LEEL Electricals Ltd

Board's report

Dear Members,

Your Directors have pleasure in presenting the 31st Annual Report on the business and operations of the Company along with the Standalone and Consolidated Audited Accounts for the Financial Year ended on March 31, 2018.

SUMMARISED FINANCIAL RESULTS

(Rs. in crore, except per share data)

PERFORMANCE OF THE COMPANY

For the financial year ended March 31, 2018, on standalone basis, the revenue from the operations stood at Rs. 1,963 Crores as compared to Rs. 3,023 Crores during the previous year. EBIDTA for the year was Rs.146 Crores as compared to Rs.274 Crores in the previous year. The profit before exceptional item and the tax stood at Rs.46 Crores as compared to Rs.119 Crores during the last year and the finance cost during the year was Rs. 67 Crores as against Rs. 119 Crores during the previous year. The profit after exceptional item and tax stood at Rs. 522 Crores as against Rs. 85 Crores during the previous year. The total comprehensive income for the year stood at Rs. 523 Crores as compared to Rs. 85 Crores during the previous year. Figures of the year under review are not comparable with the corresponding year, due to the sale of Consumer Durable Business w.e.f. May 08, 2017.

On the consolidated basis, the revenue from the operations for the year ended March 31, 2018 was Rs. 2,342 Crores as compared to Rs. 3,373 Crores during the previous year. EBIDTA for the year stood at Rs. 134 Crores as compared to Rs. 273 Crores in the previous year. The consolidated profit before exceptional item and tax stood at Rs. 20 Crores and after exceptional items and tax was Rs. 510 Crores as compared to Rs. 104 Crores and Rs. 70 Crores respectively during the previous year. The total comprehensive income for the year stood at Rs. 511 Crores as compared to Rs. 70 Crores during the previous year. For detailed review, please refer Management Discussion and Analysis Report as attached and forms part of Annual Report.

SLUMP SALE OF CONSUMER DURABLE BUSINESS

During the year under review, the company sold its consumer durable business as a going concern to Havells India Ltd, on a slump sale basis on May 8, 2017 for an enterprise value of Rs. 1550 crores, on debt free cash free basis.

The company received upfront consideration of Rs. 1458 crores and balance as per the terms of the agreement, would be released upon finalization of the closing financials which is under process as on the date of this report.

The proceeds from the disinvestment has been utilized by the company partially towards deleveraging the balance sheet by repaying the long term and short term borrowings and partially towards capital investment in view of strategic expansion by increasing capacity at existing plants, setting up new plants at various locations to tap up with the increased demand of customers in the Heating Vantalion and Air Conditioning industry.

OPERATION

During the year under review, your Company organized its revenue stream primarily into the following three reportable business segments:

a) Consumer Durable Business (discontinued w.e.f. May 8, 2017);

b) OEM & Packaged Air conditioning Segment; and

c) Heat Exchangers & Components Segments.

Consumer Durable Segment: During the year under review, the Company had sold its Consumer Durables business to Havells India Limited on May 08, 2017. The Company has classified this business as discontinued business. Till May 08, 2017, the Consumer Durable Business reported revenue of Rs. 424 Crores.

The air conditioning industry had witnessed tough time during the financial year under review. Output took a hit because of a host of disruptions such as GST transition, a modest festive season, change in rating standards and a subdued summer of 2017. The AC production volumes grew a minuscule 7 per cent in Financial Year 2017-18. Major brands reported a subdued volume growth during the year 2018. A major factor that impacted RAC volumes in FY18 was the change in energy efficiency ratings. The Bureau of Energy Efficiency (BEE) introduced a new star rating methodology called Indian Seasonal Energy Efficiency Ratio (ISEER) for air conditioners in 2016, which came into effect in January 2018.

Your Company being an OEM supplier to various brands in India witnessed the downside too, yet the sales from this segment grew from Rs.936 crores to Rs.964 crores.

Heat exchangers and the component segment caters to the manufacturing of heat exchangers and the evaporator coil for the heating ventilation and the air conditioning industry and copper and brass heat exchangers for the railways, heavy automobiles and other industrial applications and the component business of sheet metal. During the year, the revenue of the segment stood at Rs.640 Crores as compared to Rs. 604 Crores during the previous year.

