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The directors have pleasure in presenting the twenty–third annual report and the audited accounts for the year ended 31st March, 2015.
1. COMPANY PERFORMANCE
The Company achieved higher than the industry growth in 2014–15, registering sales of 24.1 lakh two wheelers, growing by 20.9% over last year. Sale of Motorcycles increased by 21% and scooters by 47.7%. Moped sales grew at a modest 3.6%. Three–wheeler sales of the Company increased by 35% in 2014–15. Sales of spare parts grew by 19.7%. This performance was achieved despite a challenging year characterized by slow economic activity, successive crop failures and severe competitive intensity.
TVS Jupiter, StaR City+, Scooty Zest and Apache won several national and international awards clearly signaling a very strong customer acceptance and strong portfolio.
Total revenue of the Company including other income increased from Rs.7,996.15 Cr in the previous year to Rs.10,130.83 Cr in the current year. Profit before tax (PBT) for the year 2014–15 increased significantly to Rs.456.16 Cr from Rs. 352.54 Cr in the previous year. Similarly Profit After Tax increased from Rs.261.63 Cr achieved in the previous year after considering the exceptional items to Rs.347.83 Cr in 2014–15.
The board of directors of the Company (the board), at their meeting held on 3rd February, 2015, declared a first interim dividend of Re.0.75 per share (75%) for the year 2014–15 absorbing a sum of Rs.41.95 Cr including dividend distribution tax. The same was paid to the shareholders on 13th February 2015.
The board at its meeting held on 29th April, 2015 declared a second interim dividend of Rs.1.15 per share (115%) for the year 2014–15 absorbing a sum of Rs. 65.56 Cr including dividend distribution tax. The same will be paid to the shareholders on or after 9th May, 2015. Hence, the total amount of dividend including the second interim dividend payable, for the year ended 31st March, 2015 will aggregate to Rs.1.90 per share ( 190%) on 47,50,87,114 Equity Shares of Re.1/– each. The board does not recommend any further dividend for the year under consideration.
4. MANAGEMENT DISCUSSION AND ANALYSIS REPORT
INDUSTRY STRUCTURE AND DEVELOPMENTS
The two wheeler industry's growth appears to have converged to the long term trend after three years, growing 9% in 201415. While the first half of 2014–15 witnessed a growth of 18%, the second half grew by only 2%. Hence, the annual growth rate of 9% is not a fair reflection. Decline in growth in second half was more pronounced in rural markets. This is mainly due to a lag effect of lower agricultural output and impact of unseasonal rains.
Scooter as a category continued to gain share in total two wheeler industry. The category share of scooters increased from 23% to 27% due to changing consumer preferences and strong urban demand. Scooters segment increased from 36.97 lakh numbers to 47.00 lakh numbers. The motorcycle segment remained flat at 4% (129.97 lakh numbers) in 201415 compared to 4% (124.64 lakh numbers) in 2013–14. The continued traction in urban demand however enabled the premium segment to increase by 19% (24.23 lakh numbers) in 2014–15 from 12% (20.30 lakh numbers) in 2013–14. This is in contrast to the lower growth witnessed in the commuting segment of 1% growth (105.35 lakh numbers) in 2014–15 and of 3% growth (104.15 lakh numbers) in 2013–14. Mopeds grew marginally by 5% in 2014–15 compared to a decline of 8% in 2013–14.
Industry sales of three wheelers (Domestic plus Export)
The petrol passenger three wheeler industry (3 plus 1 segment) increased by 23% during 2014–15 to 5.61 lakh units. Domestic sales increased by 51% due to new permits released by Maharashtra (from 1.04 lakh units in 2013–14 to 1.57 lakh units in 2014–15). Exports increased by 15% (from 3.51 lakh units in 2013–14 to 4.04 lakh units in 2014–15).
BUSINESS OUTLOOK AND OVERVIEW
Revival in economic activity appears to be marginal and slow paced. With a nominal growth in crop prices, unseasonal rains, stagnating rural wages and declined rabi output, weakness in rural economy appears to persist. Increasing probability of El–nino effect can result in poor spatial and seasonal distribution of rainfall affecting kharif production. Consequently the growth in two wheeler industry in 2015–16 is expected to be flat at 9% as in 2014–15.
New Product Launches and Initiatives
The superior quality of our products is well reflected in the recently concluded JD Power study. The study ranks the Company as a distinct number 1 with its products having the lowest number of defects compared to competition. TVS Wego has least problems in scooter industry, followed by Scooty Pep+ and Jupiter. In Economy Segment motorcycles, TVS Sport & Star City+ are at 2nd & 3rd positions, respectively, while in Premium Segment, Apache RTR 160 & 180 are at 2nd & 3rd positions. In APEAL (Automotive Performance, Execution and Layout ) Survey, measuring how gratifying a new two–wheeler is to own and ride based on owner evaluations, TVS Sport and TVS Apache 180 rank highest in their respective categories. During the year 2014–15, the following new products and variants were launched.
