Dear Shareholders,
Your Directors hereby present the sixty fourth Annual Report of Elgi Equipments Limited ("Elgi/the Company") along with the audited financial statements for the financial year ended March 31, 2024.
Financial Results
The highlights of the standalone performance of your Company during the fiscal are given hereunder:
(Rs in millions)
Review of Business Operations
The Company realised an operating revenue of ' 18,433.75 Million as against ' 17,566.35 Million in 2022-23.
The details of division wise performance and other operational details are discussed at length in the Management Discussion and Analysis section. There was no change in the nature of business of the Company during the financial year ended March 31, 2024.
Share Capital
During the year under review, there were no changes in the issued and paid-up share capital of the Company. The issued and paid-up share capital of the Company consist of 31,69,09,016 equity shares of face value of ' 1/- each amounting to ' 31,69,09,016/- as on the date of the report.
Transfer to reserves
The Company has not transferred any amount to the General Reserve during the year under review. However, an amount of ' 2,613.98 million of the current profits has been carried forward under the head retained earnings.
Dividend
Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations"), the Dividend Distribution Policy of the Company is hosted in the Company?s website https://www.elgi.com/in/policies/ dividend-policy.pdf. For the financial year 2023-24, in line with the Dividend Distribution Policy, the Board of Directors at their meeting held on May 27, 2024, has recommended a dividend of ' 2/- per share (200%) on the paid-up share capital of 31,69,09,016 equity shares.
Subject to the approval of shareholders, an amount of ' 633.82 million will be paid as dividend after deducting applicable taxes (Previous Year ' 633.82 million).
Transfer of Unclaimed Dividend/Shares to Investor Education and Protection Fund
In terms of Sections 124 and 125 of the Companies Act, 2013, ("Act") unclaimed or unpaid dividend relating to the financial year 2016-17 is due for remittance to the Investor Education and Protection Fund ("IEPF") established by the Central Government.
Further, pursuant to Section 124(6) of the Act, read with IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, 38,140 equity shares of ' 1/- each on which dividend had remained unclaimed for a period of 7 years have been transferred to the credit of demat account identified by the IEPF Authority during the year under review.
Annual Return
The Annual Return of the Company for the financial year 2023-24 as required under Section 92(3) of the Act is available on the website of the Company and can be accessed on the Company?s website at the link https://www.elgi.com/in/financials/.
Board Meetings held during the year
During the year, five meetings of the Board of Directors were held. The details of the meetings are furnished in the Corporate Governance Report which is attached to this Report.
Committees
As on March 31, 2024, the Company has Audit Committee, Nomination and Remuneration Committee, Compensation Committee, Stakeholders Relationship Committee, Risk Management Committee and Corporate Social Responsibility Committee. Detailed note on the composition of the Board and its Committees are provided in the Corporate Governance Report attached to this Report.
Statement on compliance with Secretarial Standards
The Directors have devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards and such systems are adequate and operating effectively.
Directors' Responsibility Statement
Pursuant to the requirement under Section 134(3)(c) of the Act, with respect to Directors? Responsibility Statement, it is hereby confirmed that:
a. In the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures from those standards;
b. The Directors have 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 have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d. The Directors have prepared the annual accounts on a going concern basis;
e. The Directors have 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 the applicable laws and such systems were adequate and operating effectively.
Details in respect of frauds reported by Auditors under Section 143(12) of the Act, other than those which are reportable to the Central Government
There were no instances of frauds identified or reported by the Statutory Auditors during the course of their audit pursuant to Section 143(12) of the Act.
Declaration of Independent Directors
The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Act and SEBI Listing Regulations. Regulations and that their name is included in the data bank as per Rule 6(3) of the Companies (Appointment and Qualification of Directors) Rules, 2014 (as amended).
Remuneration policy of the Company
The Board has based on the recommendation of the Nomination and Remuneration Committee, framed a policy for fixing and revising remuneration of Directors, Key Managerial Personnel, Senior Management Personnel and other employees of the Company. The
Remuneration policy is annexed herewith as Annexure A to this report. The Remuneration policy of the Company can be accessed on the Company?s website at the link https://www.elgi.com/in/policies/remn-policy.pdf.
