(Including Management Discussion and Analysis)
TO THE MEMBERS OF WENDT (INDIA) LIMITED
Your Directors have the pleasure in presenting the 41 Annual Report of Wendt (India) Limited (hereinafter referred to as 'the Company') together with the Audited Financial Statements for the year ended 31 March 2023. The Management Discussion & Analysis Report which is required to be furnished as per SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (hereinafter referred to as 'the Listing Regulations') has been included in the Directors' Report to avoid duplication and overlap.
ECONOMIC OVERVIEW
In a world that is more interconnected than ever before, all countries are getting impacted by what is happening in other countries. Apart from change in date, very little in FY 2022-23 feels different from the one gone by for the global economy. Geopolitical uncertainties continued unabated, a legacy of the last year, and there is wide consensus among economists now that the global economy is on verge of entering a phase of severe slowdown. Amidst this, the Indian economy remains a bright spot and GDP had grown around 7 per cent in 2022-23, making it the fastest growing major economy in the world for third time in a row.
The uncertainties caused by Russia Ukraine war which started in Feb 22 escalated further with more sanctions imposed on Russia by NATO, leading to surge in global crude oil and gas price, food grains like wheat and corn and several other commodities casting a shadow on global growth prospects and cascading inflationary trend. This had major impact on almost all major economies of the world like US, Europe etc. including energy crisis and resultant production restriction. China, however, had its own surge of COVID variant which led to total lockdown including travel restrictions for some months impacting its economic growth.
India, tackled this situation well by sourcing cheaper crude from Russia and using this as an arbitrage to keep its foreign exchange outflow low. The Indian economy had a transitory slowdown impacted by the overall slowing global demand and domestic consumption. However, the Indian economy is poised for growth as the Government has utilised this opportunity to sustain the ongoing momentum for infrastructure expansion and strategic policy thrust to lay solid foundation for medium to long term growth. As per the outlook data 6.8% growth is expected in FY 2023-24 maintaining India's status quo as the fastest growing global economy.
The optimistic growth can be assessed from number of positives for India like thrust on capex spend, rebound of private consumption boosting production activity, near universal vaccination coverage enabling people to spend on contact based services, opening of restaurants, hotel, shopping malls, aviation, tourism sector resulted in creation of record capacities, return of migrant workers to cities to work in construction sites leading to significant decline in housing market inventory, strengthening of corporate balance sheets, well capitalised public sector banks ready to increase credit supply and credit growth to the Micro, Small, Medium Enterprises (MSME) sector to name a few. In order to curb rising inflation, while the Central banks worldwide were busy in unprecedented repo rates hike, RBI did better job by balancing between inflation and growth, depreciating currency against US dollar and capital flight by raising rates.
India's growth can be attributed to record direct tax collections (Income Tax both personal and corporate) and GST collections, increased spending and pick up in private sector investment. The corporate sector performance is expected to show robust growth with improvement in net margins due to softening off the commodity prices from their recent highs.
India is also set to act as an important contributor of global economic recovery in the current year. The International Monetary Fund (IMF) expects emerging economies to account for four-fifth of global growth this year, with India alone expected to play the role of a global growth engine and contribute more than 15%. The stable growth of the Indian economy is aided by sustained government capital expenditure, deleveraging of the corporate sector, lower gross non-performing assets in the banking sector, and moderation in commodity prices.
In this context, the Government continued its agenda of structural reforms like rationalisation of Production Linked Incentive Schemes (PLI Schemes) to boost manufacturing in India and Make for World and stimulate output and investments. Specifically, support to economic growth will come from the expansion of public digital platforms and from the path-breaking measures announced such as PM Gati Shakti and
National Logistics Policy. The initiatives like vehicle scrappage policy, thrust on renewable and non-conventional energy sources is expected to reduce the India's overreliance on fossil fuel. To promote 'Ease of Doing Business' initiatives like proposed digitisation of land records, digital payments, single window clearance ensuring faster setup of new manufacturing units, faceless assessment and tax administration will boost manufacturing and help in making India a global manufacturing hub. The Government's continued heavy lifting on the capex front will also help drive in the private sector greenfield capex, which via its multiplier effect will help support domestic growth.
