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HPL Electric & Power Ltd.

BSE:540136  |  NSE:HPLEQ  |  58888:  |  IND:Electronics/Electricals  |  ISIN code:INE495S01016  |  SECT:Consumer Durables

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You can view full text of the Director's Report for HPL Electric & Power Ltd.
Director Report
Mar2016   Mar 2018

Dear Members

The Directors have pleasure in presenting 26th Annual Report of the Company together with the Audited Financial Statements for the financial year ended 31st March, 2018.

1. FINANCIAL HIGHLIGHTS

The Company’s financial performance for the year ended 31st March, 2018 alongwith previous year’s figures is summarized below:

(Rs. in Lakhs)

Particulars

Standalone

Consolidated

2017-18

2016-17

2017-18

2016-17

Revenue from Operations

102,336.43

103,693.41

106,135.62

110,537.21

Other Income

381.57

452.28

442.78

541.89

Operating Profit before Finance Costs, Depreciation, Tax and Extraordinary items

10,055.27

11,353.55

11,429.79

12,931.36

Less: Finance Cost

4,615.67

6,209.18

5,101.83

6,793.83

Less: Depreciation and amortization expenses

2,137.00

2,321.01

2,279.04

2,445.54

Profit before Exceptional Expenses and Tax

3,302.60

2,823.36

4,048.92

3,691.99

Profit before tax

3,302.60

2,823.36

4,048.92

3,691.99

Less: Tax Expenses

1,020.56

812.43

1,291.16

1,098.53

Profit for the year

2,282.04

2,010.93

2,757.76

2,593.46

Other comprehensive income for the year, net of tax

(1.08)

(21.91)

(1.36)

(24.33)

Total comprehensive income for the year, net of tax Profit for the year attributable to

2,280.96

1,989.02

2,756.40

2,569.13

Equity holders of the parent Company

2,282.04

2,010.93

2,742.87

2,576.68

Non-controlling interest

Total comprehensive income for the year attributable to

-

-

14.89

16.78

Equity holders of the parent Company

2,280.96

1,989.02

2,741.52

2,552.42

Non-controlling interest

Earnings per Share (in Rs.) Not Annualised

-

-

14.88

16.71

Basis (Rs. )

3.55

3.63

4.27

4.65

Diluted (Rs. )

3.55

3.63

4.27

4.65

2. State of Company’s Affairs

The company has witnessed an improved financial performance in the fourth quarter driven by growth across all business segments. It has noted a very positive business trend marked by stronger H2 FY18 compared to H1 FY18. The H2 FY18 revenues were 33% higher compared to H1 FY18; strong growth was displaced across all segments with switchgear sales up 58%, Lighting up 32%, Metering up 27% and Wires & cables up 26%. On an absolute basis, H2 FY18 EBITDA and PAT grew by 23% and 42% respectively compared to H1 FY18. LED trade sales displayed growth on YoY basis, however overall lighting revenues declined due to high base effect of last year when we had executed some bulk LED sales.

The overall order book was up 43% on YoY basis to Rs. 531 crore, led by 67% growth in metering orders. This places the company in a very strong position with an improved revenue visibility in FY19. Further, tenders for over 7mn meters are currently being evaluated by a couple of states. It is to expect a double-digit growth in all business segments. Switchgear business shall continue to maintain current momentum driven by renewed management focus. Lighting business growth will be driven by improved LED trade sales and new LED products recently launched. The increased efforts on advertising & marketing front should help to generate healthy growth in the trade business across all segments, strengthening the HPL brand and product recall in the mind of the customers.

3. Subsidiaries/ Joint Ventures/ Associates

As on 31st March, 2018, the company is having only one subsidiary namely Himachal Energy Private Limited and two Joint Ventures (JVs) namely HPL Electric & Power Pvt. Ltd. - Shriji Designs (JV) and HPL Electric & Power Pvt. Ltd. - Trimurthi Hitech Co. Pvt. Ltd. - Shriji Designs (JV). These JVs are established as Association of Person (AOP) and not registered under the Companies Act and accordingly are not Associate Companies as per section 2(6) of the Companies Act, 2013.