Comments on Auditors' Report
With respect to the remarks made by the Statutory Auditors, M/s. Price Waterhouse Chartered Accountants LLP, your directors wish to state as follows:
With respect to the remarks made by the Secretarial Auditors, M/s. MDS & Associates LLP, your directors wish to state as follows:
Particulars of Loans, Guarantees or Investments made under Section 186 of the Act
Details of loans given, investments made, guarantees given and securities provided pursuant to the provisions of Section 186 of the Act have been given in the notes to the Financial Statements.
Particulars of contracts or arrangements with Related Parties
All transactions entered into with related parties as defined under the Act and Regulation 23 of the SEBI Listing Regulations during the financial year 2023-24 were in the ordinary course of business and on an arm?s length pricing basis.
The particulars of contract or arrangement entered into with related parties referred to in Section 188(1) of the Act which are material in nature are disclosed in the prescribed Form AOC-2 and annexed herewith as Annexure B to this report.
The Audit Committee and the Board of Directors have approved the Related Party Transactions Policy and the same has been hosted on the Company?s website at https://www.elgi.com/in/policies/rpt-policy.pdf.
The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and related parties.
Material Changes and commitments affecting the financial position of the Company
There are no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year as on March 31, 2024, and the date of this report.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo
The information on foreign exchange earnings and outgo, technology absorption, conservation of energy stipulated under Section 134(3)(m) of the Act, read with Rule 8 of the Companies (Accounts) Rules, 2014 is annexed herewith as Annexure C.
Risk Management
Pursuant to the requirement of Regulation 21 of the SEBI Listing Regulations, the Company has constituted a Risk Management Committee ("RMC"), consisting of Board members and senior executive of the Company. The Company has in place a Risk Management framework to identify, evaluate business risks and challenges across the Company both at corporate level as also separately for each subsidiary.
The top 10 risks for the Company have been mapped by the operating management (with additional support of external guidance) after extensive deliberations on the nature of the risk being a gross or a net risk and thereafter in a prioritized manner presented to the Board for their inputs on risk mitigation/management efforts. Based on this framework, a Risk Management policy has been adopted.
The RMC engages in the Risk Management process and has set out a review process so as to report to the Board the progress on the initiatives for the major risks of each of the businesses that the Company is into. The RMC reviews the top 10 risks. The results of the mitigation measures implemented by the Company are given below:
Corporate Social Responsibility Initiatives
The brief outline of the Corporate Social Responsibility ("CSR") Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out as Annexure D to this report in the format prescribed in the Companies (CSR Policy) Rules, 2014. For other details regarding the CSR Committee, refer to the Corporate Governance Report, which is a part of this report. The policy is available on the website of the Company.
Performance Evaluation of the Board, its Committees and the Directors
Pursuant to the provisions of the Act and SEBI Listing Regulations, the Board of Directors has carried out annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report attached as an Annexure to this report.
Statement regarding opinion of the Board with regard to integrity, expertise and experience (including the proficiency) of the Independent Directors
The Board of Directors have evaluated the Independent Directors during the year 2023-24 and opined that the integrity, expertise and experience (including proficiency) of the Independent Directors is satisfactory.
Directors and Key Managerial Personnel
Mr. Anvar Jay Varadaraj, Executive Director retires by rotation at the ensuing AGM and being eligible, offers himself for re-appointment. Your directors recommend his re-appointment.
A resolution seeking approval of the Members for the re-appointment of Mr. Anvar Jay Varadaraj as Director have been incorporated in the Notice to the AGM of the Company along with brief details about him.
Mr. Harjeet Singh Wahan, Non - Executive Director of the Company retired on November 5, 2023, and Mr. Mohan Nambiar, Independent Director retired on April 10, 2024. The Board wishes to place on record its appreciation for the invaluable services rendered by them during their tenure as independent directors of the Company.
Pursuant to the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the Company at their meeting held on May 27, 2024
have recommended the appointment of Mr. Suman Kumar Das, Mr. Srinivasan Ravindran and Mr. Srinivasan Krishnamurthi as Independent Directors of the Company for a term of consecutive five years with effect from July 31, 2024.
Ms. Aruna Thangaraj was appointed as an independent director of the company pursuant to Section 149 of the Companies Act, 2013 for the first term of 5 years and will hold officeupto August 1,2024. Consideringher knowledge, expertise and experience and the contributions made by her during her tenure as an independent director since her appointment, the Nomination and Remuneration Committee and the Board has recommended the re- appointment of Ms. Aruna Thangaraj as independent director on the board of the company, to hold office for the second term of five consecutive years commencing from August 2, 2024, and not liable to retire by rotation.