Though India is better placed than its global peers, the path to sustained recovery, however, will be distorted, given three major challenges lndia is likely to face. First, inflation is likely to remain high in the coming years even though it has already peaked. Second, aggressive tightening of monetary policies across the central banks of the advanced economies is likely to cause global slowdown in 2023, impacting domestic investment and consumer demand as the propensity to save increases. Tighter liquidity conditions may also result in capital outflows. Third, the labour market is yet to improve, and the pandemic's seemingly imminent return remains a wild card that could derail the strong recovery in consumer demand and service sector both of which are critical to GDP growth. In short, FY 2023-24 will be a challenging year for businesses and the Government to continue the growth momentum.
INDUSTRY STRUCTURE & DEVELOPMENTS
The demand for Super Abrasive products is closely linked to the level of industrial production. Super Abrasives are used to manufacture long-lasting, expensive items like auto and aircraft parts, demand for which is highly cyclical. Diamond and Cubic Boron Nitride (CBN) Super Abrasive products are used extensively in aerospace industry and other industrial applications where price considerations are less significant as they incur high initial costs. They are used in the machining of materials such as nickel, cast iron and cobalt-based superalloys, where precision in machining operations is of prime
importance.
Increasing complexity of Super Abrasive technology in high performance applications and its high initial cost provide entry barriers for small-scale and medium-scale companies to compete with the global market leaders. While industry leaders can afford significant research operations, most unorganised players do not have access to substantial R&D resources. This disparity can make it difficult for small and medium-scale companies to compete in the market, in terms of developing products that may require advanced technologies.
The Company being a total Grinding Solution provider, innovation is at the core of the Company's products and processes. As such majority of our products are customised to fulfil the customer's requirements.
Our comprehensive product range backed by state-of-the-art technology, valued-added services and consistent performance, by and large fulfil the needs and expectations of our customers in diverse industrial segments.
The Company is a preferred supplier for many of the automobile, auto component, engineering, aerospace, defence, ceramics customers for their Super Abrasive Tooling solutions, Grinding & Honing Machines and Precision components. A major contribution to the Company's revenues comes from these industries.
Also, the Company is committed to introducing new products and exploring new markets for Glass Wheels for Auto/Solar/Construction Application; Textile industry for Knife grinding industry; High performance grinding wheels for the cutting tool industry.
COMPANY PERFORMANCE OVERVIEW (STANDALONE) (Rs. in lakhs)
During the FY 2022-23, the Company clocked its highest ever sales of Rs.19095 lakhs, higher by 21% per cent over the previous year.
The Super Abrasive Business comprising Diamond/CBN Grinding Wheels in various Bonding Systems, Rotary Dressers, Stationary Dressers, Hones and Segmented products is the biggest business vertical for the company. With the respite from COVID 19 pandemic due to widespread vaccination during the previous year and surge of pent-up demand, the Company took several initiatives like regaining lost business, new products development, new customer acquisition, price correction, horizontal deployment of successful applications and products, looking at new customers, opportunities and markets, leveraging all its products as a complete package solution to serve customer better, sourcing etc., to grow the Super Abrasives Business.
These initiatives helped the Super Abrasive Business achieve sales of Rs. 13455 lakhs, its highest ever, growth of 22 % over the previous year.
The Domestic Super Abrasive Business recorded sales of Rs. 8810 lakhs, growth of 14 % over last year. This is the highest ever sales for Domestic Super Abrasive business. The higher sales was from industries like auto, auto ancillaries, steel, bearings, engineering, cutting tools, resellers etc.
The Export Super Abrasive sales during the year was Rs. 4645 lakhs, higher by 39% over the previous financial year. This is the highest Super Abrasive exports ever. The higher exports were due to increased sales from focus countries like USA, UK, Germany, Indonesia, Korea, Russia etc. The Company's strategy on continued emphasis on 10 focus countries for exports and other marketing initiatives like new customer addition, horizontal deployment of successful applications and products, dedicated customer meetings/calls, email campaigns, conducting technical seminars for steel, glass grinding etc., helped in exports growth. Also, could be able to achieve Rupee Rouble trade.
In the Machines Business, sales were Rs. 2777 lakhs, growth of 13% over previous year. The machine business recorded its highest ever sales despite continued supply chain issues leading to global shortage of semi-conductor chips and other related parts which goes into manufacturing of machines. The timely execution and delivery of machines to various customers was ensured by better planning, bulk ordering of parts for the entire year, working closely with critical vendors and also developing alternate vendors. The initiatives like advance schedule release helped to execute machines on time.