The annual accounts of the subsidiary Company is available on the website of the Company i.e. www. hplindia.com.

A statement containing the salient features of the financial statement of a company’s subsidiary or subsidiaries, associate company or joint venture or ventures in Form AOC-1 is annexed as Annexure i.

4. Consolidated Financial Statement

In accordance with the provisions of the Companies Act, 2013 (“the Act”) and Ind AS 110 - Consolidated Financial Statement read with Ind AS - 28 Investments in Associates and Ind AS 31 - Interests in Joint Ventures, the audited consolidated financial statement is provided in this Annual Report.

5. Material Changes affecting the Company

There have been no material changes and commitments affecting the financial position of the Company between the end of the financial year and date of this report. There has been no change in the nature of business of the Company.

6. Reserves

During the period under report, the company do not propose to transfer any amount to the General Reserve.

7. Dividend

The Directors are pleased to recommend a dividend of Rs. 1.00 per equity share (10%) for the financial year ended 31st March, 2018, subject to the approval of the shareholders at the ensuing Annual General Meeting of the Company.

The dividend distribution would results in cash outgo of Rs. 7,75,17,640 (including tax on dividend of Rs. 1,32,17,154). The dividend would be payable to all those Shareholders whose names appear in the Register of Members as on 20th September, 2018.

8. Credit Rating

During the year under report, India Rating & Research Pvt. Ltd. has revised the company’s rating to IND A/ IND A1 with Stable outlook from IND A/IND A1 with positive Outlook.

9. Public deposits

During the period under report, the Company has not accepted any deposit within the meaning of Sections 73 and 74 of the Companies Act, 2013 read together with the Companies (Acceptance of Deposits) Rules, 2014.

10. Directors and Key Managerial Personnel and change therein

During the period under report, Mr. Virender Kumar Bajaj (DIN: 07401106), an Independent Director, ceased to be a director of the company w.e.f. 14th January, 2018. The Board places on record its appreciation towards valuable contribution made by Mr. Virender Kumar Bajaj during his tenure as an Independent Director of the company.

The Board on the recommendation of the Nomination & Remuneration committee, by way of circulation, appointed Mr. Hargovind Sachdev (DIN: 08105319) as an Additional (Independent) Director w.e.f. 13th April, 2018 to hold office upto the date of the ensuing Annual General Meeting. The company has received consent in writing from Mr. Hargovind Sachdev to act as director in the form DIR-2 and intimation in the Form DIR- 8 to the effect that he is not disqualified U/s 164 (2) of the companies Act, 2013 to act as Director.

In the opinion of the Board, Mr. Hargovind Sachdev is a person of integrity and possess relevant expertise and experience and therefore his appointment requires the approval of the members at the ensuing Annual General Meeting.

Pursuant to the provisions of Section 152 of the Companies Act, 2013 and other applicable provisions of the Act, Mr. Vinod Ratan Gupta (DIN: 07401017), Whole- time Director of the Company, who retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence prescribed under the Act and the SEBI Listing Regulations.

During the period under report, Mr. Neeraj Kumar ceased to be the Chief Financial Officer of the Company w.e.f 12th August, 2017 and Mr. Sudhir Barik was appointed as the Chief Financial Officer of the Company w.e.f 14th August, 2017.

Brief details of the directors being recommended for appointment/re-appointment as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 have been furnished in the Notice dated 2nd August, 2018 convening the 26th Annual General Meeting. Appropriate resolutions for their appointment/re-appointment are proposed for approval of the members at the Annual General Meeting.

11. Number of meetings of the Board

During the period under report, the Board of Directors of the Company met 4 (Four) times on 22nd May, 2017; 14th August, 2017; 14th November, 2017 and 12th February, 2018. Particulars of attendance of each director are mentioned in the Corporate Governance Report.

