As on: Mar 26, 2023 09:07 AM
#MDStart#
Management Discussion and Analysis
Dear Shareholders,
The Directors take pleasure in presenting the 14th Annual Report together with the Audited Financial Statements of the Company for the year ended 31st March 2022.
1. Business Environment
The fiscal year 2021-22 was a year of transition with the focus shifting away from the pandemic and more towards recovery and growth. Due to the widespread vaccine coverage, the economic impact of the recurrent COVID-19 wave was much lesser than witnessed during the total lockdown in 2020-21. While the pandemic influenced the first quarter's performance to some extent, there was a strong recovery in the subsequent quarters.
Nonetheless the global ecosystem is still in a state of flux. The invasion of Ukraine by Russia has resulted in a slew of new supply-chain bottlenecks and adversely impacted the international crude oil prices. The recent spike of COVID-19 cases in China resulting in lockdowns in some parts of that country and the economic turmoil in Sri Lanka point to a challenging future.
Due to projection revisions, global growth was predicted to moderate from 5.9% in 2021 to 4.4% in 2022, down half a percentage point from the World Economic Outlook October 2021 Forecast of the World Bank. In the advanced as well as the emerging economies, inflation has become the key problem with the rising prices of energy, non-food commodities, inputs, the global supply chain disruptions and increased freight costs continuing to fuel it across, sparing none. In India, the consumer price inflation fell to 5.2% in 2021-22 (April-December) from 6.6% in 2020-21. It was 5.6% higher than the previous year in December 2021. WPI (Wholesale Price Inflation) is likewise in double figures.
Following a contraction of 7.3% in 2020-21, the Indian economy is expected to grow to 8.9% in real terms in 2021-22. In 2022-23, the GDP is predicted to be 7.2%. The Government and the Reserve Bank of India ("RBI") are taking well-timed steps to assist a robust economic recovery such as establishing Production Linked Incentive (PLI) Scheme for thirteen industries including automobiles, telecommunications, and pharmaceuticals. The Indian Railways' capital expenditure increased to `155,181 Cr. (US$ 20.78 Bn.) in 2020-21, up from an average annual expenditure of `45,980 Cr. (US$ 6.15 Bn.) between 2009 and 2014 and is further expected to increase to `215,058 Cr. (US$ 28.80 Bn.) in 2021-22, a five-fold increase over the 2014 figure. Additional impetus has been given by the Government in the Union Budget 2022 for capital expenditure, with an allocation of `7.5 lakh Cr., up from `5.54 lakh Cr., providing greater fiscal space to States for capital investments amongst other initiatives.
As per the Society of Indian Automobile Manufacturers (SIAM), in 2021-22, sales of passenger vehicles (PVs) grew by 17%, commercial vehicles (CVs) by 31%, three-wheelers (3Ws) by 24% while two-wheelers (2Ws) declined by 3%. The overall automobile sector experienced a decline of 6% in FY 2022 in sales. However, on the back of Government initiatives on infrastructure spending, the PLI Scheme for auto and auto components, vehicle scrappage policy, favourable policies for adoption of electric vehicles by OEMs etc, the auto industry is expected to come back strong on performance in 2022-23, putting the sector back on track.
Overall macro-economic stability indicators show that the Indian economy is well-positioned to meet the challenges of 2022-23 as per the Economic Survey 2021-22. However, the challenges posed by the external environment need to be kept firmly in view for a timely and effective strategy to achieve stability and growth. Of real concern are the current economic indicators which signal some key issues for the Government's intervention and action, namely, the rising inflation, increasing commodity, food and fuel prices to an extent due to the geo-political situation. These have also resulted in the RBI coming forward with a hike in the interest rates and the Cash Reserve Ratio (CRR) to check the runaway inflation. World over including the USA, an increase in interest rates is seen. It is likely that such a measure could impact and dampen consumer demand in the medium term. The investment climate may also slow down due to higher interest rates amongst others. With RBI keeping a close watch on the situation, it is likely that periodical, calibrated interventions through more rate hikes can be expected in the current fiscal.
2. Standalone Financial Highlights
The Board of Directors has decided to retain the entire amount of profit for the financial year 2021-22 in the Statement of Profit and Loss.
3. Performance Overview
During 2021-22, the Company has achieved a turnover of `5,986.79 Cr., registering a growth of 49% over the previous year. The Profit before Depreciation, Interest, Exceptional Items and Tax was at `785 Cr. as against `549 Cr. in the previous year. The Profit before Tax and Exceptional Items was at ` 628 Cr. as against `381 Cr. in the previous year.
The Mobility segment recorded a revenue of `963 Cr. as compared to `847 Cr. during 2020-21, a growth of 14% despite adverse market conditions. The operating profit before interest and tax stood at `55 Cr. as compared to `44 Cr. during the previous year, registering a growth of 25%.
The Engineering segment registered a revenue of `3,868 Cr. as compared to `2,317 Cr. during the previous year, a growth of 67%. The operating profit before interest and tax stood at `376 Cr. as compared to `251 Cr. during 2020-21, a growth of 50%.
The Metal Formed Products segment recorded a revenue of `1,240 Cr. as compared to `1,032 Cr. during the previous year, a growth of 20%. The operating profit before interest and tax stood at `136 Cr. as compared to `75 Cr. during previous year, a growth of 81%.