During the year, the Company manufactured 40 machines. Of these 20 numbers are the regular Delta 150/200 series machines. During the year, the Company executed for the first time 11 metres length longest bed twin spindle -twin bed grinding machine model WXG 750. Besides, some of the new machines executed includes OPRA Series 200, 300 and 400 series for steel and round tools, WBM machines refurbishing etc. The Company's strategy of moving from industry specific to application-based machines has yielded good results during the year. These machines have been well received by the customers projecting a good performance. Machine sales in the export market achieved good growth and acceptance by the customers.
The Precision Products business clocked sales of Rs 2863 lakhs, higher by 24 % over the previous year. The precision components business achieved its highest ever sales during the previous year. Besides the existing products like vanes, distance piece, TP blade, inserts etc. the Company could establish new products like silicon nitride roller project, rotors and rings etc. and started regular billing. The Company continues to focus on developing new products for its components business as a part of its de-risking strategy and looking at alternate opportunities wherever possible.
During the year, the Company has signed a Sales Partnership Agreement with Lithoz GmbH, a global market and innovation leader in ceramic 3D printing to accelerate business in Indian 3D Printing market. Besides, the access to 3D printing technology will help Wendt to produce complex designs and parts which are not easily manufactured.
In order to serve the customers better, during the previous year, the Company set up a facility in Pune for insert grinding application. The facility has started production and is expected to scale up production in future with addition of newer business.
The Company has uploaded its new products and applications in social media platforms like LinkedIn, YouTube etc., to create awareness amongst its customers. During the year, the Company has launched its new website with modified and improved content for better interaction and engagement with the customers. The website look and feel has been enhanced with graphics and user interface. The customers can choose Company's products and successful applications and place their order online. These initiatives are focussed towards Digital Marketing and Ease of Doing Business in terms of servicing customers better.
On the Information Technology side, the Company has started Digitisation initiative of its core processes in order to make ease of doing business and eliminate duplication and non-value additions. The demo and vendor finalisation has been completed and order has been placed for digitisation of Dealer Portal, vendor portal and HR portal which is expected to yield benefits from the coming years.
During the year, the Company participated in several exhibitions to showcase its products and to build rapport with customers. Some of the exhibitions where the Company participated and displayed its products are IMTEX machine tool exhibition by IMTMA, National Steel Expo Raipur, Indomech Nagpur, Faridabad, Ceramic Customer Meet at Hosur, Mela at Nataraja Coimbatore and Machine Tools Exhibition 2022 in Indonesia. Besides, the Company also conducted several Technology Days and technical seminars at various customer places to educate the customer on our products and applications and to know and eradicate their pain points. Besides, the Company has also started building Dashboard for trial and application establishment, preparation of Data Bank of all products, applications, customers based on their potential and market size and case studies of successful applications. The Company leverages its core strength like complete product range- Super Abrasives, Machine Tools and Precision Components, access to German technology, renowned global brand 'Wendt', global connect, domain knowledge and continued patronage from customers to grow its business and serve its customers better. It continues its focus on exploring new business opportunities in Aerospace, Compressor & Hydraulic parts, Special Inserts, Carbide industry, deploying its core competencies - Expertise, Experience and Knowledge on Grinding, Machines & Super Abrasive Tools for producing related precision components.
Focus on Process Efficiency
The Company continues to focus on improving operational efficiency as well as optimal utilisation of various resources- man, material and machines in manufacturing and production areas. The Company has implemented various initiatives to improve efficiency of its processes and products. Some of the
key ones are
l The QRM (Quick Response Management) Initiative
- Paired-cell Overlapping Loops of Cards with Authorisation (POLCA) which was started as a pilot in the earlier years has been deployed successfully in three of the production cells. This envisages reorganising the machine layout in the shopfloor thereby reducing lead-time/ waiting time between workstations and improvement in shopfloor inventory and other resources. This initiative is beneficial in addressing some of the key areas like planning and scheduling, production reliability, materials availability, and product delivery. This needs to be extended not only in manufacturing process but also in support functions.
l Reliability on Product delivery (ROPD) improvement- improvement in product
delivery for all major cells through POLCA.
l Loss reduction in major cells through Cross Functional Teams (CFT) to reduce in process
rejections.
l Method Engineering- CFT to work on Methods improvement through productivity improvement
projects, automating repetitive and manual tasks, value engineering, process simplification and eliminating redundancies or NVAs, flexible manufacturing and capacity utilisation ensuring all resources are utilised to the optimum.