For detailed performance review, please refer Management Discussion and Analysis Report as attached herewith and forms part of the Annual Report.

DIVIDEND

The Board of Directors had, in its meeting held on May 30, 2017, declared a special dividend (one time dividend) of Rs.20 per equity shares of the face value of Rs.10 each (200%) out of proceeds of sale of Consumer Durable Business, aggregating to Rs.97.08 Crores (including dividend distribution tax) which was duly paid on 15.06.2017.

The Board of Directors had, in its meeting held on May 30, 2018 decided to treat the special dividend declared and paid during the financial year 2017-18 as the final dividend.

TRANSFER TO RESERVES

The Company does not propose to transfer any amount to the Reserves and Surplus account.

SHARE CAPITAL

During the period under review, there was no change in the share capital of the Company. The authorized share capital of the Company stood at Rs.70 Crore, divided into 7 Crore equity shares of Rs.10 each and issued and subscribed capital of the Company stood at Rs. 40.35 Crore and the paid-up share capital stood at Rs. 40.34 Crore as at March 31, 2018.

INDIAN ACCOUNTING STANDARD (IND AS)

The financial statements are prepared in accordance with the new Indian Accounting Standards notified by the Ministry of Corporate Affairs vide its notification dated February 16, 2015.

SUBSIDIARY COMPANIES

As of the beginning of the financial Year, the Company had five direct wholly owned subsidiaries (WOS) viz; LEEL Coils Europe s.r.o. (formerly Lloyd Coils Europe s.r.o.), Janka Engineering s.r.o., Noske Kaeser Rail & Vehicle Germany GmbH, Noske Kaeser US Rail & Vehicle LLC, Noske Kaeser Rail & Vehicles New Zealand Ltd. and two Indirect WOS through Noske Kaeser Rail & Vehicles New Zealand Ltd. (NKNZ) viz; Noske-Kaeser Rail & Vehicle Australia Pty Ltd. and Noske-Kaeser Equipamentos de Aquecimento, Ventilagao e Ar Condicionado Ltda (formerly Noske Kaeser Empreendimentos e Participacoes Do Brasil Ltd.) (liquidated).

During the period under review, the Board of Directors of the Company had, in its meeting held on November 14, 2017, approved the restructuring of LEEL Coils Europe s.r.o. and Janka Engineering s.r.o. which involved spinning off certain common assets and liabilities including employees and amalgamate with a new entity set up as a wholly owned subsidiary of the Company in the Czech Republic to provide the common services to them. The appointed date for the restructuring was January 1, 2018.

In pursuant to the above, the new entity LEEL Services s.r.o., became the WOS of the Company w.e.f. 18.11.2017 and the spin off process was duly approved by the competent authorities of the Czech Republic effective as on the appointed date i.e. January 01, 2018.

The aforesaid restructuring has consolidated the selected assets and resources into a new entity and enabled the better management and control over the resources without any change in ultimate ownership over the existing aforesaid WOS(s). Further, there was no impact of said restructuring on the existence of restructured WOSs and they continued to operate in their respective business segments during the period under review.

After the balance sheet date following events have occurred with respect to subsidiaries.

Voluntary Insolvency of Noske Kaeser Rail & Vehicle Germany GmbH ('NKG'): NKG was acquired in March 2016 from an insolvency administrator with an intention that this acquisition would open up immense opportunity for the Company in providing technical and engineering solutions in the highly specialized segment of Rail HVAC and expand its business globally. However, inspite of the financial contributions and various measures undertaken to turnaround the subsidiary since the date of its acquisition, it continued to lose mainly on account of legacy orders which were executed by the subsidiary at significant losses and thus, couldn't run the operations in a self-sustainable mode and leaving no option but to file for insolvency. The Tribunal of Hamburg has appointed the insolvency administrator to manage the operations and to find an investor for taking over of NKG or put it into bankruptcy.

Sale of Janka Engineering s.r.o. ('Janka'): Janka also continued to deliver weak results and hence, the Company decided to explore the possibility of divesting its stake in it and appointed foreign consultant to look out for the prospective buyer. On the date of this report, the Company had approved the disinvestment of its 100% shareholding in Janka including all assets, liabilities, trademarks and employees to Multicraft Group for a total consideration of 45 Million Czech Crowns (equivalent to approximately Euro 1.75 Million). The closing shall take place before the end of August 2018 subject to the customary closing conditions including regulatory approvals.

