DIRECTORS' REPORT Your Directors present the 31st Annual Report of the Company together with the Audited Accounts for the year ended Mar 31, 2016 2. Dividend Due to the loss for the year, dividend could not be paid for the year. 3. Reserves The reserves of the Company have been reduced from Rs. 40,85.75 Lakhs to Rs. 21,06.75 Lakhs at the end of the year. 4. Semiconductor - Global & Indian scenario During FY 2015- 16 The Semiconductor industry witnessed slow growth in 2015 after enjoying strong growth in 2014. This was due to 3.9% YoY (Year-over-Year) growth in the Asia-Pacific region that was offset by a 10.3% fall in Japan and 8.2% fall in Europe. Moreover, the demand for Semiconductors was affected by the slowdown in PC (Personal Computer) shipments, a strengthening US dollar, economic contraction in Japan, the European crisis, and the crash of the Chinese Stock Market. China accounts for more than 50% of the global Semiconductor consumption. In the India context, the Indian Semiconductor industry offers high growth potential areas as the industries which source Semiconductors as inputs are themselves witnessing high demand. The end-use industries such as mobile devices, telecommunication equipment, information technology, office automation (IT & OA), industrial machinery, automobiles and several other industries have applications for computing in some form or other and thereby necessarily have growing demand for Semiconductors. Now with the concept of Internet of Things (IoT) picking up momentum, the next generation of interconnected devices would further increase the demand for intelligent computing, thereby creating sustainable demand for Semiconductors. Forecast for FY 2016-17 The Semiconductor market will pick up its pace over the coming years, with 1.4% growth in 2016 and 3.1% growth in 2017. However, the 9.9% growth witnessed in 2014, before the slowdown, is unlikely to repeat in the near term. The forecast is based on the assumption that the macro economy will revive during this period. According to the 2016 forecast, the highest growth will come from the Americas region, followed by a revival in Japan and loss improvement in Europe. However, the Asia-Pacific region—the key Semiconductor market that has been driving growth in the industry so far—will witness a slowdown, mainly due to China's weak economy, all regions are expected to post growth in 2017. Looking from the product perspective, all Semiconductor products to report growth, except for memory in 2016 as the demand for PC and Smartphones slows. However, growth is expected to gain momentum in 2017 over the anticipation of renewed demand for PCs. 5. Change in the Nature of Business, if any Nil 6. Human Resources Development Your Company has enthroned the attributes listed below as its Core Values. The Management will assiduously practice and enthuse its Employees to imbibe these virtues. Towards this end training is imparted every month, every Employee goes throughout the drill at least once in six months : a. Business Ethics : defines us as a Company b. Professionalism : defines us as Individuals c. Citizenship : defines our contribution to Society SPEL's medium for Corporate Social Responsibility (CSR) is through Socio-Economic Contribution (S-E-C) and SPEL Employees Social Service Organization (SESSO). For most people, the idea of Social Service is donating money to a social organization - perhaps an old-age home or an orphanage or similar. This however is the easy part. The difficult part is volunteering one's time to improve society. When can we make a contribution to SocietyRs. During Phase 1 of our lifetime, perhaps up to the age of 35, we are so focused on building our careers, starting our families & establishing a name for ourselves During Phase 2 perhaps from age of 35 thru 65, we are the most active in our work, working as a team, being able to significantly contribute to Economic Development During Phase 3 perhaps from age 65 onwards, we are most able to contribute our time on an increased basis to social causes S-E-C at SPEL is all about how we can contribute socially during Phase 2 itself while also handling Economic Development. Towards this, there are 3 areas that each of us can assist by making these a part of our day to day approach : a. Following discipline in any and everything we do b. Providing a helping hand to people around us in any way we possibly can c. Showing the right path forward to people around us S-E-C in SPEL is primarily done by One-to-One Mentoring as each person encourages & motivates the other, towards a more purposeful & effective lifestyle. As part of the Core Values, following activities were undertaken through SESSO : a. Educational assistance to the needy people in and around Factory. b. Voluntary Blood Donation camp. c. Assistance to orphanage and old age home located near Factory. 7. Material changes affecting the financial position of the Company which have occurred between the end of Financial Year and the date of the Report A section of the Workers of the Company has gone on strike since mid Apr 2015 raising a charter of demands. This has affected the normal production and the execution of the orders from the Customers. The Company's Management has taken all possible steps and the normalcy has been restored as the strike has been called off on Jun 18, 2015. 8. Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future Nil 9. Adequacy of internal financial controls with reference to the Financial Statements Adequate Internal Finance control manual was in place during the year. 10. Subsidiary/Joint Ventures / Associate Companies The Wholly Owned Subsidiary Company SPEL America Inc., in California, USA has been rendering marketing services to your Company resulting in enhanced Customer base and satisfaction. There has been no material change in the nature of the business of the Subsidiary Company. Pursuant to provisions of Section 129(3) of the Act, a statement containing salient features of the financial statements of the Company's subsidiary in Form AOC-1 is attached to the financial statements of the Company. Pursuant to the provisions of Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of the Subsidiary Company are available on the Website of the Company www.spel.com The annual accounts of the Subsidiary Company and related detailed information are kept in the Registered Office of the Holding Company and will be made available to the Shareholders during working hours. 11. Deposits The Company has not accepted any deposits from public and as such, no amount on account of principal or interest on deposits from public was outstanding as on the date of the balance sheet. 12. Statutory Auditors Pursuant to the provisions of Section 139 of the Act and the rules framed thereunder, M/s. M.S. Krishnaswami & Rajan, Chartered Accounts, (Firm Registration No.01554S) were appointed as Statutory Auditors of the Company from the conclusion of the 30th Annual General Meeting (AGM) of the Company held on Sep 8, 2015 till the conclusion of the 33rd Annual General Meeting of the Company to be held in the year 2018, subject to ratification of their appointment at every AGM. 13. Reply to Auditors' Comments in their Report The Auditors have commented in their report regarding the value of box stock (inventory) of Rs. 21,25.56 Lakhs and the related internal control system as at Mar 31, 2016. This includes non-moving / possibility of obsolescence in respect of certain items, the value of which needed to be reckoned in the Statement of Profit and Loss. The production of the said items / products was on the basis of specific orders, utilizing raw materials supplied by the Customers. Hence, pending negotiations / acceptance by Customers and conclusion of discussions with them, the said stock is carried at cost. 14. Share Capital There has been no change in the Share Capital of the Company during the year. 15. Extract of the Annual Return As provided under Section 92 (3) of the Act, the extract of annual return is given in annexure in the prescribed Form MGT9, which forms part of this report. 16. Conservation of energy, technology absorption and foreign exchange earnings and outgo The details of conservation of energy, technology absorption, foreign exchange earnings and outgo are as follows : Conservation of Energy The Company has in place an Energy Committee which meets once a month. This Committee consists of Cross-functional Executives. It assesses the potential areas, devises means to save energy and implements the plan with the approval of the Management. Measures were taken during the year to conserve water and electricity resorting to reuse of Dicing process water, rain water harvesting, power factor improvement and modification of the condenser in the Air conditioner. The savings achieved were Technology Absorption The particulars regarding Technology Absorption are not applicable to your Company. Foreign Exchange Earnings and Outgo Your Company is a 100% Export Oriented unit and isconstantly striving to increase its exports. Foreign Exchange used during the year : Rs. 13,48.03 Lakhs Foreign Exchange earned during the year : Rs. 27,78.39 Lakhs 17. Research & Development (R&D) The Company has carved out an ambitious plan of investment in R&D. This will include investment in Package Intellectual Property, thereby assisting Company's revenue and profitability in the future years. 18. Directors and Key Managerial Personnel Pursuant to the provisions of Section 149 of the Act, Mr. K. Ravikumar, Mr. M. Jayasankar, Dr. Enakshi Bhattacharya were appointed as Independent Director at the Board Meeting held on Sep 8, 2015. The terms and conditions of appointment of Independent Director are as per Schedule IV of the Act. They have submitted a declaration that they meet the criteria of Independence as provided in Section 149 (6) of the Act and there has been no change in the circumstances which may affect their status as Independent Directors during the year. Mr. S. S. Arunachalam was appointed as Company Secretary and Compliance Officer of the Company w.e.f. Nov 2, 2015. Mr. V. Srinivasan, was appointed as Chief Financial Officer of the Company in the place of Mr. R. Venkatesh Kumar, w.e.f. Apr 2, 2016, pursuant to the provisions of Section 203 of the Act. 19. Declaration by an Independent Director(s) & Re-appointment, if any The Indepent Directors have submitted their discloures to the Board that they fulfill all the requirements as stipulated in Section 149 (6) of the Companies Act, 2013 so as qualify themself to be appointed independent Directors under the provision of the the Companies Act, 2013 and the relavant rule. 20. Number of meetings of the Board 7 (Seven) Meetings of the Board were held during the year. For details of the meetings of the Board, please refer to the Corporate Governance Report, which forms part of this report. 