Modern Insulators Ltd

The Members,

Your Directors have pleasure in presenting their 30th Annual Report together with the Audited Financial Statements for the year ended March 31,2015.

(Rs. in crores)

OPERATIONS

The net turnover for the year has been Rs. 417.93 crores as against Rs. 459.33 crores in previous year and net profit after tax Rs. 16.64 crores as against Rs. 14.07 crores in previous year. Overall turnover for the year has been lower from previous year mainly due to lower turnover of Yam Division on account of adverse market conditions.

Keeping in view the need to conserve the Company's resources for meeting the enhanced working capital requirement and balancing the manufacturing equipments, your directors deemed it prudent not to recommend any dividend for the year.

Insulators Division

The division has achieved a net turnover of Rs. 288.68 crores during the year and profit before interest & depreciation of Rs. 40.19 crores as against Rs. 273.91 crores and Rs. 37.75 crores respectively of previous year. Various factors have contributed for sustained performance of the division interalia balancing of plant & machinery, continuous efforts for production of better quality product and manufacturing of higher value-added Insulators. Company's vision to broaden the scope of manufacturing of all kinds of extra high voltage insulators for electrical equipments has borne fruits, witnessed by the performance of the company during the year under review.

Yarn Division .

The turnover of this division has been Rs. 129.25 crores as against Rs. 185.42 crores in previous year and profit before interest & depreciation has been Rs. 1.82 crores as against Rs. 8.20 crores in previous year. Turnover and profitability has been lower due to adverse market conditions and low production/sales due to shut down of plant for about forty days .

EXPORTS

The company is one of the .major exporter of H.T. Porcelain Insulators from India. The Company has achieved export turnover of Rs. 55 crores during the year under review as compared to Rs. 79 crores in previous year. Lower exports were mainly due to stiff competition from China as well as lower demands from Russian/European countries, because of slow down. The company possesses the ability to cater to diverse needs of global customers and is concentrating to strengthen its presence in all comers of global market. This would help the company in getting optimum utilization of its productive resources. Your company is a regular supplier to all the major multinational OEMs for their world wide requirements of quality porcelain insulators. The company is also focusing to save cost effectively with R&D activities and better process control so that products of the insulator division remain competitive in terms of quality and price in the international market.

Major focus on approvals in OEMs and utilities worldwide will further enhance export business. These steps taken by the company will help export turnover to increase substantially in 2015-16.

FUTURE PROSPECTS

Your Company continues to be a leader in the manufacture of High Voltage Insulators in the country. Despite stiff competition buyers show interest in your company's product for its quality & timely delivery and hence your directors are confident of achieving better working results in the coming years. Your Company has a well equipped R&D laboratory recognized by Govt, of India, Ministry of Science & Technology which takes care of the stringent quality requirements of customers and ensures quality and reliability in each and every product manufactured. In-house R&D activities have a thrust on development to replace expensive input raw material & to further bring consistency in quality of the products under manufacture. The future of the Insulator industry looks promising due to major thrust on power sector reforms and speedier implementation of new power projects. The Government of India has given emphasis to upgrading the transmission system in the country along with plans for construction of new power transmission lines like the green corridor project connecting renewable power projects across various states as well as upgradation of transmission infrastructure in the North East Region.

Major Railway electrical projects as well as the Dedicated Freight Corridor project will increase demand for railway insulators. Further, the Imposition of anti dumping duty on imports from China for a period of 5 years will provide sustainable relief to domestic manufactures.

In view of this & looking to the present scenario in power sector, the business prospects for Insulator Industry in general and for your Company in particular are encouraging.

The company is diversifying its business by way of expanding capacity of foundry which at present is fulfilling company's major captive requirement of SGI and Aluminum Castings. This will give further boost to the revenue of the company in coming years.

AMALGAMATION OF MODERN TERRY TOWELS LIMITED WITH THE COMPANY

Modem Terry Towels Limited has filed revised DRS with the Operating Agency for its amalgamation with your Company by taking deemed date of amalgamation as 01.01.2008 (as envisaged in original scheme). The same is under consideration for circulation and thereafter for sanction by Hon’ble BIFR.

DEMERGER OF YARN DIVISION OF THE COMPANY

As reported earlier, a scheme of Demerger under section 391 to 394 of the Companies Act, 1956 has been filed before the Hon’ble High Court of Rajasthan at Jaipur to demerge the Yam Division of the Company which is under consideration for approval of Hon'ble High Court. The demerger would result in benefit to the shareholders, creditors, employees and general public.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The Company has not given any guarantees covered under the provisions of Section 186 of the Companies Act, 2013. The details of the loans and investments made by Company are given in the notes to the Financial Statements.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions that were entered into during the financial year were on ami's length basis and were in the ordinary course of business. There were no materially significant related party transactions which may have a potential conflict with the interests of the Company at large. Particulars of contracts or arrangements with related parties under the provisions of section 188(1) of the Companies Act, 2013 are annexed herewith in the prescribed form AOC-2 as Annexure-A.