Incorporation of new India Subsidiary: The new Indian subsidiary was incorporated viz; 'LEEL Engineering Private Limited' in the state of Delhi on April 03, 2018 with an object to do business in the field of all types of engineering and electricals equipment and machinery. The Company holds 99% of the total share capital of the Company.

Dissolution of Noske-Kaeser Equipamentos de Aquecimento, Ventilagao e Ar Condicionado Ltda. (Indirect subsidiary through NK NZ): As there was no operation in the subsidiary the same has been voluntary dissolved and as on the date of approval, the applicable authority had also approved the dissolution and now this entity ceased to exist.

There are no associate companies within the meaning of Section 2(6) of the Companies Act, 2013 (Act). There has been no material change in the nature of the business of the subsidiaries.

In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared consolidated financial statements of the Company and its subsidiaries existing as on March 31, 2018, which form part of the Annual Report except Noske Kaeser US Rail & Vehicle LLC, which is yet to commence its operation and is in dormant state.

Further, a statement containing the salient features of the financial statement of our subsidiaries in the prescribed format AOC 1 is attached to the financial statements of the Company.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and accounts of each of its subsidiaries, are available on our website www.leelelectric.com .These documents will also be available for inspection during business hours at our corporate office situated at 159, Okhla Industrial Estate, Phase III, New Delhi 110020.

MANAGEMENT DISCUSSION & ANALYSIS REPORT

As required pursuant to Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a detailed Management Discussion and Analysis Report is attached herewith and forms a part of the Annual Report.

LISTING AGREEMENT

The equity shares of the Company are listed at BSE Ltd. and National Stock Exchange of India Ltd.

The Annual Listing fees to the above Exchanges for the Financial Year 2018-19, as applicable have been paid well before the due date. CORPORATE SOCIAL RESPONSIBILTY (CSR)

The Company believes that CSR is a business approach that contributes to sustainable development by delivering economic, social and environmental benefits for all the stakeholders. The Company has always endeavored to promote education and well-being of weaker sections of society.

In recognition of this, the Company concentrates most of its sustainability / CSR efforts by actively supporting the education and social causes through its philanthropic arm "Pandit Kanahaya Lal Punj Trust".

In accordance with the requirements of Section 135 of Companies Act, 2013, your Company has constituted a CSR Committee. The composition and terms of reference of the CSR Committee is provided in the Corporate Governance Report.

Further, details about the CSR policy and initiatives taken by the Company on CSR during the year are available in our website. The annual report on our CSR activities is appended as Annexure 1 to the Board's Report.

EXTRACT OF THE ANNUAL RETURN

In accordance with Section 134(3)(a) of the Companies Act, 2013, as amended by the Companies (Amendment) Act, 2017 effective from July 31, 2018, an extract of the annual return in the prescribed format is available on the website of the Company viz. www.leelelectric.com

SECRETARIAL STANDARDS

The Company complies with all applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

NUMBER OF MEETINGS OF THE BOARD

The Board met four times during the financial year viz; on May 30, 2017; August 10, 2017; November 14, 2017 and February 14, 2018. The necessary quorum was present at all the meetings. The intervening gap between any two meetings was not more than one hundred and twenty days as prescribed by the Companies Act, 2013. For composition, category and attendance of directors please refer the Corporate Governance Report which forms part of the Board's Report.

COMMITTEES OF THE BOARD

The Board has five committees viz; the Sub-Committee of the Board, Audit Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee and Stakeholders' Relationship Committee.

The details pertaining to composition of above committees are included in the Corporate Governance Report, which forms part of the board's report.

POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

The policy of the Company on directors' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Sub section (3) of Section 178 of the Companies Act, 2013, adopted by the Board, has been disclosed in the corporate governance report, which forms part of the Board's Report.

BOARD EVALUATION

In pursuance to the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, the Board has carried out annual performance evaluation of its own performance, the directors individually as well the evaluation of the working of committees. The performance of the Board was evaluated by the Board after seeking inputs from all the directors on the basis of the criteria such as the Board composition and structure, board meetings and effectiveness of board processes, information and functioning, etc. The performance of the committees was evaluated by the board after seeking inputs from the committee members on the basis of the criteria such as the compliance with the terms of reference of the committees, composition of committees, functions and duties, committee meetings & procedures, etc.