Supply Chain efficiency is one of the Company's key focus areas. The Company continues its focus in reducing product lead time and improving operational efficiency by reducing Work in Progress (WIP).
On the raw materials front, the Company continuously
develops alternative, reliable and competitive sources/suppliers for critical raw materials including Diamond/CBN, machine castings, systems, electrical, chemicals etc. However, to mitigate supply chain disruption the Company has tied up with critical suppliers with annual orders delivery schedules.
FUTURE PROSPECTS AND OUTLOOK
The Company's products are used extensively for Auto, Auto ancillaries, Engineering, Cutting Tools, Steel, Ceramics, Refractories, Defence, Aerospace, Construction and other industry segments. As such the Company closely monitors the developments in these sectors and accordingly devises its business strategy.
In the auto ancillary segment, rising middle class income and huge youth population in India is expected to be key demand driver. India could be a leader in shared mobility by 2030, providing opportunities for electric and autonomous vehicles. With the continued emphasis on green planet and reducing carbon emission, focus is shifting to Electric Vehicles (EV). The EV industry is expected to create 5 crores jobs by 2030 (Indian Brand Equity Foundation (IBEF)). India enjoys a strong position in the global heavy vehicles market as it is the largest tractor producer, second-largest bus manufacturer, and third-largest heavy truck manufacturer in the world. Further, initiatives like the PLI schemes for automobile and auto components, Automotive Mission Plan 2026, vehicle scrappage policy, flexi fuels etc., is expected to provide growth opportunities to the automobile sector. Indian automotive industry (including component manufacturing) is expected to reach Rs. 16.16-18.18 trillion (US$ 251.4-282.8 billion) by 2026 (IBEF).
With regards to the Steel industry, India's finished steel
consumption is anticipated to increase to 230 Million
Tonnes (MT) by FY 2030-31 from 134 MT in FY 2021-22. As of April 2022, India was the world's second largest producer of crude steel, with an output of 10.14 MT. In FY 2021-22, the production of crude steel and finished steel stood at 133.596 MT and 120.01 MT respectively. During April-October 2022, the production of crude steel and finished steel stood at 71.56 MT and 68.17 MT respectively. The growth in the Indian steel sector has been driven by the domestic availability of raw materials such as iron ore and cost-effective labour. Consequently, the steel sector has been a major contributor to India's manufacturing output. Due to the Government's continued thrust on infrastructure development including building railways, roadways and highways etc., the demand for Indian steel is expected to increase further.
Indian Abrasive market is valued at $363.26 million in 2021 and is expected to project a robust growth with a CAGR of 6.61% to reach $ 541 million by FY 2026-27. Initiatives like 'Smart Cities Mission' and 'Housing for All' along with rising demand for electronics and automobiles are driving the growth of Indian abrasive market.
The global Super Abrasives market is estimated to grow at a CAGR of 6.78% to USD 14.45 billion (Rs. 11.82 trillion) during 2021-2030. The dominating region is the Asia Pacific with major countries being China, India, Japan, South Korea and other regions being North America-US, Canada, Europe -Germany, UK, France, Italy etc. The largest segment of Super Abrasives market was the diamond segment accounting to 67% out of which the largest market is the electroplated diamond. By the end user industry, the electronic segment has the highest demand of super abrasives occupying 49% market share followed by automotive and oil and gas, which accounted for 14% and 10% market share respectively. The electronics industry was worth USD 1787 million in 2016. The highest market share by country is occupied by Japan with USD 918 million followed by US with USD 581 million. Major factors responsible for the growth of global super abrasives market include growing awareness regarding adoption of high-end technologies and their benefits coupled with the continuing growth of the automotive industry. In addition to this, the product is widely popular due to its long lifecycle, high scale hardness and superlative performance, which is anticipated to spur the global super abrasives market growth. However, some of the factors that might act as major impediments to the growth of super abrasives market across the globe in the years to come are high cost of production along with product price volatility due to
the fluctuating raw material costs.
