TO THE MEMBERS,
HAPPY FORGINGS LIMITED
Your Directors have the pleasure in presenting the 44th Annual Report on the business, operations and other activities of the Company together with the Audited Financial Statements for the year ended 31st March, 2023.
1. Financial Highlights
The Company's financial performance for the year under review along with previous year's figures are given hereunder. Some of the key figures are:
2. State of Company's Affairs Standalone Results
The revenue from operations increased by 39% from H 860 crores in the Financial Year (FY) 2021-22 to H 1197 crores in FY 2022-23. Increase in revenues was driven by both increase in volumes by 17% and increase in average realisations by 15%. The increase in average realisation resulting in to from both the factors i.e. higher contribution from machining products & export sales (both commanding higher realisations) along with increase in steel prices.
The Earnings before Depreciation, Interest and Tax ("EBITDA") stood at H 341 crores in FY 2022-23 as compared to H 231 crores in FY 2021-22 witnessing a growth of 48% on a y-o-y basis. EBITDA margins improved to 28.5% in Fy 2022-23 as against 27% in FY22.
Profit before tax stood at H 280 crore in FY 2022-23 as compared to H 192 crore in FY 2021-22 showing a growth of 46%.
Consolidated Results
During the year company taken exit from Investment made in Linchpin Technologies Private Limited by way selling its shareholding in Linchpin to VVDN Technologies P Ltd.
3. Dividend
The Board of Directors of the Company have recommended final dividend @ 65% i.e. H 1.30 per share of face value of H 2/- for the FY 2022-23 (previous year NIL) subject to the approval of the shareholders. This will be paid to the eligible members as on 8th August 2023.
4. Transfer of Unclaimed Dividend to Investor Education and Protection Fund
Since, no dividend was declared and paid by the Company in previous year , the provisions of Section 125(2) of the Companies Act, 2013 are not attracted relating to transfer of unclaimed dividend to Investor Education and Protection Fund.
5. Changes in Share Capital
There was no change in share capital during the year under review.
6. Subsidiary and Associate Companies
During the year under review, Happy Forgings disinvested into equity shares of M/s Linchpin Technologies Private Limited and hence M/s Linchpin Technologies Private Limited is no more a associate Company . There is no subsidiary Company of M/s Happy Forgings Limited.
Your Company does not have any Subsidiary Company and there was no change in this position during the Financial Year.
7. Material Changes and Commitment if any Affecting the Financial Position of the Company Occurred Between the end of the Financial Year to Which this Financial Statements Relate and the Date of the Report
No material changes and commitments affecting the financial position of the company occurred between the end of the financial year to which these financial statements relate on the date of this report.
8. Business Excellence and Quality
Business Excellence is described as outstanding practices in managing the organisation and achieving results, all based on a set of fundamental concepts or values. Business Excellence (BE) is about developing and strengthening the management systems and processes of an organisation to improve performance and create value for stakeholders. Your Company has in place the Quality, Safety & Health and Environmental policies and its continuous endeavour is to adopt the best practices across industry. The adherence to these policies is ensured through internal and external audits. In line with its focus on business excellence and quality, your company has got various external certifications such as ISO 14001/2015 and IATF 16949/2016. The company has also adopted policies to conserve resources and is consciously trying to reduce their impact on the surrounding environment.
9. Occupational Health and Safety Management
An occupational health and safety management system (OHSMS) encompasses more than just your health and safety programme. It includes health and safety policies, systems, standards, and records, and involves incorporating your health and safety activities and programme into your other business processes. Your Company strongly believes that the health and safety of its employees is of utmost importance. The Company is committed to provide a safe and healthy working environment for its employees and associates.
To ensure a high degree of safety across organisation, training and awareness of safety norms, and conducting of regular safety audits are the most essential part
for an organisation to follow safety guidelines in entirety. Key managers/associates are trained on safety management aspects and the fundamentals of it regularly. Your company also holds ISO 45001 certification. Occupational health and safety risks have been minimised through trainings and multiple line of controls. The company has also started to conduct occupational health check-ups done for all employees, along with health awareness programmes.
Your Company is endeavouring to build a robust mechanism for workers to engage in the occupational health and safety management system.