12. Formal Annual Evaluation

Pursuant to the provisions of Section 178 of the Companies Act, 2013 read with Companies (Amendment) Act, 2017 and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, the Nomination and remuneration committee has laid down the manner for effective evaluation of performance of Board, its committees and individual directors and accordingly the performance of the Board; its committees and individual directors were evaluated by the Board.

While evaluating the performance of Board, the Board had considered the composition and structure of the Board in terms of size, experience, diversity, effectiveness of the board process, dissemination of information etc.

The performance of the committees were evaluated by the board taking into consideration the factors such as composition of the committee; effectiveness of committee meetings; independence of the committee from the Board and contribution in decision making by the Board etc.

The performance evaluation of all the individual directors including the Independent Directors was carried out after taking into account their individual contribution to the board and committee meetings such as preparedness on the issues to be discussed, effective contribution in the discussion on the various agenda items etc. Therefore the outcome of the performance evaluation for the period under report, was satisfactory and reflect how well the directors, board and committees are carrying their respective activities.

The independent directors in its separate meeting without the attendance of non-independent directors and members of management, reviewed -

(a) the performance of non-independent directors and the Board as a whole;

(b) the performance of the Chairperson of the company, taking into account the views of executive directors and non-executive directors;

(c) assess the quality, quantity and timeliness of flow of information between the company management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

13. Policy on Appointment and Remuneration of Directors and Key Managerial Personnel and other employees

The Company has framed a Nomination and Remuneration Policy pursuant to Section 178 of the Companies Act, 2013 and Regulation 19(4) of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Specified in Part D of the Schedule II).

The detailed Nomination & Remuneration Policy is annexed as Annexure ii and forms part of this Report and is also available on the website of the Company at www.hplindia.com.

14. Extract of Annual Return

The extract of Annual Return in Form MGT-9 is annexed as Annexure iii.

15. Listing

The equity shares of the Company are listed on the National Stock Exchange of India Ltd. and BSE Limited. The listing fee for the financial year 2018-19 has been paid to both the Stock Exchanges.

16. Audit Committee

The details pertaining to the composition of the Audit Committee are included in the Corporate Governance Report which is a part of this Annual Report.

17. Vigil mechanism

Pursuant to the provisions of Companies Act, 2013 and SEBI Listing Regulations, the Company has established a robust vigil Mechanism for directors and employees to report to the management instances of unethical behavior, actual or suspected, fraud or violation of the Company’s code of conduct. The Vigil Mechanism Policy provided that the company investigates in such incidents, when reported, in an impartial manner and shall take appropriate action as and when required to do so. The policy also provides the mechanism for adequate safeguard against the victimization of Director(s)/employees who avail the mechanism and also provide for the direct access to the Chairman of the Audit Committee in exceptional cases. A vigil Mechanism policy is available on the website of the company i.e. www.hplindia.com.

18. Risk Management

The Company has in place a robust risk management policy to anticipate, identify, measure, manage, mitigate, monitor and report the risk and uncertainties that may have an impact to achieve the business objective of the company. The Company recognizes these risks which need to be managed and mitigated to protect the interest of the stakeholders, to achieve business objectives and enable sustainable growth. The risk management framework is aimed at effectively mitigating the Company’s various business and operational risks, through strategic actions. The risks are reviewed for the change in the nature and extent of the major risks identified since the last assessment. It also provides control measures for risk and future action plans.

An extensive program of internal audits and regular reviews by the Audit Committee is carried out to ensure compliance with the best practices.

19. Policy on Material Subsidiary

The Company has framed a Policy on Material Subsidiary under Regulations 16(c) of SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015 which is available on the website of the company i.e. www.hplindia.com.

20. Corporate Social Responsibility (CSR)

It is the responsibility of the corporations operating within society to contribute towards social and environmental development that will help in creating a positive impact on society at large.

The Corporate Social Responsibility committee comprises of Mrs. Madhu Bala Nath as Chairperson, Mr. Lalit Seth, Mr. Rishi Seth and Mr. Jainul Haque as members of the committee.