The expected growth of the above sectors provides good opportunities for the Company's products Super Abrasives, Machines, and Precision Components in future.
The Company's growth lies in constantly monitoring changes in the external environment and adapting to the customer needs that are emerging. Accordingly, mega trends and underlying new opportunities that unfolds are being tracked continuously.
The growing usage of Super Abrasive products for various medical applications such as Surgical Instruments, Hypodermic Needles, Dental implants, Knee, Hip and Shoulder joints create new opportunities for the Company to explore through technical collaboration and new products development. Also, growing Consumer Electronic Segment with manufacturing facilities in India is expected to provide a wide array of opportunities for consumption of Super Abrasives in the coming years. The focus on semiconductor industry which will make India a major hub for manufacturing semiconductors is expected to be a major growth engine. The Company is exploring necessary tie-ups and collaboration to venture into these growing sectors.
To bridge the gap between optimising existing technologies & investing in advancements, the Company's in-house R&D efforts are aimed at strengthening the existing technology, complemented by new methods of manufacturing.
Adoption and deployment of appropriate technologies for indigenous Bond development, streamlining processes has been the key focus areas for Company's growth prospect and the Company will continue to do so.
SUBSIDIARY COMPANIES
Wendt Grinding Technologies Limited,
Thailand
The Company's wholly owned subsidiary, Wendt Grinding Technologies Limited, Thailand, achieved sales of Thai Baht 870 lakhs (Rs. 1974 lakhs) which is 14% lower than the last year. This is despite unprecedented challenges and industry slowdown on account of increase in COVID-19 infection, EV impetus, geopolitical uncertainties due to anti-China thrust and
China - Taiwan relations, rising costs and all odds. The subsidiary continues to demonstrate its strong resolve and business acumen challenging the unfavourable conditions and churning out results on a consistent basis.
The Profit Before Tax was Thai Baht 115 lakhs (Rs. 263 lakhs), 34% lower than previous year and the Profit After Tax has been Thai Baht 92 lakhs (Rs. 209 lakhs), 34% lower over previous year.
During this challenging year, the subsidiary resorted to strict cost and receivables control, clear business focus in terms of increasing product and customer basket and strengthening the export business. These initiatives have helped in de-risking the business by compensating for the decline in existing products. Focus on providing value added services, enhancing product basket, new customer additions and entering new geographies have yielded desirable results.
The subsidiary will continue to focus on core business & value-added service and increased customer/product base along with measures to ensure OPEX, safety and cash flow to achieve sustainable & profitable growth.
During the year, the subsidiary successfully received strong recommendation and revalidated “ISO9001-2015” audit from “TUV NORD”.
WENDT MIDDLE EAST FZE, SHARJAH
Wendt Middle East FZE (WME), Sharjah, the other wholly owned subsidiary of the Company, had applied for voluntary de- registration during previous year.
The clearance from the Hamriyah Free Zone Authority (HFZA) was received in May 2022, after which WME has been de-registered.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements of the Company (incorporating the operations of the Company and its wholly owned overseas subsidiary), for the financial year 2022-23 are prepared in compliance with the applicable provisions of the Companies Act, Accounting Standards as prescribed by Regulation 33 of the Securities and Exchange Board of India (SEBI) (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Consolidated Financial Statements have been prepared based on the audited financial statements of the
Company and its subsidiary, as approved by their
respective Board of Directors.
Pursuant to provisions of Section 136 of the Act, the Financial Statements of the Company, the Consolidated Financial Statements along with the relevant documents and the Auditors' Report thereon form part of this Annual Report. A statement of summarised financials of all subsidiaries of the Company in form AOC-1 forms part of the Annual Report. The audited annual accounts and related information of the subsidiaries is available in our website www.wendtindia.com.
The key financial information on the consolidated operations are as follows: -
KEY CONSOLIDATED FINANCIAL SUMMARY (Rs. in lakhs)
DIVIDEND
Considering the past dividend pay-out ratio and the current year's operating profit, the Board has recommended a final dividend of Rs. 50/- per equity share of Rs. 10/- each for the year ended 31 March 2023. Besides, in January 2023, an interim dividend at the rate of Rs. 30/- per equity share of Rs.10/- each was declared and paid in February 2023. This aggregates to a total dividend of Rs. 80/- per equity share of Rs.10/- each for the year which is highest ever declared by the Company since inception.