The company has also received declaration from the appointee directors that they fulfill the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 as well as Regulation 16(1)(b) of the SEBI Listing Regulations. Further, the Company has received notices from the members under Section 160(1) signifying their intention to propose the candidature of the aforesaid persons for the office of independent director(s) of the Company.
The board of directors recommends the appointment of the independent director(s).
Mr. Jayakanthan R relinquished his position as Chief Financial Officer with effect from March 18, 2024, and Mr. Indranil Sen was appointed as the Chief Financial Officer with effect from March 18, 2024. Mr. Prakash S resigned as the Company Secretary with effect from December 4, 2023, and Mrs. Devika Sathyanarayana was appointed as the Company Secretary with effect from May 27, 2024.
Pursuant to the provisions of Section 2(51) and 203 of the Act, the Key Managerial Personnel of the Company are Mr. Jairam Varadaraj, Managing Director, Mr. Anvar Jay Varadaraj, Executive Director, Mr. Indranil Sen, Chief Financial Officer and Mrs. Devika Sathyanarayana, Company Secretary.
Subsidiaries, Joint Ventures and Associate Companies
The highlights of performance of subsidiaries, associates and joint venture companies and their contribution to the overall performance of the Company during the period review have been disclosed in the Management Discussion and Analysis Report.
The Company has 25 subsidiaries and 9 joint ventures/ associate entities. The statement pursuant to Section 129(3) of the Act, containing the salient features of the financial statements of subsidiary companies, in Form AOC-1 forms part of this Annual report.
Elgi Compressors Vietnam LLC, a wholly owned subsidiary of the Company was wound up during the year.
Elgi Compressors USA Inc., Elgi Compressors Europe S.R.L, Rotair SPA, and Patton?s Inc., are the material subsidiaries of the Company based on the financials for the year ended March 31, 2024. The Board has approved a policy for determining material subsidiaries, which has been uploaded on the Company?s website viz. www.elgi.com.
The consolidated financial statements of the Company and its subsidiaries prepared in accordance with the applicable accounting standards have been annexed to the Annual Report. The annual accounts of the subsidiary companies are hosted on the website of the Company viz. www.elgi.com and will also be kept open for inspection by the shareholders at the registered office of the Company till the date of AGM. The Company will also provide a copy of the annual accounts of subsidiary companies to the shareholders upon their request.
Deposits
Your Company has not accepted any deposit within the meaning of provisions of Chapter V of the Act, read with the Companies (Acceptance of Deposits) Rules, 2014 for the year ended March 31, 2024.
Details of significant and material orders passed by the Regulators or Courts or Tribunals
There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company?s operations in future.
Internal Control Systems and their Adequacy
The Company has adequate internal control systems to monitor business processes, financial reporting and compliance with applicable regulations. The systems are periodically reviewed for identification of control deficiencies and formulation of time bound action plans to improve efficiency at all the levels. The Audit Committee of the Board constantly reviews internal control systems and their adequacy, significant risk areas, observations made by the internal auditors on control mechanism and the operations of the Company and recommendations made for corrective action through the internal audit reports. The Committee reviews the statutory auditors? report, key issues, significant processes, and accounting policies. The Directors confirm that the Internal Financial Controls are adequate with respect to the operations of the Company. A report of Auditors pursuant to Section 143(3) (i) of the Act certifying the adequacy of Internal Financial Controls is annexed with the Auditors Report.
Statutory Auditors
Price Waterhouse Chartered Accountants, LLP (Firm Reg. No.: 012754N/N500016) Chartered Accountants, Chennai was appointed as the Statutory Auditors of the Company for a second term of five years at the Sixty Second AGM of the Company held on August 12, 2022, till the conclusion of the sixty seventh AGM to be held in the year 2027.
Secretarial Auditors
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed MDS & Associates LLP, Company Secretaries, Coimbatore to undertake the secretarial audit of the Company. The report of the secretarial auditor is attached as Annexure E.
