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Updated:19 Nov, 2019, 15:59 PM IST

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-0.45 -3.01%

Updated:19 Nov, 2019, 16:01 PM IST

DIRECTORS' REPORT

TO  

THE MEMBERS,

Your Directors are pleased to present their Seventy Eighth Annual Report on the business and operations of the Company (or "CG") and the accounts for the financial year ended 31 March 2015.

THE YEAR IN RETROSPECT

The consolidated net revenue of the Company during 2014–2015 grew by 2.8% at Rs.14,013 crore, as compared with Rs.13,632 crore last year. The Company has achieved a stand­alone net turnover of Rs.7,837 crore, during the year under review, as compared with Rs.7,571 crore during the previous year, a rise of 3.5%.

Consolidated profit before tax decreased to Rs.428 crore, as compared with Rs.495 crore in the previous year, a decrease of 13.4% over last year. Stand–alone profit before tax increased from Rs.713 crore to Rs.899 crore, an increase of 26.3%.

Consolidated profit after tax is Rs. 209 crore as compared with consolidated profit after tax of Rs.244 crore in the previous year, a decrease of 14.3%. The Company recorded a stand–alone profit after tax of Rs.731 crore, an increase of 40.3% from Rs.521 crore last year.

The Sales and Profit Before Interest and Tax (PBIT) of the respective Business Groups, compared with last year is given in Table 1.

A detailed review of the operations and performance of the Company and each Business Group as well as the Company's International operations is contained in the Management Discussion and Analysis Report, which is given as a separate chapter in the Annual Report.

AMALGAMATION

The Board of Directors, at their meeting held on 29 January 2014, approved the amalgamation of CG–ZIV Power Automation Solutions Limited (CG–ZIV) and CG Energy Management Limited (CGEM), wholly owned subsidiaries of the Company, with the Company, for simplification of the shareholding structure and operational synergies, as reported in the previous year's Directors' Report.

A Scheme of Amalgamation filed with the Hon'ble High Court of Bombay was duly approved by the High Court and the said Scheme became effective on 25 March 2015, with 1 April 2014, as the appointed date.

The Amalgamation of CG –ZIV and CGEM with the Company has resulted in an increase in the Authorised Share Capital of the Company by Rs.46.60 crore.  Being wholly owned subsidiaries of the Company, the entire paid–up share capital of CG–ZIV and CGEM would be cancelled and both the companies would stand dissolved without winding up.

DEMERGER

The Company operates in two business domains – B2B comprising Power, Industrial and Automation businesses and B2C which comprises the Consumer Products  Business. With a view to create better growth opportunities for its two large but significantly different businesses, the Board of Directors have considered it prudent to demerge the B2B business and B2C business by transfer of the entire Consumer Products Business of the Company into a separate Company under a Scheme of Demerger. The Board believes that the demerger will create greater independence and flexibility in pursuing growth opportunities for the B2B and B2C businesses under two stronger and independent entities and thereby unlocking shareholder value.

After considering the comments from stakeholders and regulatory authorities, the Board approved a Scheme of Arrangement (Scheme) for the demerger at its meeting held on 3 March 2015, under which, the Consumer Products Business of the Company will be transferred into, Crompton Greaves

Consumer Electricals Limited (CGCEL), which, upon demerger, shall be listed on the Stock Exchanges, subject to receiving regulatory and statutory approvals. The Scheme approved by the Board, proposes that upon sanction of the Scheme by the Hon'ble High Court of Bombay, the shareholders of the Company will be allotted one equity share of CGCEL for every equity share held in the Company. The Scheme has been filed in the High Court of Bombay for directions for convening meeting of shareholders of the Company for approval of the Scheme.

The Company has received an intimation from Avantha Holdings Limited, one of the entities of the promoter group of the Company, addressed to the Stock Exchanges announcing its intention to divest its 34.37% proposed shareholding in CGCEL to be allotted consequent to the sanction of the Scheme of Demerger, to one or more special purpose vehicles managed by Advent International Corporation, USA and a wholly owned subsidiary of Temasek Holdings (Private) Limited for an aggregate consideration of Rs 2000 crore, subject to requisite consents and approvals.

DIVIDEND

The Company declared two interim dividends during the year :

• Rs.0.40 per equity share (20%) aggregating to a total dividend payout of Rs. 30.06 crore (including dividend tax) declared on

16 October 2014; the Record Date for this purpose was 27 October 2014; and the Interim Dividend was paid on 5 November 2014.