4. Second wave of the pandemic
With a resurgence in the COVID-19 pandemic resulting in a second wave, lockdown/lockdown-like restrictions were again imposed across several States from April 2021, which had some impact on the operations of the manufacturing plants and warehouses of the Company located in those States during the first quarter of the financial year 2021-22.
With the easing of restrictions and the vigorous vaccination drive launched by the Central Government to inoculate the huge population contributing to an overall improvement in the confidence level in managing the situation, operations started from mid-June 2021 onwards leading to improved revenue growth. The Company on its part initiated multiple vaccination drives to inoculate its employees, their relatives and contract staff to provide a safe and healthy work environment to everyone.
The Company has considered the possible effects/ impact arising from COVID-19 on its financial results for 2021-22 and at this stage, it has concluded that no material adjustments are required to the same. The Company will continue to closely monitor any material changes in future economic conditions.
5. Venturing into Clean Mobility business
5.1. Incorporation of Wholly-owned Subsidiary: TI Clean Mobility Private Limited
The Company has been exploring various new opportunities in its pursuit for growth. The Company has identified the clean mobility space, which offers good business potential and exciting prospects to grow.
To bring more focus to this, the Company formed a wholly-owned subsidiary during the year under review to focus on clean mobility.
TI Clean Mobility Private Limited ("TICMPL") was accordingly incorporated as a wholly-owned subsidiary on 12th February 2022 to focus exclusively on clean mobility solutions. The Company invested `100 Cr. in subscribing to 10 crore equity shares of `10/- each of TICMPL. The Company has also extended an Inter-Corporate Deposit amounting to `64 Cr. to TICMPL for its business operations as on 31st March 2022. This new subsidiary will comprise of the electric three-wheeler venture and other EV-related ventures of the Company.
The assets of the three-wheeler electric vehicle business, which was earlier part of the Company were moved from the Company to TICMPL. TICMPL is actively engaged on the product launch preparations which is expected in Q2 of FY 2023 and work is on towards product reliability testing, getting statutory approvals, manufacturing and infrastructure facilities readiness, ensuring quality systems, sales channel and service set-up and brand building activities.
5.2. Acquisition of Cellestial E-Mobility Private Limited
In continuation of its foray into clean mobility, with shareholders' approval, the Company, through its subsidiary, TICMPL acquired 69.95% in the equity share capital of M/s. Cellestial E-Mobility Private Limited ("Cellestial") for a total investment of `161 Cr. through a combination of primary infusion and secondary purchase of shares.
TICMPL was allotted 44,030 equity shares of the face value of `10/- per share for an aggregate amount of `50 Cr. and acquired 97,647 equity shares from the existing shareholders of Cellestial for a total consideration of `110.88 Cr.
Consequent to the aforesaid allotment and acquisition of equity shares, TICMPL acquired a controlling interest of 69.95% in Cellestial. Cellestial thus became a subsidiary of TICMPL under Section 2(87) of the Companies Act, 2013 (hereinafter referred to as "the Act" in this Report) with effect from 4th March 2022 (treated as a joint venture under Ind AS).
Cellestial is a start-up engaged inter alia in the design and manufacture of e-Tractors. The e-Tractors developed by Cellestial offer several advantages like a swappable battery and lower total cost of ownership compared to the conventional internal combustion engine tractors. Besides, these e-Tractors will also result in lower carbon di-oxide emissions, promote green farming and will take a step towards a circular economy.
Further, another new Company viz., M/s. Cellestial E-Trac Private Limited was incorporated as a wholly-owned subsidiary of Cellestial on 25th February 2022 with an authorized share capital of `5 lakhs. The paid-up capital of the said Company as on 31st March 2022 was `1 lakh.
Cellestial is currently working towards building 7 prototypes with different mechanical variants catering to different customer and industry segments. Product testing is at its peak and a roadmap has been prepared for product variations, new product development and platform development. Distribution partners are also being on boarded. It has also finalized a location in Chennai for manufacturing.
6. Business Review – Standalone
6.1. Mobility Business TI's Presence
Mobility segment of the Company comprises of bicycles of the Standard and Special variety including alloy bikes & speciality performance bikes, cycling accessories, bicycle components sold as spares and home fitness equipment. This year the scope of business expanded by introducing the flagship product of e-bicycle.
Industry Scenario
Bicycles fall under two distinct categories – Standards and Specials. While Standard cycles are largely used for commuting, especially in small towns & rural areas, Special cater to recreational usage, where the product is used for fun, fitness and leisure activities. During the year under review, the trade industry witnessed a negative growth of about 13% as against the previous year. Standards de-grew by 13% and Specials too de-grew by about 14%. In addition to this, movements by the unorganized players based on economy offerings have also impacted the organized trade (All India Cycle Manufacturer's Association-AICMA) players' sales volume.
Significant increase in commodity prices over last year has impacted product pricing in the market, resulting in consumers downgrading to mass and economy range of products. In addition to this, the cycling euphoria of 2021 post the first lockdown was not seen post the second lockdown as schools, workplaces and fitness centres opened up, changing the consumer behaviour towards cycling, resulting in a market drop.
Over 86% of the country's requirements are met by four major players and the smaller regional players and imports constitute the balance. The Company's cycles business viz., TI Cycles enjoys a share of about 26% of the total organised trade market. The Company's exports segment registered a growth of 23% and e-commerce by over 100% compared to the last fiscal.