Cost Auditors
Pursuant to the provisions of Section 148(3) of the Act, the Board of Directors had appointed STR & Associates, Cost Accountants, Trichy (Firm Registration No.: 000029), as Cost Auditors of the Company, for conducting the audit of cost records for the financial year ended March 31, 2024. The Audit is in progress and report will be filed with the Ministry of Corporate Affairs within the prescribed period.
The cost accounts and records as specified by the Central Government under sub-section (1) of Section 148 of the Act, are made and maintained by the Company.
Details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 during the year
No applications have been made and no proceedings are pending against the Company under the Insolvency and Bankruptcy Code, 2016.
Details of difference between amount of the valuation done at the time of one-time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof
The disclosure under this clause is not applicable as the Company has not undertaken any one-time settlement with the banks or financial institutions.
Human Resources and Industrial Relations
The Company continues to enjoy cordial relationship with its employees at all levels. The total strength of employees as on March 31, 2024, was 2172.
Particulars of Employees
In terms of the provisions of Section 197(12) of the Act, read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names of the top ten employees in terms of remuneration drawn and names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules forms part of this Report as Annexure F. Disclosures relating to remuneration and other details as required under Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms part of this Report.
Having regard to the provisions of the second proviso to Section 136(1) of the Act and as advised, the Annual Report excluding the aforesaid information is being sent to the members of the Company. Any member interested in obtaining such information may write to the Company Secretary.
Elgi Equipments Limited Employee Stock Option Plan, 2019
The Company has implemented the Elgi Equipments Limited Employees Stock Option Plan 2019 to enable the Company and its subsidiaries to attract, retain and reward appropriate human talent in its employment and to create a sense of ownership and participation amongst the employees. The Compensation Committee administers and monitors the Employees? Stock Option Plan of the Company through the Elgi Equipments Limited Employee Stock Option Trust. The Compensation Committee has during the year under review issued 1,75,900 options at a grant price of ' 430/- per option to the eligible employees of the Company. No options were granted to the Directors.
The disclosure pursuant to the provisions of Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 is given as Annexure G to this report.
The Company has received a Certificate from the Secretarial Auditors that the above referred Scheme had been implemented in accordance with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and the resolutions passed by the members in this regard.
Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
As per the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder, your Company has constituted an Internal Complaints Committee. During the year under review, one case was received/filed pursuant to the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The same was resolved during the year. As on March 31, 2024, no complaint is pending for investigation and resolution.
Business Responsibility and Sustainability Report
In terms of Regulation 34 of the SEBI Listing Regulations, read with relevant SEBI Circulars, new reporting requirements on ESG parameters were prescribed under Business Responsibility and Sustainability Report ("BRSR"). The BRSR seeks disclosure on the performance of the Company against nine principles of the "National Guidelines on Responsible Business Conduct? (‘NGRBCs?). As per the SEBI Circulars, effective from the financial year 2023-24, filing of BRSR Core is mandatory for the top 1000 listed companies by market capitalisation. Accordingly, for the financial year ended March 31, 2024, your Company being amongst top 1000 companies, BRSR is annexed as Annexure H to this Report.
Corporate Governance
A report on corporate governance is annexed as Annexure I to this report. The Company has complied with the conditions relating to corporate governance as stipulated in SEBI Listing Regulations.
Vigil Mechanism/Whistle Blower Policy
Pursuant to the provisions of Section 177(9) of the Act, read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulations 4 and 22
of the SEBI Listing Regulations and in accordance with the requirements of SEBI (Prohibition of Insider Trading) Regulations, 2015, the Company has a Whistle Blower policy to deal with unethical or improper practice or violation of Company?s Code of Business Conduct or any complaints regarding accounting, auditing, internal controls or disclosure practices of the Company.
This Policy inter-alia provides a direct access to the Chairman of the Audit Committee. Your Company hereby affirms that no Director/employee has been denied access to the Chairman of the Audit Committee. Brief details about the policy are provided in the Corporate Governance Report attached to this Report.
The Audit Committee of the Board reviews the Complaints received, redressed, objected, withdrawn and dismissed for, every quarter in their meeting. The Whistle Blower policy is available on the website of the Company at the link https://www.elgi.com/in/policies/wb-policy.pdf.
Acknowledgement
Your Directors thank the shareholders, customers, suppliers, bankers and all other stakeholders for their continued support during the year. Your Directors also place on record their appreciation of the contributions made by employees at all levels towards the growth of the Company.