• Rs.0.40 per equity share (20%) aggregating to a total dividend payout of Rs.30.08 crore (including dividend tax) declared on  03 February 2015; the Record Date for this purpose was 09 February 2015; and the Interim Dividend was paid on 18 February 2015.

• The total dividend payout (including dividend tax) for the financial year 2014–15, as a percentage of the share capital works out to  48.00%

RESERVES

The Reserves, on stand–alone basis, at the beginning of the year were Rs.3,231 crore. The Reserves at the end of the year are Rs.3,884 crore.

DIRECTORATE

The appointment and remuneration of Directors is governed by the Remuneration  Policy of the Company which also contains the criteria for determining qualifications, positive attributes and independence of Directors. The Policy along with the CG Board Diversity Policy aims at attracting and retaining high calibre personnel from diverse educational fields and with varied experience to serve on the Board for guiding the Management team to enhanced organizational performance. The detailed Remuneration Policy is contained in the Corporate Governance section of the Annual Report.

The Company's Board comprises of nine member Board of Directors. The Chairman, Mr Gautam Thapar is a Non–Executive Director and represents the Promoter Group. Mr Laurent Demortier is the CEO and Managing Director. Five other Non–Executive Directors – Mr Shirish Apte, Mr Sanjay Labroo, Dr (Mrs) Colette Lewiner, Ms Meher Pudumjee and Dr Valentin von Massow are independent in terms of Clause 49 of the Listing Agreement and Companies Act, 2013. Two other Directors –Mr B Hariharan and Dr Omkar Goswami are Non–Executive Directors. The Directors are reputed professionals with diverse functional expertise, industry experience, educational qualifications, ethnicity and gender mix relevant to fulfilling the Company's objectives and strategic goals.

Mr Suresh Prabhu, Independent Director stepped down from his directorship of the Company, with effect from 7 November 2014. The Board places on record its gratitude and appreciation for Mr Prabhu's guidance to the Company during his tenure as a Director.

None of the Independent Directors are liable to retire at the forthcoming Annual General Meeting. All Independent Directors have submitted declarations that they continue to meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013, and Clause 49 of the Listing Agreement.

As per the provisions of the Companies Act, 2013, Mr Gautam Thapar retires by rotation at the forthcoming Annual General Meeting; and being eligible, offers himself for re–appointment to the Board. His profile details are contained in the accompanying Notice of the forthcoming Annual General Meeting and in the Corporate Governance Report.

The Board of Directors met 8 times during financial year 2014–15. The details of the meetings and the attendance of the Directors are mentioned in the Corporate Governance Report.

The Board has established Committees as a matter of good corporate governance practice and as per the requirements of the Companies Act, 2013. The Committees are Risk and Audit Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee and Stakeholders' Relationship Committee. The composition, terms of reference, number of meetings held and business transacted by the Committees is given in the Corporate Governance Report.

During the year, the Board has carried out the annual evaluation of its own performance as well as the evaluation of the working of its Committees and individual Directors, including

Chairman of the Board. This exercise was carried out through a structured questionnaire prepared separately for Board, Committee and individual Directors. The questionnaire for Board evaluation was prepared taking into consideration various aspects of the Board's functioning such as adequacy of the composition and role of the Board, Board meeting and reporting process, effectiveness of strategies, risk management systems, external relationships, ethics and governance framework. Committee performance was evaluated on the basis of its composition, effectiveness in carrying out its  mandate, relevance of its recommendations and allocation of adequate time to fulfill its mandate.

Individual and peer assessment of Directors based on parameters such as knowledge, contribution, level of engagement, communication/relationship with Board and Senior Management were received by the Chairman for individual feedback. The Board acknowledged certain key improvement areas emerging through this exercise and action plans to address these are in progress. The performance evaluation of the Chairman was carried out by the Independent Directors. The Directors expressed their satisfaction with the evaluation process and its result.

PROMOTER GROUP

The Company is a part of the Avantha Group, one of India's leading diversified conglomerates. Led by Chairman Mr Gautam Thapar, the Avantha Group has a global footprint and operates in 90 countries with more than 25,000 employees worldwide. As required by the Listing Agreement with Stock Exchanges, CG periodically discloses its promoter group and persons acting in  concert in the shareholding pattern and other filings with the Stock Exchanges.