21. Audit Committee The details pertaining to composition of Audit Committee are included in the Corporate Governance Report, which forms part of this report 22. Vigil Mechanism for Director and Employees The Company has a Vigil Mechanism by way of Whistle Blower Policy to provide a Vigil Mechanism for Employees and Directors to report genuine concerns. The provisions of this policy are in line with Section 177 (9) of the Act and Clause 34 (3) & Schedule V of SEBI (Listing Obligation and Disclosure Requirement) Regulation 2015. A copy of the policy is uploaded in the website of the Company. 23. Nomination and Remuneration Committee The details pertaining to Nomination and Remuneration Committee are included in the Corporate Governance Report, which forms part of this report 24. Loans, Guarantees or Investments Particulars of loans, guarantees and investments have been disclosed in the financial statements 25. Contracts or Arrangements with Related Parties The particulars of every contract or arrangements entered into by the Company with Related Parties referred to in Sub-section (1) of Section 188 of the Companies Act, 2013 including certain arm's length transactions under third proviso thereto have been disclosed in Form No. AOC -2. 26. Managerial Remuneration Managerial Remuneration is given in annexure which forms part of this report. 27. Secretarial Audit Report Secretarial Audit Report is given as annexure, which forms part of this report. 28. Formal Annual Evaluation of Board on its own performance, Committees of the Board and the Individual Directors The Board of Directors has carried out an annual evaluation of its own performance, Committees of the Board and the Individual Directors pursuant to the provisions of the Act and Corporate Governance as prescribed under Section 134 of Companies Act, 2013 and Regulation 17 of the SEBI (Listing Obligation and Disclosure Requirement) Regulation 2015. In a separate meeting of the Independent Directors, performance of the Non-Independent Director and performance of the Board as a whole was evaluated. 29. Familiarization Programme for Independent Directors The Company has prepared and presented a Power Point Presentation for Independent Directors in order to enable them to familiarize with the Company's Policies and Practices. 30. Risk Management A Risk Management Committee to identify and monitor the risks has been formed with a responsibility to review the risks and evolve mitigation plan required. Periodical action is taken to address the major risks identified. 31. Corporate Governance Certificate The Corporate Governance Certificate from the Auditors regarding compliance of conditions of Corporate Governance as stipulated in SEBI (Listing Obligation and Disclosure Requirement) Regulation 2015. 32. Reply to comments by Secretarial Auditor in his report. Regarding the comment that the Company is not regular in depositing undisputed PF, ESI, Income-tax (TDS) and Property dues, the Management is confident that the situation will improve, based on the austerity steps and proactive measures taken during the year. This in turn will improve the liquidity and ensure that the statutory dues will be paid regularly in the future. In respect of non-filing of MR-1, Company will be filing the necessary forms. In respect of non-filing of form for the Company Secretary, Company will be filing necessary forms. 33. Directors Responsibility Statement Pursuant to Section 134 (5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability confirm that : a. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; b. they 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 loss of the company for that period; c. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d. they have prepared the annual accounts on a going concern basis; e. they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively and f. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the Internal, Statutory & Secretarial Auditors and External Consultants and the reviews performed by the Management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company's internal financial controls were adequate and effective during the Financial Year 201516. 34. Acknowledgements Your Directors place on record their gratitude to the Government of India, the Government of Tamil Nadu, Financial Institutions, Bankers, Insurance Companies, Customs & Excise authorities, valued overseas Customers & Vendors and the Promoters for the continued assistance and support extended to the Company. Yours Directors wish to place on record, their appreciation of the efficient and loyal services rendered by the Employees at all levels to the Company. Yours Directors wish to thank the Shareholders who constitute the mainstay of the Company for their unstinted support, forbearance confidence reposed on the Management. By order of the Board for SPEL Semiconductor Limited K. Ravikumar Director DIN: 00119753 M. Jayasankar Director DIN: 00048351 D. Balakrishnan Whole Time Director & CEO DIN: 02131242 Place : Chennai date : May 30, 2016 |