Review of Performance
TI Cycles sold about 20.6 lakh bicycles during the year in trade which was lower by 6.6% compared to the previous year. Overall Trade bicycle industry itself registered a de-growth of 13% over the previous year. Despite tough market conditions, TI Cycles registered an overall market share gain of 1.8%. The thrust on Specials segment was driven through frequent new product launches, product innovations, enhanced digital marketing and superior consumer experience through exclusive retail outlets under the exclusive retail brand ‘Track & Trail'. Moreover, the expansion of export business and domestic spares business is considered to be a new avenue of business to the Company. To participate in the growing economy sub-segment, 9 low cost products were launched in major categories like Kids and Mountain Terrain Bikes (MTB).
In 2021-22, 66 new model bicycles were launched, and 23 models were refreshed. 24% of the trade sales volume came from new products.18 innovations were introduced for the first time in the industry, notable among them being introduction of split basket in junior SLR, pedal light, dual braking force, turbo drive 2.0 and anti-slip chain 2.0.
On the consumer outreach front, the business onboarded Mr. Rishabh Pant, well known Indian cricketer as the brand ambassador for Hercules, and consistently ran digital influencer campaigns for its major brands, with BSA Ladybird, Hercules, Roadeo, and Montra delivering a significant lift in brand awareness. The objective of the campaigns was to increase brand awareness and product consideration among the target group.
6.2. Engineering TI's Presence
The Engineering segment of the Company consists of Cold Rolled Steel Strips (CRSS) and precision steel tubes viz., Cold Drawn Welded tubes (CDW) and Electric Resistance Welded tubes (ERW). These products primarily cater to the needs of the automotive, boiler, bicycle, general engineering and process industries. The Company is further engaged in the manufacture of large diameter welded tubes mainly for non-auto application which are largely imported.
During 2021-22, the automotive industry's production volume de-grew by 6%. Passenger vehicle and commercial vehicle grew by 19% and 29% respectively and two-wheeler segment de-grew by 3% over the previous year.
The Engineering segment was able to grow its volumes leveraging the growth of passenger vehicles and commercial vehicles. The business also focussed and realized the increased opportunities in the export market. The volumes of tubes in domestic business grew by 18%, CRSS business grew by 14% and large diameter tubes grew by 26%. Overall export volume grew by 98% during the year.
The business continued to drive efficiency improvement and spending capital expenditure prudently on critical growth projects.
The business started Lean implementation for eliminating/reducing wastes in the value chain by focussing on productivity & quality improvement, inventory reduction & creating a flow in production system using Lean tools & techniques.
Career path initiatives were taken up to provide opportunities to employees within the organization for new openings and to enable cross function exposure and growth.
The business continued to participate in the reviews of the US Department of Commerce on the complaint of alleged dumping of cold-drawn steel mechanical tubes from India and some other countries, the Countervailing Duty (CVD) and Anti-dumping Duty (AD) on the Company's exports to the US market, to reduce duty rates to enhance export volumes.
6.3. Metal Formed Products
TI's presence
Automotive chains, fine blanked products, roll-formed car doorframes and cold roll formed sections for passenger coaches constitute the Metal Formed Products segment.
During 2021-22, production of two-wheeler segment de-grew by 3% and passenger cars grew by 17%.
The financial year was a challenging one amidst the rise in steel prices, global shortage in semi-conductor chips coupled with negligible growth of auto industry. The business demonstrated resilience despite these challenges through prudent capital spending, operating with an optimum working capital along with control over costs.
This segment is one of the major players in the manufacturing of roller chains and fine blanked parts for the automotive industry in India.
With international car majors continuing to invest in the country and increasingly using India as an export base, many component manufacturers have the opportunity to cater to the global needs of automobile manufacturers and their Tier 1 suppliers.
Post COVID-19 pandemic, the Railways business continued to go through a turbulent phase as demand continues to be subdued.
Due to State-wide lock down in first few months of the year, all the businesses were affected during the first quarter. Though the first quarter was impacted due to the pandemic, the auto segment improved from the second quarter onwards. The global shortage of semi-conductor chips affected certain segments of the businesses during the year. The Company continued to focus in the aftermarket segment benefiting from the two-wheeler population growth. The replacement market continues to provide opportunities for growth notwithstanding good competition and the business expects to strengthen on sales structure, deepen its coverage and launch new products for new categories.
Doorframe sales were higher by 11% during 2021-22 and the business manages to hold on to market due to good traction seen in select models with renowned auto majors. The focus is on generating more business from the auto OEMs, leveraging the Tier-1 position with specific emphasis on roll formed products and other tubular parts used in passenger cars. In addition, increased volumes in coach parts, focus on metros and expanding the customer/product base are some of the driving factors that will put the Railways business back on track.
6.4. Others Segment
Effective 1st April 2021, the Company has reorganized certain business units and its operating structure across all the business units and a reporting segment "Others" was formed.
This segment consists of the Industrial Chains and New Businesses of the Company viz, Truck Body Works, TMT Bars and TI Opto Electronic Solutions,
Industrial Chains business manufactures Power Transmission Chains, Engineering Class Chains, Agricultural Chains and Textile Chains for use in agriculture, cement, steel, sugar, textiles, food and other sectors. This business has performed well during the year with healthy growth in both domestic and exports.