TVS StaR City+:
TVS StaR City+ was launched in May 2014 with new 110cc eco thrust engine, best–in–class mileage and many classleading features. With an apt tagline of Style Ka Naya StaR, TVS StaR City+ is StaR of Style, Performance, Features and Comfort. The bike derives its urban look from a muscular tank, sporty head lamp, premium 3D logo and stylish side air scoops. The stunning designer styling of TVS StaR City+ is complemented by array of features such as multi–function digital display with service reminder and econometer. TVS StaR City+ won best motorcycle of the year award (Upto 110cc category) at NDTV Car and Bike Awards 2015 and Bike India Awards 2015. The launch advertising campaign for StaR City+ won Global Marketing Excellence Award, by World Marketing Congress.
TVS Sport that stands for style and mileage was introduced in a new colour called Team Blue in February 2015. The occasion was to create a buzz around the start of ICC 2015 Cricket World Cup where Team India with its signature blue colour entered as defending Champions.
TVS Scooty Zest 110:
To partner the new–age Indian women who live their life to the fullest, Scooty Zest 110 was launched in August 2014. Powered by 110cc CVT–I engine with best–in–class mileage of 62 kmpl, Scooty Zest 110 gives the best feminine definition to any two wheeler offering. Its best–inclass pickup, best–in–class underseat storage, first–time ever backlit speedometer and several unique features make it the best mix of style, power, comfort, convenience and safety. Widely appreciated by leading auto reviewers and users, Scooty Zest 110 won four scooter of the year awards this year viz. Autocar Scooter of the year, Overdrive Scooter of the year, Zigwheels Scooter of the year and Motorbeam Scooter of the year.
TVS Wego 110:
India's only dual usage scooter that has been built keeping both men and women in mind. Wego has been the most feature rich scooter in its category and with the launch of the refresh it has widened that gap. It houses a fully digital speedometer, body balance technology, all metal body, a powerful CVT–i engine which gives the best–in–class mileage and host of other features which serve as a delight to both men and women. It is an epitome of a clever integration of style, performance, power, convenience, comfort and safety.
Launched in September 2013 with next–gen 110cc CVT–I Engine, best–in–class mileage and many class–leading features, TVS Jupiter took riding comfort of scooters to the next level. It has become the no. 3 scooter brand in India in just 9 months and has crossed 5,00,000 customers, the fastest ever in the scooter segment.
With accolades pouring in, TVS Jupiter has become the most awarded scooter ever. To celebrate Jupiter being Scooter–of–the–Year, a "Special Edition" Jupiter was launched in December 2014. To be sold in only a limited number, the special edition Jupiter got a new 'Stallion Brown' colour with beige inner panels, a special edition dome sticker and a 'Dura Cool' seat.
Two wheeler operations: Domestic
Category shift from motorcycles to scooters continued in 2014–15, with more male buyers entering the category. The shift in the scooter consumer preferences towards bigger scooters which resulted in drop of TVS Scooty sales was addressed by TVS Jupiter. Also the launch of new 110cc Scooty Zest helped growth in the girls' student segment. Sale of scooters increased by 48.9%.
The newly launched StaR City+ along with product improvements in Apache provided an impetus to motorcycles sales which grew at 15.6% during the year.
The Company has strong distribution network of authorised dealers across India and continuously seeks to increase its reach.
The Company's two wheeler exports grew by 33.7% in 2014–15 with increasing demand, market–specific product actions and improvement in distribution network in some major export markets.
Three wheeler operations:
Sale of three wheelers grew by 35%. Domestic performance was boosted by the TVS King diesel version. Exports performance was propelled by demand in African countries.
Opportunities and Threats
Even though Indian economy is experiencing a slow growth phase, the long term prospects for two wheeler industry continue to be attractive.
A slew of new launches that has been planned in 2015–16 will further strengthen the presence of the Company in two wheeler industry.
RISKS AND CONCERNS
Continued investment in infrastructure, economic reforms and well distributed monsoons are essential for sustained growth in consumer demand. Currency devaluation in key two wheeler export markets remains a concern. Moreover, currency availability in key export markets can exert further pressure. The continued momentum in scooters and motorcycles and success of planned launches are vital to achieve business objectives. If the two wheeler industry growth remains at a low level, higher competitive intensity can lead to pressure on margins. The Company will initiate various cost reduction measures to mitigate this risk.
RISK MANAGEMENT POLICY
The Board has established a Risk Management Policy which formalizes the Company's approach to overview and manage material business risks. The policy is implemented through top down and bottom up approach identifying, assessing, monitoring and managing key risks across the Company's business units.
Risks and effectiveness of their management, are internally reviewed and reported regularly to the Board. The management has reported to the board that the Company's risk management and internal compliance and control systems are operating efficiently and effectively in all material respects.
The board is satisfied that there are adequate systems and procedures in place to identify, assess, monitor and manage risks. The Audit Committee also reviews reports by members of the management team and recommends suitable action. Risk mitigation policy has been approved by the board.
Total Quality Management (TQM)
TVS Way framework has been identified as a key enabler towards sustaining and improving the rigour in TQM process. Efforts are put in to consolidate the learning and training programs in various areas of management processes.