SUBSIDIARY COMPANIES

The Company has four Indian subsidiaries as on 31 March 2015. Additionally, the Company has 32 foreign subsidiaries as on 31 March 2015. The particulars are mentioned in Annexure 6 to this Report in Form No. MGT 9 (Extract of Annual Return). Pursuant to section 136 of the Companies Act, 2013, the audited accounts of each of the Company's subsidiaries are placed on the  website of the Company and not enclosed in the Annual Report. If any Member of the Company so desires, the Company will be happy to make available the Annual Accounts of the subsidiaries to him/her, on request. The physical copies of the aforesaid documents will also be available at the Company's Registered Office for inspection during normal business hours on all working days, excluding Saturdays.

BRANCH OFFICE IN POLAND

The Company has a branch office in Poland. The stand–alone financial statements of the Company includes the financial statements of its Poland branch i.e., Crompton Greaves Ltd SA.

CONSOLIDATION OF ACCOUNTS

As required by Accounting Standards AS–21 and AS–23 of the Institute of Chartered Accountants of India, the financial statements of the Company reflect the consolidation of the Accounts of the Company, its 36 subsidiaries, and 4 Associate Companies. The Associate Companies are CG Lucy Switchgear Limited, Pauwels Middle East Trading & Contracting Pvt Co. LLC, K.K. El Fi Co Ltd, Japan and Saudi Power Transformers Company Ltd.

The performance and financial position of each of the subsidiaries, associates and joint venture companies are detailed in 'Statement containing salient features of the financial statement of subsidiaries/associate companies/ joint ventures' in form AOC I pursuant to section 129 of the Companies Act, 2013.

RELATED PARTY TRANSACTIONS

The Company's Related Party Policy governs the norms for inter–company transaction pricing between the Company and its subsidiaries. Since the Company has a network of wholly–owned subsidiaries, manufacturing, as well as, engaged in sales of various products comprising the  different businesses of CG, a substantial quantum of related party transactions comprise transactions with subsidiaries for purchase and sale of goods and services, in the ordinary course of business.

An omnibus approval has been granted by the Risk and Audit Committee of the Board for transactions which are of a foreseen and repetitive nature with other related parties. Such omnibus approvals are subjected to review by the Risk and Audit Committee every year and are monitored by the Risk and Audit Committee on a quarterly basis. All Related Party Transactions are presented to the Risk and Audit Committee every quarter.

All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are no material related party contracts, arrangements or transactions undertaken by the Company during the year in terms of its India Related Party Transaction Policy of the Company and hence the disclosure of particulars of contracts/ arrangements entered into by the Company with related parties referred to in sub–section (1)  of section 188 of the Companies Act, 2013, in form AOC 2 (Annexure 1 to the Report) is NIL. The Company's India Related Party Transactions Policy is uploaded on the website of the Company and the weblink is as follows: <http://www.cgglobal.com/pdfs/policies/>  India%20Related%20Party%20  Transactions%20Policy.pdf

PARTICULARS OF LOANS,  GUARANTEES OR INVESTMENTS

Details of Loans, Guarantees and Investments made by the Company pursuant to the provisions of Section 186 of the Companies Act, 2013, are given in the notes to the Financial Statements.

BUSINESS RISK MANAGEMENT

A risk management policy has been developed and implemented by the Company for identification of  in the opinion of the Board may threaten the existence of the company. The key elements of the company's risk management framework have been captured in the risk management policy which details the process for identifying, escalating, prioritizing, mitigating and monitoring key risk events and action plans. The assessment of the risks covers Strategy, Technology, Financial, Operations & Systems, Legal & Regulatory and Human Resources Risks. There are appropriate assurance and monitoring mechanisms in place to monitor the effectiveness of the risk management framework including the mitigation plans identified by the Management for key risks identified through the risk management exercise. The effectiveness of the risk management framework and systems is also periodically evaluated by the Risk and Audit Committee.

INTERNAL FINANCIAL CONTROLS

CG has in place, adequate systems and procedures for implementation of internal financial control across the organization which enables the Company to ensure that these controls are operating effectively.

RESEARCH AND DEVELOPMENT

During the year, the R&D activities continued to focus on developing intelligent, eco–friendly and energy efficient products, as well as, extending the range of existing products.

Power transformers targeted eco–friendly products with focus on the efficiency (low loss transformers), low noise, low size and improvement of the thermal performances of transformers. The performance evaluations of Instrument Transformers (CT & CVT) at extremely cold climatic conditions (–55 deg C), is a significant achievement.