New businesses comprising of Truck Body Works, TMT Bars and TI Opto Electronic Solutions have begun to stabilize post the 1st and 2nd wave of COVID-19 pandemic and are expected to grow their performance in the coming years.
7. Dividend
The Board of Directors declared an Interim Dividend of `2/- per share (@ 200%) on equity share of face value of `1/- each for the financial year 2021-22, which was paid on 4th March 2022 to all the eligible shareholders. Final dividend of `1.50/- per share (@ 150%) has been proposed by the Board for the said financial year and together with the Interim Dividend of `2/- per equity share, already declared and paid, in respect of the financial year 2021-22, `3.50 per share (@ 350%) will be considered as the total Dividend for the said financial year.
The dividend payout is in accordance with the Company's Policy on Dividend Distribution. The said Policy as approved by the Board is uploaded and is available on the following link on the Company's website: https://tiindia.com/dividend-distribution-policy/
Details thereof also form part of this Annual Report for the information of shareholders.
8. Share Capital
The paid-up Equity Share Capital of the Company as on 31st March 2022 was `19,29,50,221/- consisting of 19,29,50,221 Equity Shares of the face value of ` 1/- each fully paid up.
9. Finance
Cash and Cash Equivalents as at 31st March 2022 were `2.36 Cr. In addition, the Company has investments in liquid schemes of mutual funds for `280.45 Cr. The Company continues to focus on judicious management of its working capital. The Company took many steps during the year to improve the working capital turns. The working capital parameters were kept under strict check through continuous monitoring.
9.1. Non-Convertible Debentures
During the year, Non-Convertible Debentures (NCDs) aggregating `50 Cr. were redeemed. As at 31st March 2022, NCDs aggregating `50 Cr. were outstanding, which were subsequently redeemed in April 2022 on the due date. Accordingly, no NCDs of the Company are outstanding as on date of this Report.
9.2. Deposits
The Company has not accepted any fixed deposits under Chapter V of the Act and as such no amount of principal and interest were outstanding as on 31st March 2022.
9.3. Particulars of Loans, Guarantees or Investments
During the year under review, the Company incorporated a Wholly-Owned Subsidiary, M/s. TI Clean Mobility Private limited ("TICMPL") and invested `100 Cr. in its equity capital. Further the Company had given an Inter-Corporate Loan of `64 Cr. to TICMPL under Section 186 of the Companies Act, 2013, the details relating to which form part of the Notes to the Audited Financial Statements provided in this Annual Report.
During the year under review, the Company made a strategic investment in M/s. Aerostrovilos Energy Private Limited ("AEPL"), a Chennai based start-up engaged in the development of micro-gas turbine technology, by way of subscription to 4,151 equity shares, for an aggregate sum of `3.46 Cr., representing 27.78% of the paid-up equity share capital of AEPL and 25% of the equity share capital considering the ESOP Pool. Consequently, AEPL became an associate Company with effect from 24th November 2021. AEPL is currently carrying on the process of building the proto-type of micro gas turbine.
During the year under review, in February 2022, the Company exercised the option to convert 9 crore Share Warrants into equal number of equity shares of M/s. CG Power and Industrial Solutions Limited ("CG Power"), the Company's subsidiary, by paying the balance subscription amount of `57.78 Cr. and was allotted equal number of equity shares by CG Power.
Post allotment of the shares on conversion of the Share Warrants, the Company holds 80,12,51,887 equity shares of `10/- each fully paid up of CG Power, constituting 55.57% of the subscribed and paid up capital of CG Power.
The Company decided to exercise the option to convert the remaining 8,52,33,645 Share Warrants, in May 2022, into equity shares of CG Power in the current financial year 2022-23, and paid the balance of the purchase consideration of about `54.72 Cr. Post allotment of the shares in respect of the second and final conversion of Warrants, the Company holds 88,64,85,532 equity shares of `10/- each representing 58.05% of the subscribed and paid up capital of CG Power on a fully diluted basis.
Consequent to the improved business performance of CG Power, State Bank of India ("SBI"), the lender of CG Power released and cancelled the corporate guarantee earlier provided by the Company in favour of SBI towards the fund-based facilities aggregating `1,365 Cr. extended by SBI to CG Power.
As part of treasury management, the Company also deploys any short-term surplus in units of mutual funds, the details relating to which form part of the Notes to the Audited Financial Statements provided in this Annual Report.
9.4. Consolidated Financial Highlights
10. Business Review – Subsidiaries and Joint Venture
10.1. Shanthi Gears Ltd (SGL)
SGL, a subsidiary of the Company, recorded revenue of `337 Cr. in 2021-22 against `216 Cr. in the previous year. Profit before tax was `59 Cr. (previous year: `26 Cr.). During the year, SGL renewed its focus on re-establishing itself in the market and gaining new customers.
SGL continued to look at enlarging its market presence, create a robust channel, enhance its process capabilities and launch new products to meet the growing expectations of customers.
SGL declared and paid an Interim Dividend of `2.50 per share for the financial year 2021-22.