During 2014–15, the Company has further added 60 people as certified problem solvers through Green belt and Black belt programs, which initiative has helped the Company in completing many critical projects on time. Workmen contribution to suggestion schemes and Quality Control Circles projects has yielded significant results in the continuously rotating standardize–do–check–act (SDCA) cycle which has helped to retain good practices towards achieving Quality, Cost, Delivery (QCD) targets. More than 70,000 suggestions were implemented and 1,200 projects were completed during the last year.
Total cost management is a continuous journey and the Company has been instituting various cost control measures across the organization. The Company will continue to pursue process innovation, value engineering and alternate sourcing to reduce material costs during this year.
Research and Development
The Company is the most awarded two wheeler manufacturer for the year. This is testimony to a strong Research and
Development (R&D) team that works continuously towards creating exciting new products for our customers.
The R&D team, aided by modern Computer Aided Design/ Computer Aided Engineering resources and state–of–art engine and vehicle design facilities, is constantly in pursuit of honing and sustaining its competence to develop cutting edge technology. With a customer centric approach, the team focuses on the development of innovative features and fuel–efficient, environment friendly technologies.
The Company also collaborates with leading research establishments and educational institutions to explore and develop breakthrough opportunities. The R&D team has so far published 92 technical papers in national and international conferences.
TVS Racing, an R&D entity, over the years has provided valuable data and design inputs towards the development of reliable motorcycle models with excellent vehicle dynamics and handling. With a very good success rate of over 90% wins in national racing events, TVS racing became the first Indian manufacturer to participate and complete the world's longest and toughest "Dakar Rally 2015".
The Company has been using ERP to integrate its various business processes within the Company and with its business partners. The Company continued to implement several projects in the supply chain to improve its efficiency and transparency. A comprehensive retail management solution was deployed across all dealerships to monitor and manage the distribution network. Digital manufacturing execution system has been introduced to improve automation, process control and traceability.
During the year, the Company has enhanced its business analytical capability by introducing In–memory Computing. Several enhancements have been effected in the digital framework for measuring customer satisfaction, while related actions to improve customer satisfaction have been implemented.
As part of continuous improvement and to enhance information security, periodic audits are conducted by experts and necessary control measures are taken. During the year, the Company enhanced the scope of ISO 27001:2005 certification to all manufacturing units and sales offices. Business continuity plan for major business and design applications have been implemented and tested.
INTERNAL CONTROL AND THEIR ADEQUACY
The Company has a proper and adequate internal control system to ensure that all the assets of the Company are safeguarded and protected against any loss and that all the transactions are properly authorized and recorded. Information provided to management is reliable and timely and statutory obligations are adhered to.
INTERNAL FINANCIAL CONTROL
The Company has an established internal financial control framework including internal controls over financial reporting, operating controls and anti–fraud framework. The framework is reviewed regularly by the management and tested by internal audit team and presented to the audit committee. Based on the periodical testing, the framework is strengthened, from time to time, to ensure adequacy and effectiveness of Internal Financial Controls.
Occupational Health & Safety (OHS)
The Company has won the "First prize" in State Safety Award for longest accident free period from the Government of Tamil Nadu and Commendation award from National Safety Council, Tamil Nadu Chapter for implementing best practices in safety. The Company has also successfully completed surveillance audit in recertification process for continual improvement in Occupational Health Safety system through implementation of OHSAS18001:2007 standard. To motivate and sustain safety culture, the Company has implemented plant safety rating system and all the Company's plants are currently in "Silver" category.
HUMAN RESOURCE DEVELOPMENT (HRD)
Manpower planning & Resourcing, Employee engagement, Performance & Compensation management, Competency based development, Career & Succession planning and Organisation building are the six constituents of the HRD framework. Each of these constituents have a structured approach, guidelines, policies and standard operating procedures which are reviewed and updated periodically to deliver consistent results.
Through a systematic talent review process, leadership development for identified talents through exposure to globally acclaimed programs, challenging project assignments and job rotations are taken up on a regular basis.
The Company continues to maintain its record of good industrial relations without any interruption in work. As on 31st March, 2015, the Company had 5,048 employees on its rolls.
Statements in the management discussion and analysis report describing the Company's objectives, projections, estimates and expectations may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company's operations include, among others, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the government regulations, tax laws and other statutes and incidental factors.
5. DIRECTORS' RESPONSIBILITY STATEMENT
In accordance with the provisions of Section 134(5) of the Act 2013, with respect to Directors' Responsibility Statement, it is hereby stated –
i. that in the preparation of annual accounts for the financial year ended 31st March, 2015, the applicable Accounting Standards had been followed and that there were no material departures;
ii. that the directors had selected such accounting policies and applied them consistently and made judgments and estimates that were 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 and of the profit of the Company for the year under review;
iii. that the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
iv. that the directors had prepared the accounts for the financial year ended 31st March, 2015 on a "going concern basis";
v. that the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
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.
6. CORPORATE SOCIAL RESPONSIBILITY (CSR)
CSR activities have already been textured into the Company's value system through Srinivasan Services Trust (SST), established by the group companies in 1996 with the vision of building self–reliant rural community.