The Company has adopted the Dividend Distribution Policy as approved by the Board in line with the Listing Regulations and the same is available on the Company's website https://wendtindia.com/wp-content/themes/ wendtindia/pdf/dividend-distribution-policy.pdf. The dividend paid as well as being recommended for the year ended 31 March 2023 is in line with this policy.
TRANSFER TO RESERVES
The Company transferred Rs.401 lakhs to the General Reserve. An amount of Rs. 9856 lakhs is retained in the Statement of Profit & Loss.
(Rs. in lakhs)
APPROPRIATIONS
CORPORATE SOCIAL RESPONSIBILITY
(CSR)
The Company believes that social responsibility is not just a corporate obligation that has to be carried out, but an opportunity to make a difference. The Company's Corporate Social Responsibility programmes are aimed at inclusive growth and sustainable development of the community.
The Company's Corporate Social Responsibility pursuits have always been based on the foundation of ethical behaviour in all its business transactions and contributions for economic development of not only the workforce and their families but also extending to the local communities and the society at large. The Company being a part of the Murugappa Group has been upholding this tradition by allocating a part of its profits for fulfilling its social responsibilities. The Group's philosophy is to serve the communities in which it operates through the services of service-oriented philanthropic institutions with education and healthcare being the core focus areas.
The Company's Skill Development Program was set up
in 2012 in collaboration with Carborundum Universal
CSR Donation to Government School at Zuzuvadi for classroom Construction
Limited. The major focus was to provide high quality vocational and technical training to less privileged youth from weaker sections of the society by uplifting their lives and equipping them with employable skill sets. This training programme is designed based on the coaching methodology defined by Government of India, Ministry of Skill Development and Entrepreneurship. This builds up a skill bank of technically competent and industry ready work force benefitting the less privileged sections of the society.
The three years training programme is based on National Council of Vocational Training syllabus. This training is imparted with stipend to the enrolled students and free boarding facilities ensuring that they earn while they learn. Not only does this initiative help in imparting formal education, but also helps them in honing them to become a valuable citizen while helping them in seeking gainful employment upon successful completion of the course.
During the year, the Company undertook a project of constructing classrooms in a Government High School at Zuzuvadi, situated in the SIPCOT, Hosur. The Company focuses its CSR activities on rejuvenating schools as most of the schools are in desperate need of an overhaul and lack even the most basic facilities. This CSR project leverages contribution to build classrooms and provide other basic amenities for encouraging education in the rural and remote locations.
The Company also gives importance to green environment and tree plantation in the nearby communities by distributing and planting free saplings every year. Employees are encouraged to participate in activities like blood donation camps, creating awareness on road safety, nominating employees with RTO as traffic wardens, 5S campaigns towards cleaner environment, imparting special education to the school children to name a few.
The Company in line with the amendments in Companies Act, 2013, formulated annual action plan, which was approved by the Board of Directors, in pursuance of the CSR Policy of the Company, based on which spending on CSR activities were done. The Company, during the year 2022-23 has spent Rs. 31.72 lakhs towards CSR activities and the unspent CSR amount of Rs. 12.00 Lakhs owing to the on-going project of construction of classroom was transferred to the Unspent CSR account pursuant to section 135(6) of the Companies Act, 2013.
In accordance with requirements of the Companies Act 2013, the Company has a CSR policy incorporating the requirements therein which is also available on Company's website at the following link https://wendtindia.com/wp-content/themes/ wendtindia/pdf/csrpolicy.pdf.
The Annual Report on CSR activities in the prescribed format is annexed herewith as Annexure C.
TRANSFER TO THE INVESTOR EDUCATION & PROTECTION FUND (IEPF)
In terms of Section 124 (5) of the Companies Act, 2013, an amount of Rs. 4,62,235 being unclaimed dividend during the year, pertaining to the final dividend for the
FY 2014-15 (Rs. 2,59,035) and the interim dividend for the Interim Dividend of FY 2015-16 (Rs. 2,03,200) was transferred to IEPF after sending due reminders to the shareholders.
FIXED DEPOSITS
The Company has not accepted deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 and the rules framed thereunder and no amount of principal or interest was outstanding as on the balance sheet date.
LOANS AND INVESTMENTS
Particulars of Loans, Guarantees and Investments covered under section 186 of the Companies Act, 2013 are given below. There were no loans or guarantees covered under section 186 granted during the year.