In the Automation segment, smart grid solutions developed by the Company under ZIV brand received significant recognition when CG was awarded a contract by eRDF, France, as one of the six suppliers to the Linky project. The Linky project is one of the largest planned AMI roll outs, based on PLC technology, in the world. The award is a demonstration of CG's ability to deliver robust and scalable smart meters to meet with stringent international security and reliability norms.

In the Motors segment, research was carried out to comply with IE3 / IE4 efficiency level & NEMA standards for various ranges of motors, through improvements in winding  design & process, copper die–cast Induction Machine technology, etc. CG developed motors operating on dual voltage frequencies & power electronics equipment like power converters & auxiliary converters. Development of hybrid drives was undertaken with technology partners.

The Company's low tension or low voltage rotating machine division recently received IECEx and ATEX approvals from the International Electro–technical Commission (IEC) System, BASEEFA–UK, for certification of standards relating to equipment used in an explosive environment. The approvals entitle CG to enter the global flameproof motors' market without any additional country–wise technical re–certifications.

Consumer Products focused on improving reliability and durability of its products through technologies such as permanent magnet technology, Maximum Power Point Tracking (MPPT) and Cutter Technology. Special focus was given on thermal insulation improvement using Nano fillers to achieve compliance with 5–star energy efficiency norms without increasing significant cost. New variants of ceiling fans, table fans & wall mounted fans were also introduced during the year.

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

As required by the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014, the relevant data pertaining to conservation of energy, technology absorption and foreign exchange earnings and outgo is given in the prescribed format as Annexure 2 to this Report.

ENVIRONMENT, HEALTH & SAFETY (EHS)

CG has articulated its Corporate EHS Policy to confirm its commitment to the health and safety of all employees and stakeholders across all CG factories and minimize adverse environmental impact from its activities. The Policy is updated at regular intervals. During the year, the Company has released EHS Guidelines which aim to go beyond meeting legal requirement for ensuring safety of its workforce and protection of the environment. The Guidelines elaborate the cardinal principles of safety at CG, norms for accident reporting and investigation, emergency preparedness, training, audits and key assessment indicators for monitoring and measurement.

EHS Audit is conducted twice a year to identify the areas of improvements in EHS protection activities. EHS targets assigned to each division to reduce consumption of power, paper and water are regularly monitored through an EHS scorecard which is reviewed at monthly business review meetings. The existing EHS activities are further enhanced and strengthened through delivering training programs.

During the year, the existing online accident/incident reporting portal was extended to form a single window EHS information data portal with corrective action tracking mechanism. Each plant location has identified projects and budgeted expenses for EHS improvement activities.

All Indian manufacturing units are certified for ISO14001 and OSHAS18001 standards. Regular audits are being conducted by the certifying agencies to confirm adherence to procedures prescribed in the standards.

CORPORATE SOCIAL  RESPONSIBILITY (CSR)

The Company's undeterred commitment towards CSR initiatives endeavor to embrace responsibility for its corporate actions and achieve fruitful impact of its business actions not only on its stakeholders, but also the society at large. As part of its CSR initiatives, CG has undertaken projects in the areas of education, employability and health. CG supports Avantha Foundation on programs such as reduction of Malnutrition and Hunger and building capacities of stakeholders in small towns to ensure better delivery of services to citizens. The Annual Report on CSR activities of CG for FY 2014–15 is stated at Annexure 3 to the Report.

GREEN INITIATIVES

Electronic copies of the Annual Report and Notice of the 78th Annual General Meeting are sent to all members whose email addresses are registered with the Company/Depository Participant(s) for communication purposes. For members who have not registered their email addresses, physical copies of the Notice and Annual Report are sent in the permitted mode. Members requiring physical copies can send a request to the Company. The physical copies of the aforesaid documents will also be available at the Company's Registered Office for inspection during normal business hours on all working days, excluding Saturdays.

MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THE COMPANY

There are no material changes and commitments affecting the financial position of the Company which has occurred between the end of the financial year of the Company i.e., 31 March 2015, and the date of the Directors' report i.e., 28 May 2015.

MATERIAL ORDERS OF REGULATORS/ COURTS/TRIBUNALS

No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future.