SST, the CSR arm of the Company, was established in 1996. Over 19 years of service, SST has played a pivotal role in changing lives of people in many villages in rural India by creating self–reliant communities that are models of sustainable development.
The Company is eligible to spend on their ongoing projects / programs, falling within the CSR activities specified under the Act 2013, as mandated by the Ministry of Corporate Affairs for carrying out the CSR activities.
The CSR Committee formulated and recommended a CSR policy in terms of Section 135 of the Act 2013 along with a list of projects / programmes to be undertaken for CSR spending in accordance with the Companies (Corporate Social Responsibility Policy) Rules, 2014.
Based on the recommendations of the CSR Committee, the board has approved the projects / programs carried out as
CSR activities by the following non–profitable organizations having a track record of more than the prescribed years in undertaking similar programmes / projects, constituting more than 2% of average net profits, for the immediate past three financial years, towards CSR spending for the current financial year 2014–2015.
Presently, SST is working in 2,501 villages spread across Tamil Nadu, Karnataka, Maharashtra, Himachal Pradesh and Andhra Pradesh. Its major focus areas are: Economic development, Health care, Quality education, Environment and Infrastructure. Of the 2,501 villages, 1,573 villages (11,69,104 population and 2,51,234 families) have been funded by the Company over the years. Achievements in 1,573 villages are:
• 1,44,800 families living in these villages have a monthly income of above Rs.15,000/–. They have financial security.
• 1244 farmers groups have been formed with 22,109 members.
• 1,01,834 farmers owning 1,17,089 hectares have increased the yields higher than the state average of the crops by 15%.
• 1,03,000 families earn more than Rs 3,500/– per month through livestock.
• Formed 5,091 Self Help Groups. These groups have 79,373 women as members.
• Of the 79,373 members, 71,774 members are in income generation activities. They earn a minimum additional income of Rs. 2500/– per month.
• 23,009 children in the age group below 5 are not malnourished.
• 1,21,288 women are not anaemic any more.
• 75,749 additional households have access to toilet facilities (from 71,851 to 1,47,600)
• The morbidity percentage reduced from 17% to 5%.
• Enrolment in anganwadis increased from 86% to 100% and attendance is 99%.
• 691 anganwadis have met all the Integrated Child Development Services Scheme (ICDS) standards.
• 88% involvement of mother volunteers in the functioning of anganwadis. They volunteer their time to ensure proper functioning.
• 100% enrolment of children in schools. There are no drop outs in the schools.
• Number of percentage of slow learners reduced in schools from 27% to 14 %
• Out of 747 schools, 503 schools are now model schools.
• 50,354 illiterate women out of 65,042 have been made literates.
Environment and Infrastructure:
• 1,39,280 households dispose solid waste through individual and common compost pits. 83 tons of vermi compost generated per month from wastes.
• Sewage water from 1,41,186 households disposed through soak pits, kitchen gardens and drain.
• Safe drinking water is available to 704 villages.
Community takes care of their development needs. 2,484 social leaders are active in this effort.
As required under Section 135 of the Act 2013 read with Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014, the annual report on CSR containing the particulars of the projects / programmes approved and recommended by CSR Committee and approved by the board for the financial year 2014–15 are given by way of Annexure IV attached to this Report.
7. FINANCIAL PERFORMANCE & POSITION OF
SUBSIDIARIES & ASSOCIATE COMPANIES
The following companies and bodies corporate are the subsidiaries/associates of the Company:
– Sundaram Auto Components Limited, Chennai;
– TVS Housing Limited, Chennai;
– PT. TVS Motor Company Indonesia, Jakarta;
– TVS Motor Company (Europe) B.V., Amsterdam;
– TVS Motor (Singapore) Pte. Limited, Singapore; and
– Sundaram Business Development Consulting (Shanghai) Company Limited, Shanghai.
– Emerald Haven Realty Limited, Chennai; and
– Green Infra Wind Energy Theni Limited, New Delhi.
Sundaram Auto Components Limited (SACL)
During the year, SACL, a wholly owned subsidiary of the Company, achieved a turnover of Rs.415 Cr in Plastics component business. SACL earned a profit after tax of Rs.25.32 Cr during the year 2014–15.
SACL was awarded the best supplier "System Rating" by Visteon CCS for the year 2014–15. During the year, SACL secured new businesses for manufacture of exterior painted parts and assemblies, safety critical air bag cover parts, interior assemblies and Heating, Ventilating and Air–Conditioning (HVAC) parts.
During the year, SACL productionized 140 new parts for various customers. SACL on 28th January, 2015, declared an interim dividend of Rs.3.50 per share (35%) for the year 2014–15 absorbing a sum of Rs.485.10 lakhs including dividend distribution tax.
SACL on 23rd April, 2015 recommended a final dividend of Rs.2.50 per share (25%) for the year 2014–15, for approval of shareholders, absorbing a sum of Rs.346.49 lakhs including dividend distribution tax.
Hence, the total amount of dividend including the final dividend recommended, for the year ended 31st March, 2015 will aggregate to Rs.6 per share (60%) on 1,15,50,000 equity shares of Rs.10/– each absorbing a sum of Rs.831.59 lakhs including dividend distribution tax.