Current Investments: Investments in Mutual Funds as on 31.03.2023 was Rs. 6563 Lakhs.
KEY RATIOS
The significant change in operating profit, EBITDA and PBIT to net sales is mainly on account of operational
efficiency measures including variable and fixed cost reduction initiatives undertaken in the previous year. This has
st
also resulted in favourable change in ROCE and ROE for the year ended 31 March 2023.
QUALITY
The Company follows a quality assurance system with stringent tests built into every stage of production ensuring the quality of its products. The quality consciousness built in the company's DNA backed by a thorough understanding of customer application
needs and “one to one” customer support, has made the Company a synonym for quality and reliability. The
product quality was enhanced by introducing Gemba inspection and risks were reduced resulting in improvement of production efficiencies thereby garnering customer loyalty. Ensuring that Process & Product audits are being performed and regular testing of the product and ensuring that the quality is within the standard.
The Company has implemented 'Green Channel Suppliers & Vendors' which will eliminate incoming inspection thereby reducing production lead time & faster customer delivery. The Green channel suppliers are selected after assessment and evaluation of their processes and facilities. The Company continued planned supplier audits for assessing supplier gaps if any thereby improving incoming materials quality performance. The Company also introduced Quality assurance agreements with suppliers which will help supplier to understand their roles, responsibilities, and expectations.
The Company has certifications of ISO 9001: 2015, IS0 14001: 2015, ISO 45001: 2018, AS9100 Rev D, IATF 16949: 2016 and EN 13236: 2019 reinforcing its commitment to ensure that Quality Management Standards are met.
IATF 16949: 2016 pertains to manufacturing of precision products and AS9100 pertains to Aerospace applications. In order to comply with the safety norms and requirements of overseas customers, the Company has successfully renewed ISO 9001: 2015, IS0 14001: 2015, ISO 45001: 2018, AS9100 Rev D and IATF 16949: 2016 Standards during the year. Quality being the uncompromised differentiator, the Company aims to ensure that product quality is built by deploying and embracing effective quality control management, process robustness, quality assurance and discipline at every stage of material flow.
SAFETY, HEALTH AND ENVIRONMENT
(SHE)
Safety continues to be the key area of focus for the
Company. Behaviour based training both in person as well as virtually were conducted to promote a culture of safe working. The Company recognises the need and is committed to provide Safe, Healthy and Socially Accountable Work Culture in the Organisation.
All personnel on a periodical basis receive effective health and safety training, including on-site training, job specific training etc. During the year, the Company has provided trainings for creating awareness about the significance of safety amongst employees and visitors including by way of setting up of safety training kiosk.
The Annual medical check-up facility continue to assess the health status and risk of our employees. Employees are benefitted from awareness sessions organised on the theme- FHH (Fitness, Health and Happiness) and employees were encouraged to take initiatives to improve their health and fitness.
Quarterly mock drills for fire safety, special medical attention for employees working in special process & sensitive areas, use of personal protection equipment (PPEs), zero discharge of ETP/STP and hazardous waste handling are some of the initiatives, which the Company undertook during this year.
The Company continues following the COVID-19 protocols and safety measures in terms of social distancing, including restricted movement of manpower, use of hand sanitisers and face mask at workplace and home. This has enabled the Company to continue uninterrupted production.
RECOGNITIONS AND AWARDS
The Company encourages its employees to participate in customer audits, group competitions, various national and international events & competitions. During the year, Company received many awards and accolades from well recognised organisations, establishments and certifying bodies for various distinctive achievements. Needless to mention that these recognitions and accolades enhance the passion and optimism among the employees and acts as key motivator for the Company as a whole. Some of the key recognitions received during the year are as follows:
l ICAI Award for Excellence in Financial Reporting FY 2021-22
The Company's Annual Report FY 2021-22 was
adjudged winner in Plaque category by The
Institute of Chartered Accountants of India for Manufacturing and Trading Companies with turnover less than Rs 500 crores. l QCFI -CCQC 2022 Competition
12 teams participated in CCQC Competition during Oct 2022. 9 teams won Gold Award and 3 teams bagged Silver Award. l CUFEST 2022 Awards
Employees participated in Group-level Quality competition 'CUFEST 2022' (Quality festival of CUMI), and won awards for Kaizen, Supply Chain Excellence and Cross Functional Collaboration, HR Excellence and Suggestion Scheme. l Shine Awards
Murugappa Group recognises Best role Models for its five lights- Integrity, Passion, Quality, Respect and Responsibility. During the year, 3 of the Company's employees were declared shine award winners. Besides, Shine Award certificate of appreciation was given to 3 other employees of the Company. l Individual Excellence Award
Organisation awarded employees who demonstrated high sense of ownership and responsibility and delivered consistent results in various areas such as productivity, cycle time reduction, Safety, Quality, Problem solving, Customer satisfaction, Innovation, QRM, and best 5S practices. l Eminent Engineer Award
One of our employees, Ms. Chitra was conferred with Eminent Woman Engineer Award by the Institution of Engineers, Hosur Chapter during the Women's Day celebration at Hosur.