9. Internal Financial Controls
Internal Financial Controls are an integral part of the Group Risk Management framework and processes that address financial as well as financial reporting risks. The key internal financial controls have been documented, automated wherever possible and embedded in the respective business processes.
The Company believes that these systems provide reasonable assurance that the Company's internal financial controls are adequate and are operating effectively as intended.
The company's internal control systems are commensurate with the nature of its business, the size and complexity of its operations and such internal financial controls with reference to the financial statements are adequate. These are routinely tested and certified by Statutory as well as Internal Auditor. Significant audit observations and follow-up actions are reported to the Audit Committee. The internal control system has been designed to ensure that financial and other records are reliable for preparing financial and other statements and for maintaining accountability of assets.
The internal audit plan is designed to audit the important areas and thus aligned with the business objectives of the company. All internal audit reports are reviewed by the Audit Committee.
10. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo
As required by the Companies (Accounts) Rules, 2014 the relevant data pertaining to conservation of energy, technology absorption and foreign exchange earnings and outgo are given in the Annexure - I forming part of this Report.
11. Risk Management
Risk Management is the process of identification, assessment and prioritisation of risks followed by coordinated efforts to minimise, monitor and mitigate/ control the probability and/or impact of unfortunate events or to maximise the realisation of opportunities. The Company has a structured Group Risk Management
Framework, designed to identify, assess and mitigate risks appropriately.
The Risk Management Committee has been formed on 31st July, 2023 entrusted with the responsibility to assist the Board in:
• framework for identification of internal and external risks specifically faced by the Company, in particular including financial, operational, sectoral, sustainability (particularly, Environmental, Social and Governance (ESG) related risks), information, cyber security risks or any other risk as may be determined by the committee;
• measures for risk mitigation including systems and processes for internal control of identified risks; and
• business continuity plan.
12. Particulars of Loans, Guarantees or Investments Made Under Section 186 of the Companies Act, 2013
There was no loan or guarantees given as mentioned under section 186 of the Companies Act 2013 by the company during the year under review.
13. Particulars of Contracts or Arrangements Made with Related Parties U/S 188
All contracts/arrangements/transactions, as defined under section 188(1) of the Companies Act 2013, entered into by the Company during the year under review with related parties were on an arm's length basis and in the ordinary course of business.
Particulars of Related Party Transaction's pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014 are attached in Form AOC-2 as Annexure-2.
14. Company's Policy Relating to Directors' Appointment, Payment of Remuneration and Discharge of their Duties
The Nomination and remuneration policy of company contains criteria for Director's appointment, remuneration and the term including the same for Independent Directors and the criteria for determining qualifications, positive attributes and independence of a Director. The appointment of the Directors and Key Managerial Personnel are done as per the policy.
The Nomination and Remuneration Committee considers all the factors as given in the policy and then makes recommendations to the Board for the appointment/ reappointment. The Nomination and Remuneration policy is attached as Annexure -3
15. Composition of Board and the Board Meetings
Dates for Board Meetings are well decided in advance and communicated to the Board. The Board meets at regular intervals to discuss and decide on Company/ business policy and strategy apart from other Board businesses. However, in case of a special and urgent business need, the Board's approval is taken by way of Board Meeting through shorter notice or by passing resolutions through circulation, as permitted by law, which are noted in the subsequent Board Meeting. and the intervening gap between the meetings has been within the period prescribed under the Companies Act, 2013. The agenda and explanatory notes are sent to the Board in advance. The Board periodically reviews compliance reports of all laws applicable to the Company.
As on 31st March 2023, the Board consists of ten directors having an optimum combination of Executive, Non-Executive and Independent Directors. All the directors possess vast knowledge and experience and represent professionalism.
16. Committees of the Board
The Companies Act 2013 mandates a company to form certain Board Committees in order to have a focused approach on certain specific areas and take decisions in line with the delegated authority as per the provisions of the Act and the rules made thereunder. Committees are usually formed as a means of improving board effectiveness and efficiency, in areas where more focused, specialised and technical discussions are required. These committees prepare the groundwork for decision-making and report at the subsequent board meeting. Committees enable better management of full board's time and allow in-depth scrutiny and focused attention. Hence, your Company has constituted the following committees as per the defined scope and the role:
(i) Audit Committee
(ii) Nomination and Remuneration Committee
(iii) Corporate Social Responsibility (CSR) Committee
Audit Committee
Your Company has formed an Audit Committee as per the provisions of the Companies Act, 2013 and the said
committee functions in line with the requirements set out under section 177 of the Companies Act 2013.
