DIRECTOR'S REPORT Part I - Performance / Operations The Directors have pleasure in presenting the Annual Report of the Company, together with the audited Financial Statements, for the year ended March 31, 2012. Dividend The Directors recommened a dividend of 100% (Re.1/- per equity share) for the year ended March 31, 2012. Company Performance The year under review witnessed a lot of challenges with growing competition and changes in customers preference. Despite the challenges posed, the Company achieved a sale volume of 101,990 vehicles - highest recorded in any year so far. This was aided by the launch of 'Dost', the first variant in the Light Commercial Vehicles (LCV) category, during the year. Overall, the performance in Exports, Power, Solutions Business and Spares have also been encouraging. Highlights of performance are discussed in detail in the Management Discussion and Analysis Report attached as Annexure-D to this Report. Research and development, technology absorption, energy conservation etc. Your Company continued to focus on Research and Development activities with specific reference to green initiatives, fuel efficiency, enhancement of comforts and development of new generation engines. Expenditure incurred by way of capital and revenue on these activities are shown separately. The particulars prescribed by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules,1988 relating to Conservation of Energy, Technology Absorption and Foreign Exchange are furnished vide Annexure - A to this Report. Long Term Borrowings: Secured Non-Convertible Debentures During the year, your Company issued Secured Non-convertible Debentures Series AL 16 to the tune of Rs.15,000 lakhs repayable at the end of 3rd, 4th and 5th year from the date of issue and fully redeemed Secured Non-Convertible Debentures Series AL 12 of Rs. 15,000 lakhs. External Commercial Borrowings (ECBs) Your Company contracted ECBs to the tune of Japanese Yen equivalent to USD 150 Mn during 2011-12 from banks for an average tenor of 5 years (door to door of 6 years) on unsecured basis and drew Japanese Yen equivalent to USD 90 Mn during 2011-12. The balance of USD 60 Mn would be drawn in the ensuing financial year. The funds drawn under ECBs were utilized to fund the capital expenditure programmes of your Company as per extant RBI guidelines and as per the terms of the loan. Your Company repaid ECB loan instalments that fell due to the tune of USD 36.66 Mn during 2011-12. Strategic Alliances Optare plc, U.K. In line with the vision of being among the top 5 bus manufacturers globally, significant stakes were acquired by your Company together with it's investment arms in Optare pic, a leading bus manufacturer in U.K. thereby opening large opportunities for growth and development based on synergy and integration with the Company's bus business. Part II - Corporate matters Share Capital - Issue of Bonus Shares With the approval of the shareholders, your Company issued 133,03,38,317 Equity Shares of Re.1/- each, fully paid-up, as Bonus Shares, in the ratio of 1 (One) Bonus Share for every existing 1 (One) Ordinary Share of Re.1/-each held on August 3, 2011, (being the Record Date fixed for the purpose) by capitalisation of Securities Consequently, the Issued and Subscribed Share Capital of your Company, as on March 31, 2012, stands increased to Rs. 266,08,81,309/- divided into 266,08,81,309 Ordinary Shares of Re. 1/- each and Rs. 266,06,76,634 divided into 266,06,76,634 Ordinary Shares of Re. 1/- each respectively. Human Resources Human Resource Development is a critical organizational priority and considered as an imperative to growth. All the strategic HR initiatives are moving forward at a quick clip. Talent Acquisition, Management and Development initiatives are progressing in an integrated manner. One of the flagship HR initiatives, the 3-Tier Leadership Development Programme was rolled out to ensure early identification of talent and provide them opportunities to learn, contribute and grow. This initiative would continuously seed the internal leadership pipeline. During the year, rationalization of people processes such as IT enabled PMS, Job Evaluation and Compensation restructuring have been taken up to drive meritocracy, transparency and mutuality to reinforce your Company as a high performing organization. The capability enhancement efforts of the organization extend to shopfloor transformation. Shopfloor initiatives such as MISSION GEMBA, BLESSING PLAN and KNOWLEDGE ACADEMY have been recognized as best industry practices. Attrition rate of 10.9 % was the second lowest in the industry, an indicator of happy, engaged employees. Your Company was successful in achieving planned labour productivity levels and the Company at all seven manufacturing units maintained cordial and healthy industrial relations. Corporate Governance Your Company is fully compliant with the Corporate Governance guidelines, as laid out in Clause 49 of the Listing Agreement. All the Directors (and also the members of the Senior Management - of the rank of General Managers and above) have confirmed in writing their compliance with and adherence to the Code of Conduct adopted by the Company. The details of the Code of Conduct are furnished in Annexure-B to this Report. The Executive Vice Chairman has issued certificate of compliance to the Code of Conduct, as required by SEBI guidelines. Many of the Corporate Governance Voluntary Guidelines 2009 issued by Ministry of Corporate Affairs are being followed by your Company. The Statutory Auditors of the Company have examined the requirement of Corporate Governance with referred to Clause 49 of the Listing Agreement and have certified the compliance as required under SEBI guidelines. The Directors' Responsibility Statement as required under Section 217(2AA) of the Companies Act, 1956 is furnished in Annexure -E to this Report. The information required under Section 217(2A) of the Companies Act, 1956 and the Rules thereunder, in respect of employees is provided in the Annexure-F forming part of this Report. The MD / CFO certification as required under the SEBI guidelines is attached - as Annexure -G to this Report. Related Party disclosures/transactions are detailed in Note 3.5 of the Notes to the Financial Statements. Directors Mr Shardul S Shroff, Mr A K Dasand Mr F Sahami, Directors, retire at the forthcoming Annual General Meeting and are eligible for re-appointment. Necessary resolutions are being placed before the shareholders for approval. Cost Auditors The Government has stipulated Cost Audit of the Company's records in respect of motor vehicles as well as engineering industries (diesel engines). M/s Geeyes & Co., (Regn. No.00044). Cost Auditors have carried out these audits. Their findings have been satisfactory. The Audit Committee of the Board has recommended their re-appointment for the year 2012-13. Cost Audit Reports for the financial year 2010-11 were filed on September 23, 2011 (due date - September 30, 2011). Auditors M/s M S Krishnaswami & Rajan, Chartered Accountants and M/s Deloitte Haskins & Sells, Chartered Accountants, retire at the close of this Annual General Meeting and are eligible for re-appointment. The Company has received confirmation from both the firms that their appointment will be within the limits prescribed under Section 224(1B) of the Companies Act, 1956. The Audit Committee of the Board has recommended their re-appointment for the year 2012-13. The necessary resolution is being placed before the shareholders for approval. Acknowledgement The Directors wish to express their appreciation of the continued co-operation of the Central Government and State Governments, bankers, financial institutions, customers, dealers and suppliers and also the valuable assistance and advice received from the joint venture partners, the major shareholders Hinduja Automotive Limited, the Hinduja Group and all the stakeholders. The Directors also wish to thank all the employees for their contribution, support and continued co-operation throughout the year. On behalf of the Board of Directors Dheeraj G Hinduja Chairman Chennai May 14, 2012 |