TVS Housing Limited (TVSH) / Emerald Haven Realty Limited (EHRL)
During the year, TVSH has successfully completed phase 1 of the projects at its Nedungundram land at Chennai.
EHRL is the developer of the Nedungundram project of TVSH.
Construction of apartments have been completed and will be handed over to the buyers by June 2015. In Phase 2 of the Nedungundram project, villas are being developed and will be completed by June 2016.
PT.TVS Motor Company Indonesia (PT TVS)
During the year, motorcycle industry in Indonesia declined by 3%. The decline was more pronounced in the last quarter of the financial year when the industry plunged by 17% due to weak consumer sentiments arising out of poor commodity prices and the credit squeeze on hire purchase. The scooter category grew by 6% triggered by new product launches to end the year with a share of 70%. The sports motorcycle category and bebek category declined by 10% and 25% respectively.
PT TVS introduced two variants of 125cc sports motorcycle designed for specific customer segment during the later part of the year. During 2014–15, PT TVS sold 23,300 vehicles as against 19,200 vehicles sold during 2013–14, thereby registering a growth of 21%. While the domestic sales remained flat, exports grew by 40%. PT TVS continued its focus on exports and exported more than 14,000 units to ASEAN, Middle East and African countries.
During 2014–15, the loss at EBITDA level was marginally lower at USD 8 Mn compared to loss of USD 9 Mn recorded during 2013–14. During 2015–16, PT TVS plans to launch a new 200cc sports motorcycle and a new variant of its 110cc Dazz scooter with fuel injection system.
During the year under review, the Company has made an additional investment of USD 4 Mn in 4,00,000 ordinary shares of USD 10 each (Rs.24.92 Cr) in PT TVS.
TVS Motor Company (Europe) B.V & TVS Motor (Singapore) Pte. Ltd
The Company had earlier incorporated both these entities with a view to serve as special purpose vehicles for making and protecting the investments made in overseas operations of PT TVS.
Considering the change in the evaluation, the Company has now initiated steps to voluntarily wind up TVSM Europe, subject to such regulatory approvals / consents as may be required, both under Indian / Foreign laws. The other overseas entity viz TVS Motor Singapore Pte. Ltd will continue to hold the investment in PT TVS.
During the year under review, the Company has made an additional investment of Rs. 2.01 Cr in the ordinary shares of TVS Motor Singapore Pte. Ltd and the shares were allotted in April 2015.
Sundaram Business Development Consulting
(Shanghai) Company Limited (SBDC)
SBDC was initially established to explore options of sourcing, local assembly of two wheeler etc in China. After a complete review of the proposed activities through SBDC, it was advised that local manufacturing operations may not be required in China. Hence, the board has decided to retain the "Representative office" in China but to close down the operations of SBDC.
Green Infra Wind Energy Theni Ltd (GIWETL)
SACL had earlier invested Rs.3 Crores (30,00,000 shares of Rs.10 each) representing 21.58 % out of a total share capital of Rs.13.9 crores of GIWETL and in terms of the provisions of AS 18, GIWETL became an associate of the Company.
This investment by SACL was made purely to comply with the legal requirement to be eligible as captive consumer to draw low cost green energy units produced.
GIWETL has an installed capacity of 7.5 MW out of which 6 MW is committed to SACL. During the year under review, GIWETL reported a PBT of Rs.1.16 Cr and pro rata share of profit is considered for consolidation.
Financial position of all subsidiaries and associate companies are provided as an Annexure to consolidated financial statements.
8. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of the Company are prepared in accordance with the provisions of Section 129 of the Act 2013 read with the Companies (Accounts) Rules, 2014 and under the Listing Agreement with the Stock Exchanges along with a separate statement containing the salient features of the financial performance of subsidiaries / associates.
The audited financial statements in respect of each of its subsidiary companies will be made available to the shareholders, on receipt of a request from any shareholder them, and it has also been placed on the website of the Company. This will also be available for inspection by the shareholders at the registered office during the business hours.
9. DIRECTORS & KEY MANAGERIAL PERSONNEL
Independent Directors (IDs)
During the year, M/s T Kannan, C R Dua, R Ramakrishnan, Prince Asirvatham and Hemant Krishan Singh, were appointed as IDs for the first term of five consecutive years from the conclusion of the twenty–second Annual General Meeting and to receive remuneration by way of fees, reimbursement of expenses for participation in the meetings of the board and / or committees and profit related commission in terms of applicable provisions of the Act 2013 within the overall limit approved by the shareholders vide their resolution passed 14th July, 2014 at the annual general meeting as determined by the board from time to time.
On appointment, each ID has acknowledged the terms of appointment as set out in their letter of appointment. The appointment letter covers, inter alia, the terms of appointment, duties, remuneration and expenses, rights of access to information, other directorships, dealing in Company's shares, disclosure of Director's interests, insurance and indemnity. The IDs are provided with copies of the Company's policies and charters of various committees of the board.
All IDs have declared that they met all the criteria of independence as provided under Section 149(6) of the Act 2013 and Clause 49 of the Listing Agreement.