10.2. Financi?re C10 SAS (FC10)
FC10, the Company's wholly-owned subsidiary in France recorded consolidated revenue of Euro 33 Mn. in 2021 (previous year: Euro 26 Mn.). The profit after tax for the year was Euro 0.25 Mn. as compared with the loss of Euro 0.67 Mn. in the previous year. The consolidated results of FC10 include results of its subsidiaries viz., Sedis SAS, Sedis GmbH and Sedis Co Ltd in UK.
10.3. Great Cycles (Private) Limited (GCPL)
GCPL is the Company's subsidiary in Sri Lanka acquired in March 2018. The Company holds 80% of GCPL's equity capital.
During the year under review, GCPL recorded revenue of `32 Cr. (previous year: `19 Cr.) and registered profit before tax of `9 Cr. (previous year profit before tax: `2 Cr.).
10.4. Creative Cycles (Private) Limited (CCPL)
CCPL is the Company's subsidiary in Sri Lanka acquired in March 2018. The Company holds 80% of CCPL's equity capital.
During the year under review, CCPL recorded revenue of `77 Cr. (previous year: `41 Cr.) and registered loss before tax of `14 Cr. (previous year loss before tax: `2 Cr.).
10.5. CG Power and Industrial Solutions Limited (CG Power)
CG Power is the Company's subsidiary acquired in November 2020. The Company holds 55.57% of CG Power's equity capital.
During the year under review, CG Power recorded revenue of `5,561 Cr. and registered profit before exceptional items and tax of `527.82 Cr.
The operations of CG Power have stabilized, and its performance has registered an impressive turnaround during 2021-22, which only reaffirms the confidence of the Board at the time of acquisition that CG Power would create better value for itself and the Company in the coming years.
10.6.TI Clean Mobility Private Limited (TICMPL)
TICMPL is the Company's wholly-owned subsidiary incorporated on 12th February 2022.
During the year under review, TICMPL recorded Nil revenue and registered a loss before tax of `12.96 Cr.
During the year under review, Cellestial E-Mobility Private Limited recorded revenue of `0.06 Cr and registered a loss before tax of `4.36 Cr
10.7. TI Tsubamex Private Limited (TTPL)
Consequent to discontinuance of its business operations, the application made by TTPL to the Registrar of Companies, Tamilnadu, Chennai (RoC) was approved and the name of TTPL was struck off the Register of Companies maintained by the RoC and TTPL stood dissolved effective 25th October 2021.
11. Financial Review
11.1. Profits & Profitability
The Profit before Tax and exceptional items has registered a growth by 65%. All the business segments of the Company maintained their focus on servicing customers, improving efficiencies, controlling working capital and reducing resources employed in the business.
11.2. Capital Expenditure
The Company continues to assess the trends emerging in the industry and the changing requirements of its customers and invests appropriately for the long-term with a view to servicing its customers in a more timely and efficient manner.
11.3. Interest Cost
The Company's interest cost reduced to `12 Cr. in 2021-22 from `19 Cr. in the previous year, mainly on account of lower borrowing and better management of net working capital. The Company had a net debt of `65.26 Cr. (Net of borrowings, cash and investment in mutual funds; and debt securities) as on 31st March 2022 as compared to the cash surplus (Net of borrowings, cash and investment in mutual funds; and debt securities) of `10 Cr. as on 31st March 2021.
11.4. Financial Ratios
The key financial ratios of the Company in which there were significant changes (more than 25%) during the financial year compared to the previous financial year, with reasons therefor, are as under:
% change over
*Ratios are tracked by the Company on a standalone basis
11.5. Internal Control Systems
Internal control systems in the organisation are looked at as the key to its effective functioning. The Company believes that internal control is one of the key pillars of governance which provides freedom to the management within a framework of appropriate checks and balances. Given the nature of business and size of its operations, the Company has designed and instituted a robust internal control system that comprises well-defined organisation structure, roles and responsibilities, documented policies and procedures to reduce business risks through a framework of internal controls and processes. These controls ensure:
• Recording of transactions are accurate, complete and properly authorised;
• Adherence to Accounting Standards, compliance to applicable Statutes, Company policies and procedures and timely preparation of financial statements;
• Effective usage of resources and safeguarding of assets;
• Prevention and detection of frauds/errors;
• Efficient conduct of operations.
To ensure efficient internal control systems, the Company has a well-established, independent and multi-disciplinary in-house Internal Audit function that carries out periodic audits across locations and functions. The scope and authority of the Internal Audit function is derived from the Internal Audit charter duly approved by the Management. The Internal Audit function reviews compliance vis-a-vis the established design of the internal control, as also the efficiency and effectiveness of operations. Internal Audit function is responsible for providing, assurance on compliance with operating systems, internal policies and legal requirements as well as suggesting improvements to systems and processes. It reviews and reports to management and the Audit Committee about compliance with internal controls, and the efficiency and effectiveness of operations as well as the key process risks. The Company also has established whistle-blower mechanism operative across the Company.
In its continued efforts to further strengthen its Internal Audit process through utilizing the services of a specialist agency in order to benefit from the best of practices available (including the use of analytical tools) to monitor various processes, the Company has re-appointed M/s. Price water house Coopers ("PwC") as Internal Auditors of the Company for the current financial year 2022-23 also. The Company is seeing benefits from the professional approach and practises adopted by the said Internal Auditors.