The company discharges its CSR obligations by making contribution through its Trust, Seth Inder Narain Foundation towards supporting projects in Eradicating hunger, poverty and malnutrition promoting health care; promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects. The company also extends its objective towards CSR in supporting the rural development projects.

The Board of Directors have approved the CSR Policy of the Company as formulated and recommended by the CSR Committee which is available on the website of the Company i.e. www.hplindia.com. A report on Corporate Social Responsibility is annexed as Annexure IV.

21. Particulars of Contracts or Arrangements with related Parties

All transactions entered into with related parties as defined under the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 during the financial year ended 31st March, 2018 were in the ordinary course of business and at arm’s length basis. As per the provisions of Section 188 of the Companies Act, 2013 and Rules made thereunder read with Regulation 23 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company had obtained the necessary prior approval of the Audit Committee for such transactions.

None of the transactions with any of the related parties were in conflict with the interest of the Company rather, they synchronize and synergies with the Company’s operations.

The Company has framed a Policy on Related Party Transactions in accordance with Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and as per the amended provisions of the Companies Act, 2013. The Policy intends to ensure that proper reporting; approval and disclosure processes are in place for all transactions between the Company and related parties. The policy is available on the website of the company i.e. www.hplindia.com and the Details of Related Party Transactions are annexed as per Form AOC-2 in Annexure V.

22. Auditors

A) Statutory Auditors

As per the provisions of Section 139(1) of the Act, the Company has appointed M/s. Kharabanda Associates, Chartered Accountants (Regn. No. 003456N) as Statutory Auditors for a period of 5 (Five) years in the Annual General Meeting of the company held on 28th September, 2017.

Statutory Auditors Report

There are no observations (including any qualification, reservation, adverse remark or disclaimer) of the Auditors in their Audit Report that may call for any explanation from the Directors. Further, the notes to accounts referred to in the Auditors’ Report are self-explanatory.

B) Cost Auditors

Pursuant to the provisions of Section 148 of the Companies Act, 2013 read with Companies (Cost Records and Audit) Rules, 2014 and other applicable provision of the Act, the company is required to maintain the cost records as specified by the Central Government and accordingly such accounts and records were made and maintained and M/s Bikram Jain & Associates, Cost Accountants, (Firm Registration No. 101610) has been re-appointed as Cost Auditor of the Company to conduct audit of Cost Records maintained by the Company for the financial year 2018-19.

The company has received his consent and certificate under Section 139, 141 and 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014 to this effect.

The remuneration payable to the Cost Auditor of the Company has been proposed for the ratification by the members of the Company and shall form part of the notice of the 26th Annual General Meeting.

C) Secretarial Auditors

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with corresponding rules made there under M/s. AVA Associates, Company Secretaries has been re-appointed as Secretarial Auditors of the Company to conduct Secretarial Audit of the Company for the financial year 2018-19.

Secretarial Audit Report

The Secretarial Audit Report for the FY 2017-18 as submitted by Secretarial Auditors in Form MR-3 is annexed to this Report as Annexure Vi.

There are no observations (including any qualification, reservation, adverse remark or disclaimer) of the Secretarial Auditors in their Secretarial Audit Report that may call for any explanation from the Directors.

23. Particulars of Loans, Guarantees or investments

The investment made by the company in the subsidiary company in the form of equity share capital is disclosed in the notes to the Audited Financial Statements forming part of this Annual Report. The company has not given any loans, guarantees or provided any security in connection with a loan to any body corporate or person as per section 186 of the Companies Act, 2013 during the period under report.

24. Particulars of remuneration of Directors/ KMP/ Employees

The information required to be disclosed in the Director’s Report pursuant to Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is set out in Annexure Vii to this report.

25. Research and Development:

HPL with its passion for innovation has under taken many initiatives to accelerate the business growth curve in the upward direction. Company has been regularly investing in infrastructure and its R&D centers to make world class products, meeting stringent Quality standards. All the R&D labs in various units have been focusing on design and development of innovative products in the field of Switchgear, Lighting and Metering etc. to meet the growing technological challenges of the times.