The detailed terms of appointment of IDs are disclosed on the Company's website with following link <http://> www.tvsmotor.com/pdf/Terms–of–Appointment–Independent– Directors.pdf.
Separate meeting of Independent Directors:
The IDs were fully kept informed of the Company's activities in all its spheres.
During the year under review, a separate meeting of IDs was held on 25th March, 2015 and the IDs reviewed the performance of:
(i) non–IDs viz., M/s. Venu Srinivasan, Chairman and Managing Director Sudarshan Venu, Joint Managing Director, H Lakshmanan, and Dr Lakshmi Venu, directors; and
(ii) the board as a whole.
They reviewed the performance of Chairman after taking into account the views of Executive and Non–Executive Directors.
They also assessed the quality, quantity and timeliness of flow of information between the Company's Management and the Board that are necessary for the Board to effectively and reasonably perform their duties.
All the IDs were present at the meeting.
In terms of Section 149 of the Act 2013 read with the Companies (Appointment and Qualification of Directors, Rules, 2014 and Clause 49 of the Listing Agreement, the Company is required to have a woman director on its board.
Dr Lakshmi Venu was appointed as additional, non–executive and non–independent director of the Company in terms of Section 161 read with Section 149 of the Act 2013, at the board meeting held on 10th September, 2014. She will vacate office in terms of Section 161 of the Act 2013 at the AGM and, being eligible, seeks herself for re–appointment at the ensuing AGM.
The board, based on the recommendation of nomination and remuneration committee, has recommended her appointment as non–executive and non independent director, liable to retire by rotation, in accordance with the articles of association of the Company (AoA), at the AGM, for approval by the shareholders.
A notice has been received from the holding company viz., Sundaram–Clayton Limited, as per the provisions of Section 160 of the Act 2013, along with a requisite deposit amount signifying its intention to propose the candidature of Dr Lakshmi Venu for appointment as director at the AGM.
Non–executive and non–independent directors (NE–Non IDs)
In terms of the provisions of sub–section (6) read with explanation to Section 152 of the Act 2013 two–thirds of the total number of directors i.e., excluding IDs, are liable to retire by rotation and out of which, one–third are liable to retire by rotation at every annual general meeting.
Mr Sudarshan Venu, JMD, who is liable to retire by rotation, at the AGM, and being eligible, offers himself for re–appointment.
Joint Managing Director (JMD)
During the year, the board, at its meeting held on 10th September, 2014, based on the recommendation of the NRC, appointed Mr Sudarshan Venu, who was actively involved in all spheres of the management of the Company and handling wider responsibilities for exploring new business opportunities – both in India and abroad – as JMD from the position of the whole–time director, subject to the approval of the shareholders at the AGM.
The other terms and conditions of his appointment and remuneration, as earlier approved by the board as well as by the shareholders of the Company on 18th March, 2013 through postal ballot and on 14th July, 2014 at the twenty–second annual general meeting of the Company, would remain unchanged.
Both the NRC and the board observed that the proposed appointment of Mr Sudarshan Venu as JMD also satisfies the requirements of the provisions of sub–section (3) of Section 196 of the Act 2013 and also part I of Schedule V of the Act 2013, dealing with the eligibility for appointment of managing directors.
Mr Sudarshan Venu as JMD of both the holding company, namely Sundaram–Clayton Limited (SCL) and the Company, would be entitled to draw remuneration from one or both the companies, provided that the total remuneration drawn from both the companies does not exceed the higher maximum limit admissible from any one of the Companies.
Chairman and Managing Director (CMD)
During the year, the board, at its meeting held on 3rd February, 2015 re–appointed Mr Venu Srinivasan as chairman and managing director of the Company (CMD), effective 24th April 2015 to hold the office for a period of five years on such terms and conditions, subject to the approval of the shareholders at the AGM.
Mr Venu Srinivasan was conferred an Honorary Doctorate of Management degree by Purdue University, USA in May 2014. The honour was conferred on him in recognition of his contributions in the field of management.
Further, in December 2014, Mayor of Busan Metropolitan City, Republic of Korea, His Excellency Suh Byung–soo conferred on him the Honorary Consul General of the Republic of Korea in Chennai. This award is one of the highest of its kind being awarded to a foreign national by the Korean. He is also the first Indian industrialist to be granted this honorary citizenship, in recognition of his valuable contribution in promoting Korea–India bilateral relations.
The board, based on the recommendation of NRC, has appointed and recommended his reappointment and the terms of remuneration as CMD, in accordance with the articles of association of the Company (AoA), at the AGM. Mr Venu Srinivasan as CMD of both the holding company namely Sundaram–Clayton Limited (SCL) and the Company would be entitled to draw remuneration from one or both the companies, provided that the total remuneration drawn from both the companies does not exceed the higher maximum limit admissible from any one of the Companies.
The brief resume of the directors proposed to be appointed and reappointed and other relevant information have been furnished in the Notice convening the annual general meeting of the Company. Appropriate resolutions for their appointment / re–appointment are being placed for approval of the shareholders at the AGM.
The directors, therefore, recommend their appointment / re–appointment as directors of the Company.