The Audit Committee of the Board of Directors, comprising of independent directors, regularly reviews the audit plans, significant audit findings, adequacy of internal controls, compliance with accounting standards as well as reasons for changes in accounting policies and practices, if any.
The summary of the Internal Audit findings and status of implementation of action plans for risk mitigation are submitted to the Audit Committee every quarter for review, and concerns if any, are reported to the Board. This process ensures robustness of internal control system and compliance with laws and regulations including resource utilisation and system efficacy.
Revenue and capital expenditures are governed by approved budgets and the levels are defined by a delegation of authority mechanism. Review of capital expenditure is undertaken with reference to benefits expected in line with the policy for the same.
Investment decisions are subject to formal detailed evaluation and approved by the relevant authority as defined in the delegation of authority mechanism. The Audit Committee reviews the plan for internal audit, significant internal audit observations and functioning of the Company's Internal Audit department on a periodic basis.
11.6. Internal Financial Control Systems with reference to the Financial Statements
The Company has complied with the specific requirements of the Act, which call for establishment and implementation of an Internal Financial Control framework that supports compliance with requirements of the said Act in relation to the Directors' Responsibility Statement.
The Company's business processes are enabled by an Enterprise-wide Resource Platform (ERP) as its core IT system. The operating management is not only responsible for revenue and profitability but for also maintaining financial discipline and accountability. The systems and processes are continuously improved by adopting best in class processes, automation and implementing latest Information Technology tools.
The Company has a formal system of internal financial control to ensure the reliability of financial and operational information, and regulatory and statutory compliances. This is reviewed regularly and tested by the Internal Audit Team. The Company's business processes are enabled by the ERP for monitoring and reporting processes resulting in financial discipline and accountability.
12. Enterprise Risk Analysis and Management
The Company has an established risk assessment and minimisation framework. This framework provides a mechanism to identify the risk, evaluation of likelihood of happening and consequences. It also provides for assessment of options to mitigate the risk and develop appropriate risk management plans. There are normal constraints of time, efficiency and cost.
The Risk Management Committee of the Board of Directors reviews the risk mitigation plans periodically to monitor the key risks of the Company and evaluate the management of such risks for effective mitigation.
During the year under review, the Risk Management Committee met on 17th June 2021, 27th October 2021 and 16th March 2022 and reviewed the risks and mitigation plans of the SBUs of the Company. Some of the risks associated with the business and the related mitigation plans are discussed hereunder. The risks given below are not exhaustive and the evaluation of risk is based on management's perception.
12.1. Bicycles and Components
12.2. Engineering
13. Corporate Social Responsibility (CSR)
The Company, being part of the Murugappa Group, is known for its tradition of philanthropy and community service. The Company's philosophy is to reach out to the community by establishing service-oriented philanthropic institutions in the field of education and healthcare as the core focus areas. The CSR Policy of the Company is available on the Company's website at the following link, https://tiindia.com/csr-policy/.
As per the provisions of the Act, the Company was required to spend `7.34 Cr. and had also carried forward an excess balance of `1.17 Cr. After adjustment of the said excess carried forward balance, the minimum mandatory amount required to be spent during the financial year 2021-22 was `6.17 Cr, against which, the Company spent `6.48 Cr. towards identified CSR projects in the fields of education, health care and public infrastructure during the year.
The Annual Report on CSR for 2021-22 is annexed to and forms part of this Report as well as in the Company's website at the following link, https://tiindia.com/csr-budget-and-spend-details/
14. Corporate Governance
The Company is committed to maintaining high standards of corporate governance.
The Company was wholly in compliance with the requirements of the Listing Agreement with the Stock Exchanges as well as the SEBI Listing Regulations.
A report on corporate governance together with a certificate from the Practising Company Secretary is annexed in accordance with the terms of the SEBI Listing Regulations and forms part of the Board's Report. The Managing Director and the Chief Financial Officer have submitted a certificate to the Board regarding the financial statements and other matters in terms of Part B of Schedule II [Corporate Governance] of the SEBI Listing Regulations.
The Report further contains details as required to be provided in the Board's Report on the policy on Directors' appointment and remuneration including the criteria, annual evaluation by the Board and Directors, composition and other details of Board committees, implementation of risk management policy, whistle-blower policy/vigil mechanism, dividend policy etc.
15. Business Responsibility Reporting
As required under the SEBI Listing Regulations which mandate the inclusion of a Business Responsibility Report as part of the Annual Report for the top 1000 listed entities, the Business Responsibility Report forms part of the Annual Report.
The Business Responsibility Policy of the Company is displayed in the Company's website at the following link, https://tiindia.com/business-responsibility-policy/
With the increasing emphasis on reporting on the ESG (Environmental, Social and Governance) matters, the Company has taken steps to bring focus to ESG initiatives.
16. Human Resources
The Company continues to lay emphasis on creating a high performing work culture to achieve organisational goals of the present as well as those of the future in a sustainable way by establishing a culture of process discipline, organisational oneness and achievement orientation across its businesses through simplification and digitization, empowerment, project-based working and customer centricity.
The initiatives taken by the Company are in line with its long-term HR strategy drawn up with three broad thrust areas – TI Way of working, TI talent development and creating a high-performance work culture.