Members of the Audit Committee as on the date of this report include:
Mrs. Rajeswari Karthigeyan (Chairperson , Independent Director)
Mr. Satish Sekhri (Independent Director)
Mr. Ashish Garg (Managing Director)
Mr. Vikas Giya (Independent Director)
Mr. Prakash Bagla (Nominee Director)
Mr. Ravindra Pisharody (Independent Director)
During the year under review, the Audit Committee met five times, i.e. on 26th May, 2022, 6th September 2022, 17th December 2022, 7th March 2023 and 30th March 2023
The primary objective of the Audit Committee is to monitor and provide an effective supervision of the Management's financial reporting process, to ensure accurate and timely disclosures, with the highest levels of transparency, integrity and quality of financial reporting. The Committee oversees the work carried out in the financial reporting process by the Management, the statutory auditor and notes the processes and safeguards employed by each of them. The Audit Committee shall have an oversight of the Company's financial reporting process and the disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible; review with the management, the annual financial statements before submission to the Board for approval; approval for related party transactions and reviewing the same , review the adequacy of internal audit function, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure, coverage and frequency of internal audit; have discussion with Internal Auditors, any significant findings and follow up thereon, etc.
Nomination And Remuneration Committee
In terms of provisions of Section 178 of the Companies Act, 2013, the Nomination and Remuneration Committee of the Company is duly constituted. The composition of the committee is as follows as on the date of this report:
Mr. Satish Sekhri (Independent Director, Chairperson)
Mrs. Rajeswari Karthigeyan ( Independent Director)
During the year under review, the Nomination and Remuneration Committee met two times i.e. on 6th September 2022 and 30th March 2023
I n terms of provisions of Section 134(3)(e) of the Companies Act, 2013, the Company had adopted the its Nomination and Remuneration Policy in previous years. There was no change in the Nomination and Remuneration policy during the year. The Nomination and Remuneration Policy is attached as Annexure -3 to this report, also updated on website. The link for the same is given below: https://happyforgingsltd.com/ downloads/
The criteria for the appointment, reappointment and removal of Director is covered in the Nomination and Remuneration Policy of the Company.
The Nomination and Remuneration Committee has been entrusted with the responsibility to formulate criteria for determining qualifications, positive attributes and independence of a director and recommend to the board a policy, relating to the remuneration for the directors, key managerial personnel, and other employees; to ensure that level and composition of remuneration is reasonable and sufficient, relationship of remuneration to performance is clear and meets performance benchmarks; To carry out evaluation of every director's performance and recommend to the board his/her appointment and removal based on the performance, etc.
Corporate Social Responsibility (CSR) Committee
In terms of provisions of Section 135 of the Companies Act, 2013 and Corporate Social Responsibility Policy Rules, 2014 and its amendments thereafter, your Company has duly constituted a Corporate Social Responsibility (CSR) Committee with the following members as on the date of this report:
Mr. Paritosh Kumar (Chairman and Managing Director, Chairperson)
The CSR committee has met thrice in the financial year
i.e. on 26th May, 2022, 6th September 2022 and 30th March 2023 to discuss and plan the CSR activities in line with the CSR policy of the Company.
The CSR Policy of your Company can be viewed at the website of the Company. The link is given below for your ready reference: https://happyforgingsltd.com/ downloads/
The company as per its CSR Policy has made an expenditure of H 214.56 Lacs (Rupees two crores fourteen Lacs and fifty-six thousand only), towards Environmental sustainability, Education, health care promotion and animal welfare against the obligated amount of H 271.55 Lacs.