DIRECTORS' RESPONSIBILITY

STATEMENT

The Directors would like to assure the Members that the financial statements for the year under review conform in their entirety to the requirements of the Companies Act, 2013. The Directors confirm that :

• the Annual Accounts have been prepared in conformity with the applicable Accounting Standards;

• the Accounting Policies selected and applied on a consistent basis, give a true and fair view of the affairs of the Company and of the profit for the financial year;

• sufficient care has been taken that adequate accounting records have been maintained for safeguarding the assets of the Company; and for prevention and detection of fraud and other irregularities;

• the Annual Accounts have been prepared on a going concern basis;

• the internal financial controls laid down in the Company were adequate and operating effectively;

• the systems devised to ensure compliance with the provisions of all applicable laws were adequate and operating effectively.

SHARE REGISTRAR & TRANSFER AGENT

The Company's Registrar & Transfer Agents for shares is Datamatics Financial  Services Ltd (DFSL). DFSL is a SEBI–  registered Registrar & Transfer Agent. The contact details of DFSL are mentioned in the Report on Corporate Governance. Investors are requested to address their queries, if any to DFSL; however, in case of difficulties, as always, they are welcome to contact the Company's Investor Services Department, the contact particulars of which are contained in the Report on Corporate Governance.

FIXED DEPOSITS

The Company has discontinued acceptance of fresh deposits and also renewal of existing deposits.

PARTICULARS OF EMPLOYEES

The statement of particulars required pursuant to Section 197 of the Companies Act, 2013, read with Rule 5(1) and (2) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms a part of this Report and is given at Annexure 4.

COMPLAINTS RELATING TO SEXUAL HARASSMENT

In terms of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act and Rules, 2013, it is mandatory to review status of sexual harassment related complaints in the Annual Report. There were no incidents of sexual harassment reported in the Company. For protection against sexual harassment, CG has formed an internal complaints committee to which employees can write in their complaints. The Company has a Prevention of Sexual Harassment Policy which has formalised a free and fair enquiry process for dealing with such issues, with clear timelines.

VIGIL MECHANISM

The Company has formulated CG Whistle Blower Policy with a view to providing a mechanism for CG employees to report violations and assure them of the process that will be followed to address the reported violation. The Policy also lays down the procedures to be followed by Senior  Management for tracking of complaints, giving feedback, conducting investigations and taking disciplinary actions. It also provides assurances and guidelines on confidentiality of the reporting process and protection from reprisal to complainants.

A Management Committee as nominated by CEO and Managing Director is formed upon completion of the investigation and requiring action by the Committee. Decisions taken by the Management Committee and actions taken by the Company or exoneration cases are informed by the Head of Internal Audit to the Risk and Audit Committee on a quarterly basis. Actions taken by the Management Committee are implemented subject to applicable law(s).

AUDITORS

The Company's Statutory Auditors, Sharp & Tannan, hold office up to the conclusion of the forthcoming Annual General Meeting; and, being eligible, are recommended for re–appointment on terms to be recommended by the Risk and Audit Committee to the Board of Directors. They have furnished the requisite certificate to the effect that their re–appointment, if effected, will be in accordance with Section 141(3)(g) of the Companies Act, 2013. The Notes on Financial Statements referred to in the Annual Report are self explanatory and do not call for any further comments.

The Company had appointed Ashwin Solanki & Associates, Cost Accountants, to audit the cost accounts related to the Company's products for 2013–2014. The due date for filing the above cost audit reports was 27th September 2014; the actual date of filing was 23rd September 2014.

Upon recommendation of the Risk & Audit Committee, the Board had appointed Ashwin Solanki & Associates as Cost Auditors, for the financial year 2015–2016. At the ensuing Annual General Meeting, their appointment and remuneration is proposed to be approved and ratified by the shareholders.

The Company has appointed Dr K R Chandratre, Practising Company Secretary to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit for FY 2014–15 is annexed herewith as Annexure 5 to the Report.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as Annexure 6.

ACKNOWLEDGEMENTS

The Directors wish to convey their gratitude and appreciation to all of the Company's employees at all its locations worldwide for their tremendous personal efforts as well as their collective dedication and contribution to the Company's performance.

The Directors would also like to thank the employee unions, shareholders, customers, dealers, suppliers, bankers, government and all other business associates for their continued support extended to the Company and the Management.

On behalf of the Board of Directors

G Thapar

CHAIRMAN

Place : Mumbai,

date : 28 May 2015

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