As the Company embarked on its ambitious plan for expansion and growth, it has co-created a comprehensive operational framework to guide the employees in this journey covering all divisions/ business units/functions. ‘TI Way' is a set of guidelines for critical processes in the organization thereby uniting their approaches irrespective of the business units. TI Way rests on key three pillars – process discipline, organisational oneness and achievement orientation and powered by three key directional initiatives – talent development, Lean management and business acquisition. The journey on all these three initiatives has started well.
As part of the talent development engine, the Company has developed a framework that will ensure a structured approach towards identification, development and availability of talent ready pool for occupying elevated roles in top, middle and junior management categories. The Company has constituted a ‘Talent Board' which is an integral part of the talent development engine. The Talent Board will play an active role in development of resources across levels and will guide, support and constantly review the various developmental actions, interventions and suggest appropriate next steps for accelerated talent development in the Company.
In order to further strengthen the value chain and being competitive, the Company focuses on "we must to do more with less" and adapt to changes in the market and economy. In line with this, the Company started the Lean implementation for eliminating/ reducing wastes in the value chain and for improving customer defined value, to products and services. Lean is being practised at Tube Products of India, TI Cycles of India, Industrial Chains and the Fine Blanking businesses and also at Shanthi Gears Limited, focussing on Muda (waste) elimination, implementation of standard work, productivity & quality improvement, inventory & creating a flow in the production system using Lean tools & techniques.
The total number of permanent employees on the rolls of the Company as on 31st March 2022 is 3,107.
Industrial relations continued to remain cordial at all the Company's units during the period under review.
The information relating to employees and other particulars required under Section 197 of the Act read with Rule 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules 2014 will be provided upon request. In terms of Section 136 of the Act, the Report and Accounts are being sent to the Members excluding the information on employees, particulars of which are available for inspection by the Members at the Registered Office of the Company during business hours on all working days of the Company up to the date of the forthcoming Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in the said regard.
The disclosure with regard to remuneration as required under Section 197 of the Act read with Rule 5 of the aforementioned Rules is attached and forms part of this Report.
17. Prevention of sexual harassment at workplace
The Company has policy on prevention of sexual harassment at workplace in line with the requirement of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act 2013. An Internal Complaints Committee (ICC) to redress complaints received regarding sexual harassment has been constituted in compliance with the requirements of the aforementioned Act. The policy extends to all employees (permanent, contractual, temporary and trainees). Employees at all levels are being sensitized about the said Policy and the remedies available thereunder.
No complaints were received by the ICC during the year under review and no complaint was pending as at the end of the year.
18. Employee Stock Option Scheme
During the year under review, the Company had granted 2,85,400 Options to eligible employees under its Employee Stock Option Plan viz., ESOP 2017.
Details in respect of the ESOP 2017 as required under the relevant SEBI Regulations are displayed in the Company's website at the following link: https://tiindia.com/esop/
19. Directors' Responsibility Statement
The Board of Directors confirm that the Company has in place a framework of internal financial controls and compliance system, which is monitored and reviewed by the Audit Committee and the Board besides the statutory, internal and secretarial auditors. To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act 2013:
a) that in the preparation of the annual Financial Statements for the year ended 31st March 2022, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;
b) that such accounting policies as mentioned in the Notes to the Financial Statements have been selected and applied consistently and judgment and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2022 and of the profit of the Company for the year ended on that date;
c) that proper and sufficient care has been taken for the 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) that the annual Financial Statements have been prepared on a going concern basis;
e) that proper internal financial controls to be followed by the Company have been laid down and that the financial controls are adequate and were operating effectively; &
f) that proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
20. Auditors
M/s. S R Batliboi & Associates LLP, Chartered Accountants (Firm Registration Number : 101049W/ E300004) were appointed as Statutory Auditors at the 9th Annual General Meeting held on 6th November 2017 for a period of five years viz., from the conclusion of the said 9th Annual General Meeting till the conclusion of the ensuing 14th Annual General Meeting.
As the term of the Statutory Auditors is valid only till the ensuing Annual General Meeting, it is proposed to re-appoint M/s. S R Batliboi & Associates LLP, Chartered Accountants as Statutory Auditors of the Company for a second term, to which they are eligible under the Act.
The Statutory Auditors will be completing audit of the financials of the Company for a continuous period of ten years in FY 2025-26 if their appointment in the casual vacancy to do the statutory audit in FY 2016-17 is also reckoned. It is hence proposed to recommend a second term of four years only for re-appointment of the Statutory Auditors viz., from the conclusion of the ensuing 14th Annual General Meeting to the conclusion of the 18th Annual General Meeting.
Necessary consent for the re-appointment has been received from M/s. S R Batliboi & Associates LLP. The resolution proposing the said re-appointment of M/s. S R Batliboi & Associates LLP as Statutory Auditors of the Company for a period of four years along with the remuneration thereof forms part of the Notice for the ensuing 14th Annual General Meeting, which the Board recommends for the shareholders' approval.
The Company is required to maintain cost records in respect of Steel Products, Metal Formed Products and parts & accessories of auto components of the Company and such accounts and records are made and maintained. M/s. S Mahadevan & Co. (Firm no.000007), Cost Accountants were appointed as the Cost Auditors of the Company for auditing the cost accounting records maintained by the Company in respect of the applicable products for the financial year 2022-23. Necessary resolution for ratification of their remuneration in respect of the terms of their appointment for the financial year 2022-23 forms part of the Notice for the ensuing Annual General Meeting, which the Board recommends for the shareholders' approval.