Key Managerial Personnel (KMPs):
At the board meeting held on 29th April, 2014, Mr Venu Srinivasan, CMD, Mr Sudarshan Venu, now JMD, Mr K N Radhakrishnan, President & Chief Executive Officer, Mr S G Murali Chief Financial Officer and Mr K S Srinivasan Company Secretary were designated as 'Key Managerial Personnel' of the Company in terms of Section 203 of the Act 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.
Nomination and Remuneration Policy
The Nomination and Remuneration Committee of Directors (NRC)reviews the composition of the board, to ensure that there is an appropriate mix of abilities, experience and diversity to serve the interests of all shareholders and the Company.
During the year, in accordance with the requirements under Section 178 of the Act 2013 and Clause 49 of Listing Agreement, the NRC formulated a Nomination and Remuneration Policy to govern the terms of nomination / appointment and remuneration of (i) Directors, (ii) Key Managerial Personnel (KMPs) and (iii) Senior Management Personnel (SMPs) of the Company. The same was approved by the board at its meeting held on 23rd September, 2014. The NRC also reviews succession planning of both SMPs and board. The Company's approach in recent years is to have a greater component of performance linked remuneration for SMPs.
The process of appointing a director / KMPs / SMPs is, that when a vacancy arises, or is expected, the NRC will identify, ascertain the integrity, qualification, appropriate expertise and experience, having regard to the skills that the candidate will bring to the board / company, and the balance of skills added to that of which the existing members hold.
The NRC will review the profile of persons and the most suitable person is either recommended for appointment by the board or is recommended to shareholders for their election. The NRC has discretion to decide whether qualification, expertise and experience possessed by a person are sufficient / satisfactory for the concerned position.
NRC will ensure that any person(s) who is / are appointed or continues in the employment of the Company as its executive chairman, managing director, whole–time director shall comply with the conditions as laid out under Part I of Schedule V to the Act 2013.
NRC will ensure that any appointment of a person as an independent Director of the Company will be made in accordance with the provisions of Section 149 read with Schedule IV of the Act 2013 along with any other applicable provisions and Clause 49 of the Listing Agreement.
Criteria for performance evaluation, disclosures on the remuneration of directors, criteria of making payments to non–executive directors have been disclosed as part of Corporate Governance Report attached herewith.
Evaluation of the board, committees and directors
In terms of Section 134 of the Act 2013 and the Corporate Governance requirements as prescribed under Clause 49 of the Listing Agreement, the board reviewed and evaluated its own performance from the perspectives of Company Performance, Strategy and Implementation, Risk Management, Corporate ethics, based on the evaluation criteria laid down by the NRC.
The board discussed and assessed its own composition, size, mix of skills and experience, its meeting sequence, effectiveness of discussion, decision making, follow up action, quality of information and the performance and reporting by the Committees viz., Audit Committee, Nomination and Remuneration Committee (NRC), Stakeholders Relationship Committee (SRC) and Corporate Social Responsibility Committee (CSR).
The board upon evaluation concluded that it is well balanced in terms of diversity of experience encompassing all the activities of the Company.We endeavour to have a diverse board representing a range of experience at policy–making levels in business and technology, and in areas that are relevant to the Company's global activities.
The performance of individual directors including all Independent directors assessed against a range of criteria such as contribution to the development of business strategy and performance of the Company, understanding the major risks affecting the Company, clear direction to the management and contribution to the board cohesion. The performance evaluation has been done by the entire board of directors, except the director concerned being evaluated. The board noted that all directors have understood the opportunities and risks to the Company's strategy and are supportive of the direction articulated by the management team towards consistent improvement.
The board also noted that corporate responsibility, ethics and compliance are taken seriously, and there is a good balance between the core values of the Company and the interests of stakeholders.The board satisfied with the Company's performance in all fronts viz., new product development, operations, sales and marketing, finance management, international business, employee relations and compliance with statutory / regulatory requirements and finally concluded that the board operates effectively and is closely aligned to the culture of the business.
The performance of each committee was evaluated by the board after seeking inputs from its members on the basis of the criteria such as matters assessed against terms of reference, time spent by the committees in considering matters, quality of information received, work of each committee, overall effectiveness and decision making and compliance with the corporate governance requirements and concluded that all the committees continued to function effectively, with full participation by all its members and the members of executive management of the Company.
The board reviewed each committee's terms of reference to ensure that the Company's existing practices remain appropriate. Recommendations from each committee are considered and approved by the board prior to implementation.
Number of board meetings held
The number of board meetings held during the financial year 2014–15 is provided as part of Corporate Governance
Report prepared in terms of Clause 49 of the Listing Agreement.
The Company at its twenty second AGM held on 14th July 2014 appointed M/s V Sankar Aiyar & Co., Chartered Accountants, Mumbai, having Firm Registration No. 109208W allotted by The Institute of Chartered Accountants of India, as statutory auditors of the Company to hold office, for four consecutive years from the conclusion of the said AGM, subject to ratification at every AGM. The Auditors' Report for the financial year 2014–15 does not contain any qualification, reservation or adverse remark and the same is attached with the annual report.
The Company has obtained necessary certificate under Section 141 of the Act 2013 from them conveying their eligibility for being statutory auditors of the Company for the year 2015–16.