The company had adopted a Government school at a village in Kanganwal, Ludhiana in FY 2020-21 with the objective to make it at par with private schools. It was an ongoing project of the company, so accordingly an unspent amount of H 89.22 Lacs (Rupees eighty-nine Lacs twenty two thousand only) was transferred to unspent account after close of FY 2020-21 which would be used for this project. During the year under review, the company has spent remaining H 34.92 Lacs out of unspent account of FY 2020-21. This project was further extended during the year under review and amount of H 70.02 Lacs was spent on school project out of current year's obligation and an unspent amount of H 56.99 Lacs which remained unspent at the close of FY 2022-23 was transferred to unspent CSR account for FY 2022- 23 ( actual amount transferred was H 60 Lacs) to be spent in FY 2023-24.
The brief outline of the CSR policy of the company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure 4 of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. Further, the members are informed that the CSR initiatives and activities are aligned to the requirements of Section 135 of the Act.
17. Vigil Mechanism
Your Company has a Whistle Blower Policy in place and has established the necessary vigil mechanism for directors and employees in line with the requirements of Section 177(9) of the Act, to deal with instances of fraud and mismanagement and to report concerns about unethical behaviour. This framework provides for adequate safeguards against victimisation of persons who complain under the mechanism.. The Company has also provided direct access to the chairman of the Audit Committee on reporting issues concerning the interests of the employees and the Company. This Policy is available on the Company's website: https:// happyforgingsltd.com/downloads/
18. Annual Return
Pursuant to Section 92(3) read with Section 134(3)
(a) of the Act, the Annual Return as on 31st March, 2023 is available on the Company's website: https://happyforgingsLtd.com/downloads/
19. Internal Control Systems and Their Adequacy
The Company has in place adequate internal financial controls with reference to Financial Statements, in the opinion of the Board of Directors. Also, the Company has a proper system of internal controls to ensure that all
assets are safeguarded and protected against loss from unauthorised use or disposition and that transactions are authorised, recorded and reported correctly. These are routinely tested and certified by Statutory as well as Internal Auditor. Significant audit observations and follow-up actions are reported to the Audit Committee. During the period under review, such controls were tested and no reportable material weakness in the design or operation was observed.
20. Directors Responsibility Statement
In accordance with the provisions of Section 134(5) of the Companies Act, 2013 the Board here by submit its responsibility statement:
(a) i n the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
(b) the directors had selected such accounting policies and applied them consistently and made judgements 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) t he 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 for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern basis; and
(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.
Internal financial control means the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business including adherence to Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information.
(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.
21. Deposits
Your Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013, consequently no amount on account of principal or interest on deposits was outstanding as on the date of the balance sheet or this report and hence no details
pursuant to Rules 8 (v) and (vi) of the Companies (Accounts) Rules, 2014 are reported. The requisite returns have been filed.
22. Directors and Key Managerial Personnel Appointment/Re-appointment
In accordance with provisions of the Act and the Articles of Association of the Company, Mrs Megha Garg (DIN 07352042), Whole Time Director (Non-Independent) and Mr Narinder Singh Juneja (DIN 00393525), Whole Time Director (Non-Independent) retire by rotation at the ensuing AGM and being eligible offer themselves for re-appointment.
Mrs Rajeswari Karthigeyan (DIN: 10051618) was appointed as an Additional and Non-Executive (Independent) Director of the Company, not liable to retire by rotation, for a tenure of 5 (five) years w.e.f 30th May, 2023 upto 29th May, 2028, subject to approval of Members at this AGM. She shall hold office as an Additional Director upto the date of this AGM and is eligible for appointment as a Director.
At the forthcoming AGM approval of the Members will be sought for her appointment for five years.
Mr Atul B. Lall (DIN: 00781436) was appointed as an Additional and Non-Executive (Independent) Director of the Company, not liable to retire by rotation, for a tenure of 5 (five) years w.e.f 31st July, 2023 upto 30th July, 2028, subject to approval of Members at this AGM. He shall hold office as an Additional Director upto the date of this AGM and is eligible for appointment as a Director.
At the forthcoming AGM approval of the Members will be sought for his appointment for five years.
Independent Directors
In terms of Section 149 of the Companies Act 2013, Mr Satish Sekhri, Mr Vikas Giya and Mr Ravindra Pisharody, Mrs Rajeswari Karthigeyan and Mr Atul B. Lall are the Independent Directors of the Company as on date of this report.