SUBSIDIARY. JOINT VENTURES AND ASSOCIATE COMPANIES

The Company has one Subsidiary Company i.e. Motile Power Trade Pvt. Ltd. and does not have any Joint Ventures & Associate Companies during the year. The Statement containing salient features of die financial statement of its Subsidiary Company is attached with the Audited Financial Statements in Form AOC-1.

CORPORATE SOCIAL RESPONSIBILITY

In terms of Section 135 and Schedule VII of the Companies Act, 2013, the Board of Directors of your Company has constituted a CSR Committee which comprises Shri Sachin Ranka (Chairperson), Shri R. Raniwala and Shri H.L. Sharma (Members). The Committee is responsible for formulating and monitoring die CSR policy of the Company.

The CSR Committee has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the company, which has been approved by the Board. During the year, the Company has spent Rs. 39.52 Lacs (around 2% of the average net profits of last three financial years) on approved CSR Activities. The Company has contributed funds for medical relief, health care and educational activities. The Company will also undertake other need based initiatives in compliance with Schedule VII to the Act. The Annual Report on CSR activities is annexed herewith as Annexure-B.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review, Shri S.B.L. Jain and Shri R. Raniwala were appointed as an Independent Directors of the Company for a period of five consecutive years upto 31 st March, 2019 and Shri P.K. Rao was appointed as an Independent Director of the Company with effect from 19th June, 2014 for a period of five consecutive years upto 18th June, 2019. Smt. Meenu Sacheti was appointed as an Additional Director in die category of Non-Executive Director ofthe Company with effect from 31st March, 2015.

In accordance with the provisions of Companies Act, 2013, Shri D.B. Deshpande, Executive Director retires by rotation and being eligible offers himself for re-appointment. Shri D.B. Deshpande, Executive Director of the Company whose term will expire on 31 st December, 2015 and his terms & conditions of the re-appointment anjl payment of remuneration has been revised by the Board of Directors. Shri H.L. Sharma, Executive Director of the Company whose term expires on 30th June, 2015 and reappointed by the Board of Directors for a period of 2 years with remuneration. The Board of Directors of the Company has revised the terms & conditions of the payment of remuneration to Shri Sachin Ranka, Chairman & Managing Director of the Company for his remaining period of appointment i.e. from 01.04.2015 to 31.03.2017. Appropriate resolutions for the appointment/re-appointment of the aforesaid Directors and for revised terms & conditions of the payment of remuneration to Shri Sachin Ranka are being moved at the ensuing Annual General Meeting, which the Board recommends for your approval.

Shri S.D. Gupta was appointed as President (Commercial) & Chief Financial Officer of the Company from 1st July, 2014 and has resigned from the post of Chief Financial Officer of the Company from 30th June, 2015. Shri D.S. Singhvi has been appointed as Vice President (Finance) & Chief Financial Officer of the Company with effect from 1st July, 2015.

Shri A.K. Sharma, Company Secretary & Compliance Officer of the Company has resigned from 13th June, 2015 and Shri Gaurav Goyal has appointed as Company Secretary & Compliance Officer of the Company from 29th June, 2015.

The Company has received declarations from all the Independent directors of the Company that they meet the criteria of independence as laid down under section 149(6) of die Companies Act, 2013 and Clause 49 of the Listing Agreement.

Policy on Directors' Appointment and Remunerations

The Board has, on die recommendation of the Nomination & Remuneration Committee, framed and adopted a policy for nomination, remuneration and evaluation of Directors, Key Managerial Personnel (KMP) and other employees of the Company.

Criteria for Selection/Appointment

The Non-Executive/Whole-time/Managing Director, Key Managerial Personnel (KMP) and other employees shall be of requisite qualification, high integrity and should have relevant expertise and experience.

In case of appointment of Independent Directors, the Committee shall satisfy itself with regard to the independent nature of the Directors and also ensure that the candidate identified for appointment as an Independent Director is not disqualified for appointment under Section 149 and 164 of the Companies Act, 2013.

Remuneration Policy

The Whole tune Director/Managing Director/Key Managerial Personnel (KMP) and other employees shall be entitled to receive remuneration/ compensation/consession etc. as per the provisions of the Companies Act, 2013 and rules made there under or any other enactment for the time being in force.

The Non Executive Directors and Independent Directors shall be entitled to receive remuneration by way of sitting fees, reimbursement of expenses for participation in the Board meetings within the overall limits prescribed under the Companies Act, 2013 and rules made there under or any other enactment for the time being in force.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out the annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Audit Committee, Nomination & Remuneration Committee, Stakeholders Relationship Committee and Corporate Social Responsibility Committee. Standard parameters were prepared after taking into consideration various aspects of the Board functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance.

A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Company, who were evaluated on parameters such as level of engagement and contribution, independence of judgment, safeguarding the interest of the Company and its minority shareholders etc. The performance evaluation of the Independent Directors was carried out by the entire Board and the performance evaluation of die Chairman and the Non Independent Directors of the Company was carried out by the Independent Directors who have expressed their satisfaction with the evaluation process.