The Board and the Nomination and Remuneration Committee ("NRC") reviewed the performance of the individual directors on the basis of the criteria such as the contribution of the individual director to the Board and committee meetings, attendance, independent judgment etc. During the year, Mr. Brij Raj Punj, Chairman and MD of the Company passed away and the Board Members selected the Chairman of the each meeting amongst them. Hence, the evalution of the Chairman of the Board was not conducted during the year.

In a separate meeting of independent directors, performance of non-independent directors, performance of the board as a whole was evaluated, taking into account the views of executive directors and non-executive directors. The same was discussed in the board meeting that followed the meeting of the independent directors, at which the performance of the Board, its committees and individual directors was discussed.

DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMPS)

During the year under review, Mr. Brij Raj Punj, Chairman & Managing Director of the Company passed away on December 05, 2017. The Company have achieved so much with his vision, courage, tenacity and the leadership. The Board pays homage to its Chairman.

Mr. Bharat Raj Punj (DIN: 01432035), Deputy Managing Director and son of Late Mr. Brij Raj Punj, was elevated as Managing Director of the Company w.e.f. May 30, 2018 by the Board in its meeting held on May 30, 2018.

Mr. Achin Kumar Roy (DIN: 01475456) Whole Time Director of the Company was re-appointed for a further period of two years w.e.f. April 28, 2018 by the Board of Directors in the meeting held on February 14, 2018. Further, pursuant to provisions of section 152 of the Companies Act, 2013 and Articles of Association of the Company, he will also retire by rotation at the 31st Annual General Meeting and being eligible, has offered himself for re-appointment.

During the financial year under review, Mr. Nipun Singhal (DIN:02026825), who was the business head of the Consumer Durable Business segment, had stepped down and resigned from the Directorship of the Company w.e.f. May 08, 2017, pursuant to the sale of aforesaid segment to Havells India Ltd.

As at the end of financial year, the Company is having five KMPs viz. Mr. Bharat Raj Punj, Managing Director (w.e.f. 30.05.2018), Mr. Achin Kumar Roy, Whole Time Director, Mr. Mukat B. Sharma, Whole Time Director & Chief Financial Officer and Ms. Anita K. Sharma, Company Secretary & VP Finance.

The appointments / re-appointments as aforesaid are placed before the shareholders for their approval alongwith the brief profile in the notice of 31st Annual General Meeting ('AGM"). The Board recommends the appointment /re-appointments of above said directors.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received necessary declaration from each independent director that he/she meets the criteria of independence as laid down in Section 149(6) of the Companies Act, 2013 and Regulation 16 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

DIRECTORS' RESPONSIBILITY STATEMENT

The Audited Accounts for the financial year ended March 31, 2018 are in conformity with the requirements of the Companies Act, 2013. Pursuant to Section 134(5) of the Companies Act, 2013, your directors hereby 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 and loss 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 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.

AUDITORS & AUDITORS' REPORT

STATUTORY AUDITORS

The provision of section 139 of the Companies Act, 2013 requires that the statutory auditor may be appointed by the shareholders for a period of five consecutive years; however, the said appointment needs to be placed for ratification by the members in each AGM. Now, with effect from May 07, 2018, the aforesaid requirement related to annual ratification of appointment of statutory auditors by the members has been omitted by the Companies (Amendment) Act, 2017. Hence, the resolution for ratification of appointment of M/s Goel Garg & Co. Chartered Accountants (Firm Regn. No. 000397N) as the statutory auditor, whose appointment was approved by the members in the 30th AGM for a term of five consecutive years, has not been put for motion as an ordinary business in the 31st AGM.

Auditors' Report and the Notes on financial statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments. The Auditors' Report does not contain any qualification, reservation or adverse remark.

COST AUDITORS

The Board has re-appointed M/s Jain Sharma & Associates, Cost accountants, as cost auditors of the Company for the financial year 2018-19 at a fee of Rs. 2,06,250/- (including out of pocket expenses) plus applicable taxes, subject to the ratification of the said fees by the shareholders at the ensuing 31st AGM.

The Company has also received a certificate from M/s Jain Sharma & Associates confirming that their appointment is in accordance with provisions of section 139, 141 & 148 of the Companies Act, 2013.