The board, subject to the approval of the Central Government, has re–appointed Mr A N Raman, Cost Accountant holding Certificate of practice No. 5359 allotted by The Institute of Cost Accountants of India, as a Cost Auditor for conducting Cost Audit for the financial year 2015–16, in terms of the Companies (Cost Records and Audit) Amendment Rules, 2014.
The Company has also received necessary certificate under Section 141 of the Act 2013 from him conveying his eligibility. A sum of Rs.5 lakhs has been fixed by the board as remuneration in addition to reimbursement of service tax, travelling and out–of–pocket expenses payable to him and is also required to be ratified by the members, at the ensuing AGM as per Section 148(3) of the Act 2013. The Company does not require to carry out Cost Audit for the year 2014–15 and thereby filing of Cost Audit Report does not arise.
As required under the Cost (Cost Accounting Records) Rules, 2011, the Company has filed the Cost Audit Report for the year 2013–14 in XBRL format along with cost compliance Report.
As required under Section 204 of the Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Company is required to appoint a Secretarial Auditor for auditing secretarial and related records of the Company.
Accordingly, M/s S Krishnamurthy & Co., Company Secretaries, Chennai, was appointed as Secretarial Auditors for carrying out the secretarial audit for the financial year 2015–16.
As required by Section 204 of the Act, 2013, the Secretarial Audit Report for the year 2014–15, given by M/s S Krishnamurthy & Co., Company Secretaries, Chennai for auditing the secretarial and related records is attached to this report. The Secretarial Audit Report does not contain any qualification, reservation or other remarks.
The Company has been practicing the principles of good corporate governance over the years and lays strong emphasis on transparency, accountability and integrity.
A separate section on Corporate Governance and a certificate from the statutory auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement(s) with the Stock Exchange(s) form part of this Annual Report.
The chairman and managing director and the executive vice president – finance of the Company have certified to the board on financial statements and other matters in accordance with the Clause 49 (IX) of the Listing Agreement pertaining to CEO/CFO certification for the financial year ended 31st March 2015.
12.POLICY ON VIGIL MECHANISM
The Board at its meeting held on 23rd September 2014, adopted a Policy on Vigil Mechanism in accordance with the provisions of the Act 2013 and as per the revised Clause 49 of the Listing Agreement, which provides a formal mechanism for all directors, employees and other stakeholders of the Company, to report to the management their genuine concerns or grievances about unethical behaviour, actual or suspected fraud and any violation of the Company's Code of Business Conduct or Ethics policy.
The Policy also provides a direct access to the Chairperson of the Audit Committee to make protective disclosures to the management about grievances or violation of the Company's Code of Business Conduct and Ethics.
The Policy is disclosed on the Company's website with the following link <http://www.tvsmotor.com/pdf/Whistle–Blower–>Policy.pdf.
The Company has not accepted any deposit from the public within the meaning of Chapter V of the Act 2013, for the year ended 31st March 2015.
Information on conservation of energy, technology absorption, foreign exchange, etc
Information on conservation of energy, technology absorption and foreign exchange earnings and outgo are given in Annexure I to this report, in terms of the requirements of Section 134(3)(m) of the Act 2013 read with the Companies (Accounts) Rules 2014;
Extract of Annual Return in the prescribed form is given as Annexure II to this report, in terms of the requirement of Section 134(3)(a) of Act 2013 read with the Companies (Accounts) Rules, 2014.
Details of employees receiving the remuneration in excess of the limits prescribed under Section 197 of the Act 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed as a statement and given in Annexure III. In terms of first proviso to Section 136(1) of the Act 2013 the Annual Report, excluding the aforesaid annexure is being sent to the shareholders of the Company. The annexure is available for inspection at the Registered Office of the Company during business hours and any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Company.
Comparative analysis of remuneration paid
A comparative analysis of remuneration paid to Directors and employees with the Company's performance is given as Annexure V to this report.
Details of related party transactions
Details of material related party transactions under Section 188 of the Act 2013 read with the Companies (Meetings of Board and its Powers) Rules, 2014, are given in Annexure VI to this report in the prescribed form.
Details of loans / guarantees / investments made
The details of loans and guarantees under Section 186 of the Act 2013 read with the Companies (Meetings of Board and its Powers) Rules, 2014, for the financial year 2014–2015 are given as Annexure VII to this report. On loans granted to the employees, the Company has charged interest as per its remuneration policy, in compliance with Section 186 of the Act 2013. Please refer note No. IX to Notes on accounts for the financial year 2014–15, for details of investments made by the Company.
During the year under review, there were no cases filed pursuant to the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013.
The directors gratefully acknowledge the continued support and co–operation received from the holding company i.e. Sundaram–Clayton Limited, Chennai. The directors thank the bankers, investing institutions, customers, dealers, vendors and sub–contractors for their valuable support and assistance.
The directors wish to place on record their appreciation of the very good work done by all the employees of the Company during the year under review.
The directors also thank the investors for their continued faith in the Company.
For and on behalf of the Board
Place : Bengaluru
Date : 29th April 2015