All Independent Directors of the Company have given requisite declarations under Section 149(7) of the Act, that they meet the criteria of independence as laid down under Section 149(6) of the Act along with Rules framed thereunder.
Meeting of Independent Directors
The meeting of the Independent Directors was held on 30th March 2023.
Key Management Personnel
Mr. Pankaj Kumar Goyal is the Chief Financial Officer of the Company Ms. Bindu Garg is the Company Secretary and Compliance officer of the Company
AUDITORS
I. Statutory Auditor
At the 42nd Annual General Meeting of the Company held on 30th November, 2021, S. R. BATLIBOI & CO. LLP, (Registration no.-301003E/E3000005), Chartered Accountants were appointed as statutory auditors to hold office up to the conclusion of 46th Annual General Meeting to be held in the year, 2025
The Auditors' Report for FY 2022-23 does not contain any qualification or reservation.
All other financial statements, as referred to in the Auditor's Report, are self-explanatory and do not require any further comments and explanations.
II. Secretarial Auditor
M/s. PS Bathla & Associates, Practicing Company Secretary, Ludhiana were appointed as the Secretarial Auditors of the Company for the F.Y. 2022-23. The Secretarial Audit Report for the financial year ended 31st March, 2023 is annexed herewith as Annexure 5. There is no qualification, reservation or adverse remark in the secretarial audit report.
III. Cost Auditor
M/s Rajan Sabharwal & Associates were appointed as the Cost Auditors of the Company for FY 2022-23.
23. Maintenance of Cost Records
The Company is maintaining cost records as required under law. As per the provisions of Companies Act 2013, the cost audit is applicable to the Company. The cost audit was done and the cost Audit Report for the FY 2021-22 as filed with Ministry of Corporate Affairs well within prescribed timelines.
24. Frauds Under Section 143(12) of Companies Act 2013
No frauds were reported by auditors under sub-section (12) of section 143 of the Companies Act, 2013 to the Audit Committee.
25. Shares
a. Buy Back of Securities
The Company has not bought back any of its securities during the year under review.
B. Sweat Equity
The Company has not issued any Sweat Equity Shares during the year under review.
c. Sub Division of Equity Shares
No sub division of the Equity shares happened during the year under review
d. Bonus Shares
No bonus shares were issued during FY 2022-23
e. Employees Stock Option Plan
The Company has not provided any stock options to the employees during FY 2022-23 .However, the first grant of ESOP was made in the NRC meeting held on 31st July, 2023.
26. Industrial Relations
Your company believes in maintenance of harmonious industrial relations as it is of vital importance for the survival and growth of the industrial enterprise. Good industrial relations result in increased efficiency and prosperity. Company's industrial relations continued to be harmonious during the period under review.
27. Human Resources
For Sustainable growth, employee satisfaction and organisational effectiveness, Happy Forgings Limited deems it necessary to have a human resource policy that encompasses the policies and procedures followed within the organisation keeping in mind-the vision and goals. Also, the Company's focus is to improve the overall work culture, increase in effectiveness and efficiency and employee engagement and development.
28. Details of Significant and Material Orders Passed by Regulators or Courts or Tribunals Impacting the Going Concern Status and Company's Operations in the Future
During the year under review, there were no material and significant orders passed by the regulators or courts or tribunals impacting the going concern status and the Company's operations in future.
29. Disclosures Under SeKual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013
The Company is committed to provide a safe and conducive work environment to its employees. Further, the Company has zero tolerance towards sexual harassment at the workplace To achieve this objective, the company regularly organises awareness sessions to sensitise the employees about the act.
During the year under review, no complaints of sexual harassment were received as per the provisions and the Company is not in contravention of any of the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Training/awareness programmes are conducted throughout the year to create sensitivity towards ensuring respectable workplace.
30. Compliance with Secretarial Standards
The Company has followed the applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to 'Meetings of the Board of Directors' and 'General Meetings' respectively.
31. Acknowledgements
The Board of Directors would like to express their sincere thanks to all the stakeholders and investors of the Company for the trust reposed in the Company. Your Directors would also like to thank the government, both Central and state, financial institutions, banks, customers, employees, dealers and vendors for their co-operation and help throughout the year.