Number of Board Meetings

The Board of Directors duly met four times during the financial year from 1 st April, 2014 to 31 st March, 2015 i.e. 19th June, 2014,27th September, 2014,26th December, 2014 and 20th March, 2015. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013.

AUDIT COMMITTEE

The Board of Directors of the Company has constituted the Audit Committee of Directors to act in accordance with the terms of reference specified by the Board as stipulated in Section 177 of the Companies Act, 2013. The details of Committee members are as follows:-

D1RECTORS RESPONSIBILITY STATEMENT

In terms of Section 134 (5) of the Companies Act, 2013, the directors would like to state 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) The directors have selected such accounting policies and applied them consistently and made judgments and estimates that were 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 have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) The directors have 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;

(f) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively.

Statutory Auditors

M/s B.L. Verma & Co. (Firm Registration No. 001064C), Chartered Accountants were appointed as Statutory Auditors of tile Company at the last Annual General Meeting held on 27th September, 2014 for a period of three years subject to ratification by members at every consequent Annual General Meeting. Accordingly, the appointment of M/s B.L. Verma & Co. Chartered Accountants, as statutory auditors of the Company, is placed for ratifications by the shareholders. In this regard, the Company has received a certificate from the auditors to the effect that if they are reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013.

The observations made in the Auditors' Report read together with relevant notes thereon are self explanatory and hence, do not call for any further comments under Section 134 of the Companies Act, 2013.

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 Company has appointed M/s JAKS & Associates, Company Secretaries, Jaipur to undertake the Secretarial Audit of the Company. The Secretarial Audit report is annexed herewith as Annexure-C.

The observations in Secretarial Audit Report which pertains mainly to listing agreement requirements, stock exchange compliances etc., it is clarified that the company will take necessary action after approval of amalgamation of Modem Terry Towels Limited with the Company and ensures that all the provisions will be complied to the fullest extent.

EXTRACT OF ANNUAL RETURN

In accordance with Section 134 (3)(a) of the Companies Act, 2013, an extract of the annual return in the prescribed format (MGT-9) is annexed herewith as Annexure-D to the Board's Report.

PARTICULARS OF EMPLOYEES

The information required pursuant to Section 197 read with rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, will be provided upon request. In terms of Section 136 of the Act, the reports and accounts are being sent to the members and others entitled thereto, excluding the information on employees' particulars which is available for inspection by the members at the Registered office of the company during business hours on working days of the Company up to the date of ensuing Annual General Meeting. If any member is interested in inspecting the same, such member may write to the Company Secretary in advance.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule, 8 of The Companies (Accounts) Rules, 2014, is annexed herewith as Annextire-E.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations to safeguard and protect from loss, unauthorized use or disposition of its assets. The Internal Auditor ensure and evaluates the efficacy and adequacy of internal control system of the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. The Company is following all the applicable Accounting Standards in respect of maintenance of books of accounts and reporting financial statements. All the transactions are properly authorized, recorded and reported to the Management of the Company. Significant audit observations and recommendations along with corrective actions taken by the management thereon are presented to the Audit Committee meetings and thereafter Board Meetings.

BUSINESS RISK MANAGEMENT

In accordance with Clause 49 of the Listing Agreement, the Board of Directors of the Company formally adopted a policy i.e. Risk Management Policy for framing, implementing and monitoring the risk management plan of the Company. The main objective of this policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving risks associated with the business. The policy establishes a structured and disciplined approach to Risk Management. In the challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the Company are imperative. The common risks of the Company inter alia are competition, technology obsolescence, raw material availability, retention of talent and statutory and regulatory compliances etc. As a matter of policy, these risks are assessed and appropriate steps are taken to mitigate the same.

CODE OF CONDUCT

The Company has a Code of Conduct which is applicable to the Board of Directors, Key Managerial Personnel and all other employees in the course of day to day business operations of the Company. The Code lays down the standard procedure of business conduct which is expected to be followed by the Directors, Key Managerial Personnel and all other designated employees of the Company in their business dealings and in particular on matters relating to integrity in the work place, business practices and dealing with stakeholders. The Code gives guidance through examples on the expected behavior from an employee in a given situation and the reporting structure.

VIGIL MECHANISM

Pursuant to the provision of Section 177 (9) and (10) of the Companies Act, 2013, the Company has adopted Vigil Mechanism, which also incorporates a whistle blower policy for Directors and employees to report genuine concerns about unethical behavior,, actual or suspected fraud and violation of the Company's code of conduct and ethics. The Company has also provided adequate safeguards against victimization of employees and Directors who express their concerns.

GENERAL

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under the Provisions of Companies Act, 2013.

2. Issue of equity shares with differential rights as to dividend, voting or otherwise.

3. No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which this financial statement relate and the date of this report.

. 4. No significant or material orders were passed by the regulators or Courts or Tribunals which impact the going concern status and Company's Operations in future.

ACKNOWLEDGEMENTS

Your Directors wish to extend their sincerest thanks to die Members of the Company, Bankers, State Government, Local Bodies, Customers, Suppliers, Executives, Staff and Workers at all levels for their continuous cooperation and assistance.