The cost audit report of the financial year 2017-18 would be filed with the Central Government within the prescribed time. SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board had appointed Mr. Sanjay Chugh Practicing Company Secretary, to conduct Secretarial Audit for the financial year 2017-18. The Secretarial Audit Report (in prescribed Form MR-3) for the financial year ended March 31, 2018 is appended as Annexure 2 to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

The Board has re-appointed Mr. Sanjay Chugh, Practicing Company Secretary, as secretarial auditorS of the Company for the financial year 2018-19 also.

PARTICULARS OF LOANS AND GUARANTEES

The particulars of loans, guarantees and investments have been disclosed in the notes to the financial statements.

PARTIULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. During the year under review, no material transactions, contracts or arrangements as defined under the SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015 or which were above the threshold limits mentioned under Rule 15 of the Companies (Meetings of Board & its Powers) Rules, 2014 were entered with the related parties by the Company.

Accordingly, the disclosure of Related Party Transactions as required under Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 in Form AOC-2 is not applicable and hence, not annexed.

For details on related party transactions entered during the year, members may refer to the notes to the standalone financial statement. RISK MANAGEMENT

The Audit Committee in supervision of Board of Directors is responsible for identifying, evaluating and managing all significant risks faced by the Company. The detailed statement indicating the development and implementation of risk management policy including identification therein of elements of risk has been covered in the management discussion and analysis, which forms part of this report.

INTERNAL FINANCIAL CONTROL

The Company has in place adequate internal financial controls with reference to financial statement, including adherence to the Company's policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial disclosures.

The detailed information about internal controls is set out in the Management Discussion & Analysis report which is attached and forms part of this Report.

VIGIL MECHANISM

The Company has implemented a Whistle Blower Policy and has established a vigil mechanism for employees and directors to report their genuine concerns. The Policy provides for a mechanism to report genuine concerns to Whistle Counselor or the Whistle Blower Committee and in exceptional cases, the Chairman of the Audit Committee of the Company. The functioning of the Vigil mechanism is reviewed by the Audit Committee from time to time. None of the Whistle Blowers have been denied access to the Audit Committee of the Board. The Whistle Blower Policy complies with the requirements of Vigil mechanism as stipulated under Section 177 of the Companies Act, 2013. The details of establishment of the Whistle Blower Policy/ Vigil mechanism have been disclosed on the website of the Company.

MATERIAL CHANGES AND COMMITMENT AFFECTING THE FINANCIAL POSITION OF THE COMPANY AND MATERIAL EVENTS OCCURRED AFTER BALANCE SHEET DATE

Except as disclosed elsewhere in the Annual Report, there have been no material changes and commitments/events, affecting the financial position of the Company which occurred between the end of the financial year to which the financial statements relate and the date of this report.

SIGNIFICANT AND MATERIAL ORDERS

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.

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

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, are given in Annexure 3 to this Report.

PARTICULARS OF EMPLOYEES

Disclosures with respect to the remuneration of Directors and employees as required under Section 197 of the Act and Rule 5 (1) Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (Rules) have been appended as Annexure 4 to the this report. Details of employee remuneration as required under provisions of Section 197 of the Companies Act, 2013 and Rule 5(2) and 5(3) of Rules are available at the Corporate Office of the Company during working hours, 21 days before the Annual General Meeting and shall be made available to any shareholder upon request.

PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE

The Company has a policy against sexual harassment and a formal process for dealing with complaints of harassment or discrimination. The said policy is in line with Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 and Rules made thereunder. The Company, through the policy ensures that all such complaints are resolved within defined timelines. During the year, no case was reported.

ACKNOWLEDGEMENT

We thank our shareholders, customers, vendors, investors and bankers for their continued support during the year. We place on record our appreciation for the contribution made by our employees at all levels. Our consistent growth was made possible by their hard work, solidarity, cooperation and support.

We also place on record deep appreciation to various statutory authorities, Central and State Governments and Government of various countries where we operate for their continued assistance, co-operation and encouragement they have extended to the Company and look forward to their continued support in future.

For and on behalf of the Board of

Directors LEEL Electricals Limited

Date: August 13, 2018

Place: New Delhi

Bharat Raj Punj Managing Director & Chairman of the Meeting

DIN:01432035