During the year, two new products were developed, viz. Automatic Transfer Switch(40~125A) & Double Break type MCCB(up to 250A). ATS (40~125A) was successfully developed and commercialized too during the FY 2017-18. Double Break type MCCB (up to 250A) is in the tooling stage after successful development of prototypes. Once fully tested and productionized, it will cater to a whole new range of requirements. The products are user friendly from application point of view, safe & maintenance free. As such, these products were “Star of attraction” in HPL stall during Elecrama’18 exhibition held this year. The R&D team has been continuously working on improving the reliability and life cycle of HPL products. Most of the products are “CE” marked. All the plants are RoHS compliant to meet the demands of the new era of business globally.

Timely delivery of new products under development is of primary focus of R&D department. It works on a cohesive approach to narrow the gap between Design and Manufacturing by investing money in 3D model prototypes before commencing tool manufacturing. This saves a lot of time, energy and money while developing new products thereby increasing the efficiency of the company.

Company is continuously working on many more smart engineering electrical products to meet the future demand.

26. Conservation of Energy, Technology Absorption, foreign Exchange Earnings and Outgo

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is attached as Annexure Viii to this report.

27. Corporate governance Report

The Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirements set out by Securities and Exchange Board of India. The Company has also implemented several best corporate governance practices as prevalent globally. The report on Corporate Governance as stipulated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms an integral part of this Report. The requisite certificate from M/s. Kharabanda Associates, Statutory Auditors of the Company confirming compliance of conditions of corporate governance is also annexed to the Corporate Governance Report.

28. Directors’ Responsibility Statement

Pursuant to Section 134(3) (c) and 134(5) of the Companies Act, 2013, the Directors confirm that:

a. in the preparation of the annual accounts, the applicable accounting standards had been followed alongwith proper explanation relating to material departures;

b. the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

c. the Directors had taken proper and sufficient care 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 Directors had prepared the annual accounts on a going concern basis;

e. 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

f. 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.

29. Disclosure under the sexual harassment of women at workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company has always believed in providing a safe and harassment free workplace for every individual working in the Company premises through various interventions and practices. The Company always endeavors to create and provide an environment that is free from discrimination and harassment including sexual harassment.

The Company has in place robust policy on prevention of sexual harassment at workplace which is applicable to all employees of the company as per the provisions of Sexual Harassment of woman at work place (Prevention, prohibition and Redressal) Act, 2013.

During the year under report, the company has not received any complaints pertaining to sexual harassment.

30. Significant/material orders passed by the regulators

There are no significant/material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of the Company and its operations in future.

31. Internal Control Systems and adequacy of internal Financial Controls

The Company has adopted policies and procedures for effective internal controls system. This ensures that all transactions are authorized, recorded & timely preparation of reliable financial information, the safeguarding of its assets, the prevention and detection of frauds and errors. The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations.

32. Management Discussion and Analysis Report

Management Discussion and Analysis Report for the year under report, as stipulated under the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is also presented in a separate section forming part of this Annual Report.

33. CEO and CFO Certificate

CEO and CFO Certificate as prescribed under Schedule II part B of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to the Corporate Governance Report forming part of this Annual Report.

34. Disclosure of commission paid to managing or whole time directors

There is no commission paid or payable by the company to the managing director or the Whole-time directors.

35. Acknowledgement

The Board of Directors acknowledges the continued co-operation, assistance and support the Company has received from various Government Departments, Banks/ financial Institutions and shareholders. The Board also places on record its appreciation for the sincere services rendered by employees of the company at all levels and the support and co-operation extended by the valued business associates and the continuous patronage of the customers of the Company.

For and on Behalf of the Board

For HPL Electric & Power Limited

Lalit Seth

Date: 2nd August, 2018 Chairman and Managing Director

Place: Noida DIN: 00312007

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