Company for the social and economic welfare. As the process of evaluating and identifying specific programme is in progress, no amount was spent on CSR during the year ended 31st March 2015. The annual report on CSR activities is appended as Annexure III to the Directors' report.

EXTRACT OF ANNUAL RETURN

In accordance with Section 134(3) (a) of the Companies Act, 2013, an extract of the annual return in the prescribed format is appended as Annexure IV to the Directors' report.

PARTICULARS OF EMPLOYEES

The ratio of the remuneration of each Director to the median employee's remuneration and other details in terms of sub-section 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report as Annexure V.

The statement containing name and particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this report as

Annexure VI.

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

The particulars of Conservation of energy, Technology Absorption and Foreign Exchange Earnings and Outgo as required under Section 134(3) (m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, are annexed herewith marked as Annexure VII to this Report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the financial statements provided in this Annual Report.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of contracts or arrangements with related parties referred to in Section 188(1), in prescribed in Form AOC-2, is appended as Annexure VIII.

CORPORATE GOVERNANCE

We strive to attain high standards of corporate governance while interacting with all our stakeholders. The "Report on Corporate Governance" forms an integral part of this report and is set out as Annexure IX to this report. The certificate of M/s. S.R. Dinodia & Co. LLP (Formerly Known as M/s S.R. Dinodia & Co.), Chartered Accountants, the statutory auditors of the Company certifying compliance with the conditions of corporate governance as stipulated in Clause 49 of the Listing Agreement is annexed with the report on corporate governance.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report for the year under review as stipulated under Clause 49 of the Listing Agreement is appended as Annexure X to this Report.

VIGIL MECHANISM

The Company has established a vigil mechanism for Directors and employees to report their genuine concerns. Vigil Mechanism is available on the Company's website www.shardamotor.com

FIXED DEPOSITS

The Company has not accepted any fixed deposits from the public during the year under review and has nil fixed deposits outstanding.

INDUSTRIAL RELATIONS

During the period under review, the Company maintained healthy, cordial and harmonious industrial relations at all levels.

Your Directors wish to place on record their appreciation of the co-operation, valuable contributions, enthusiasm and unstinting efforts made by the employees of the Company at all levels in the organization and they have ensured the accomplishment of excellent results and achievement by the Company.

MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There have been no material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this report.

THE DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE;

During the year under review, no significant and material orders have been passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future.

COMPANIES WHICH HAVE BECOME OR CEASED TO BE SUBSIDIARIES, JOINT VENTURES OR ASSOCIATE COMPANIES

During the year under review, a Joint Venture company with Name and style of "Toyo Sharda (India) Private Limited" has been incorporated in terms of Joint Venture Agreement with Toyo Seat Co. Ltd., Japan.

RISK ASSESSMENT AND RISK MINIMIZATION PROCEDURE

In line with the new regulatory requirements, the Company has formally framed a Risk Assessment and Risk Minimization Procedure to identify and assess the key risk areas and monitor the same. The Board periodically reviews the risks and suggests steps to be taken to control the risks.

Details on the Company's risk management framework, risk evaluation, risk identification etc. is provided in the Mangement Discussion and Analysis Report forming part of this report.

DETAILS OF NUMBER OF CASES FILED, IF ANY, AND THEIR DISPOSAL IN TERMS OF SECTION 22 OF THE SEXUAL  HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013.

The Company values the dignity of individuals and strives to provide a safe and respectable work environment to all its employees. The Company is committed to providing an environment, which is free of discrimination, intimidation and abuse. The Company believes that it is the responsibility of the organisation to protect the integrity and dignity of its employees and also to avoid conflicts and disruptions in the work environment due to such cases.

The Company has put in place a 'Policy on redressal of Sexual Harassment at Work Place' as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("Sexual Harassment Act"). As per the policy, any employee may report his / her complaint to the Redressal Committee formed for this purpose or their Manager or HR personnel. We affirm that adequate access has been provided to any complainant who wished to register a complaint under the policy, but no complaint was registered during the year under review.

DIRECTORS' RESPONSIBILITY STATEMENT

In terms of Section 134(3) (c) read with 134(5) of the Companies Act, 2013, it is hereby stated that:

(a) In the preparation of the annual accounts, the applicable accounting standards had been followed;

(b) Appropriate accounting policies have been selected and applied consistently and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at March 31, 2015 and of the profit and loss of the company for the year ended on that date;

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) The annual accounts have been prepared on a going concern basis;

(e) Internal financial controls have been laid down to be followed by the company and that such internal financial controls are adequate and were operating effectively;

(f) Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

ACKNOWLEDGEMENT

Your Company has been able to operate efficiently because of the professionalism, creativity, integrity and continuous improvement in all functional areas to ensure efficient utilization of the Company's resources for sustainable and profitable growth. The Directors acknowledge their deep appreciation to employees at all levels for their total dedication, hard work, commitment and collective team work, which has enabled the Company to remain at the forefront of the industry despite increased competition and challenges.

Your Directors take this opportunity to express their grateful appreciation for the excellent assistance and co-operation received from its customers i.e. M/s Hyundai Motor India Ltd., M/s Mahindra & Mahindra Ltd., M/ s. Tata Motors Ltd., M/s. Samsung Electronics India Ltd. and M/s. Bharat Seats Ltd.

Your Directors also extend their appreciation to Yes Bank Limited, HDFC Bank, Citi Bank, ICICI Bank Limited, State Bank of India, Punjab National Bank and various Departments of Central and State Government(s).

Your Directors also would like to thank all the shareholders for their continued support & Co-operation.

On behalf of the Board of Directors

For SHARDA MOTOR INDUSTRIES LTD.

N. D. Relan

Co-Chairman

(DIN: 00240280)

Ajay Relan

Managing Director

(DIN: 00257584)

 Place : New Delhi

Dated : 26th May' 2015