21. Related Party Transactions
All related party transactions that were entered into during the financial year under review were on an arm's length basis and were in the ordinary course of business.
The Company did not enter into any materially significant related party contracts or arrangements or transactions during the financial year which may have a potential conflict with the interest of the Company at large or which is required to be reported in Form No. AOC-2 in terms of Section 134(3)(h) read with Section 188 of the Act and Rule 8(2) of the Companies (Accounts) Rules 2014.
Necessary disclosures as required under the Indian Accounting Standards have been made in the notes to the Financial Statements.
The policy on Related Party Transactions as approved by the Board is uploaded and is available on the following link on the Company's website, https://tiindia.com/rpt-policy/. None of the Directors had any pecuniary relationships or transactions vis-?-vis the Company.
22. Directors
During the year under review, the following key Board level changes were effected to evolve and realign the senior management team after considering the growth aspirations in the existing businesses, the number of new initiatives/businesses in the anvil and towards long-term succession planning:
- Mr. M A M Arunachalam, who was the non- executive Chairman till 31st March 2022, was appointed as a Whole-time Director (Key Managerial Personnel), designated as the Executive Chairman for a 5-year term of Office from 1st April 2022 to 31st March 2027 (both days inclusive) for guiding the Company's existing business interests, helping in identifying new business interests, actively promoting good governance, nurturing business relationships and other corporate affairs including representing the Company at various forums, interacting with the Government for active promotion of the Company's business interests etc.;
- Mr. Vellayan Subbiah, who was the Managing Director till 31st March 2022, was appointed as a Whole-time Director (Key Managerial Personnel), designated as the Executive Vice Chairman for a 5-year term of Office from 1st April 2022 to 31st March 2027 (both days inclusive) for providing the overall leadership, identifying the growth vectors for the Company and look at the long-term business opportunities, organic as well as inorganic besides continuing to provide tactical direction, to guide and support the business teams and its leaders in strategic and operational matters; and
- Mr. Mukesh Ahuja, who was heading Tube Products of India, the largest division of the Company was appointed as Additional Director and as the Managing Director (Key Managerial Personnel) for a 5-year term of Office from 1st April 2022 to 31st March 2027 (both days inclusive) as part of long-term succession planning and in view of appointment of Mr. Vellayan Subbiah as the Executive Vice Chairman, to focus on growing the existing businesses and to facilitate future growth of the Company.
Mr. Tejpreet Singh Chopra was appointed by the Board of Directors as an Additional Director in the Independent Director category of the Company on 16th March 2022.
In respect of all the four appointments as aforementioned, the Board decided to recommend the same to the shareholders and further seek the approval of the shareholders through the issue of a Notice of Postal Ballot & E-voting dated 12th May 2022, since the amended SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 stipulates inter alia that in respect of appointment of any directors, shareholders' approval be taken within three months from the date of appointment by the Board of Directors.
Consequent to his appointment as the Executive Vice Chairman (Whole-time Director) effective 1st April 2022, Mr. Vellayan Subbiah stepped down as ManagingDirectoreffectivecloseofbusinesshourson 31st March 2022.
The Board further places on record its appreciation of the major role played by Mr. Vellayan Subbiah as the Managing Director of the Company during his term of Office from 19th August 2017 to 31st March 2022 in actively driving the growth of the existing businesses of the Company, apart from providing strategic direction for the acquisitions and step outs into new lines of business by the Company. The Board also wishes him, Mr. M A M Arunachalam and Mr. Mukesh Ahuja the very best in their respective new roles.
During the year 2021-22, Ms. Madhu Dubhashi, Independent Director retired on the completion of her second term, at the 13th Annual General Meeting of the Company. Mr. Mahesh Chhabria, Independent Director resigned from the Board in October 2021 citing potential conflict of interest on account of the Company's business strategies with his senior management position with another Company.
The Board places on record its appreciation of the distinguished services rendered by Ms. Madhu Dubhashi and Mr. Mahesh Chhabria during their term of office as Directors of the Company.
Mr. K R Srinivasan, President and Whole-time Director retires by rotation at the ensuing Annual General Meeting to facilitate the compliance of the requirements of Section 152 of the Act and being eligible, he offers himself for re-appointment. The Board, based on and after taking into consideration the recommendations of the Nomination and Remuneration Committee, recommends the re-appointment of Mr. K R Srinivasan as Director, not liable to retire by rotation, at the forthcoming Annual General Meeting.
All the Independent Directors of the Company have furnished the necessary declaration in terms of Section 149(6) of the Act affirming that they meet the criteria of independence as stipulated thereunder. In the opinion of the Board, all the Independent Directors have the integrity, expertise and experience including the proficiency as required to effectively discharge their roles and responsibilities in directing and guiding the affairs of the Company and, are independent of the management.
23. Declarations/Affirmations
During the year under review:
- there were no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year of the Company to which the financial statements relate viz., 31st March 2022 and the date of this Report; &
- there were no significant material orders passed by the regulators or courts or tribunals impacting the Company's going concern status and its operations in future.
24. Secretarial Audit
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 Mr. R Sridharan of Messrs.
R. Sridharan & Associates, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Auditor is annexed herewith and forms part of this Report.
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