OPPORTUNITIES & THREATS
OPPORTUNITIES
Disruptive technologies like Electric Automobiles, the recent emerging trend in the automotive industry, although a threat to the IC engine, also provides opportunities to explore this segment and find parts suitable for EV vehicles.
Nano Cubic Boron Nitride abrasives are likely to augment applicability of Super Abrasives in many medical and electronic industry applications. The Company is exploring venturing into EV, medical and electronics segments by collaboration and technology tie-ups with global partners to grow further.
The industries in the Auto, Aerospace, and Electronics manufacturing space demand high-performance applications. Improvements in the design of diamond wheels used to finish ceramics can be key to cost-effective manufacturing. Metal-bond specially design wheels for longer wheel life can lead to shorter process cycle times while also ensuring longer life, thereby reducing the overall grinding cost. The company achieving the aerospace certification is a step in looking at growing this segment in future.
The Company would continue to leverage upon its vast experience and technical expertise, deep understanding of customer requirements, comprehensive product range, superior technology and the resultant competitive edge emerging out of its complementary business verticals namely Super Abrasives, Machine Tools and Precision Components.
Further, the Government's focus on Projects like 'Make In India' and 'Make for World' are expected to give a boost to the Company's products being import substitute, thus helping in conservation of precious foreign exchange during these difficult times.
THREATS
Industry leaders across globe, with high brand value afford significant Research operations. Investment in R&D activities by these major players to innovate the existing products and to develop new technologies to sustain competition in the market is very high. On the other hand, we have many unorganised, regional proprietary run entities that are smaller in size with limited offering, which address customers' requirements in a specific region.
In order to counter both the extremes, the Company strives to evolve a unique approach to improve its market presence, market share and address both the segments. To address the price competitive market, the Company has launched fast moving and Standard Super Abrasives and other tooling products and has been aggressively conducting promotional activities at the vicinity of high potential customers. For addressing the high performance, quality conscious segment, the Company is working with foreign Research Institutes and is on lookout for product specific, niche manufacturers for acquiring state-of-the-art technology.
Enterprise Value Addition (EVA)
The Company has been able to continuously add value, the summary of which is given below:
l Gross Value Added is Revenue less Expenditure (excluding depreciation, expenditure on employee & directors service).
l Payment to Government is current tax + dividend distribution tax.
l Replacement and expansion is retained earnings +depreciation + deferred tax.
l The Company has been constantly investing towards replacement and expansion expenditure to ensure fulfilment of market demand.
RISK & CONCERN
The Company has constituted a Risk Management Committee aligned with the requirements of the Companies Act, 2013 and Listing Regulations. The details of the Committee and its terms of reference are set out in the Corporate Governance Report forming part of this Report.
The Company has a robust business risk management process to identify, evaluate and mitigate risks impacting business including those which may threaten the existence of the Company. This framework seeks to create transparency, minimise adverse impact on the business objectives and enhance the Company's competitive advantage. This also defines risk management approach across the organisation across various levels including documentation and reporting.
The Company determines the categories of risk from strategic, operational, environmental, legal, social, cyber risks, extended enterprise and financial which the organisation may be exposed to and could impact its ability to conduct its business operations without disruption, to provide customer satisfaction and achieve sustainable success.
The Risk Management also forms an integral part of the Company's Business Plan.
The Company has also developed a structured Risk Management Policy encompassing the risk management objectives, principles, processes, responsibility for implementation, maintenance of risk registers, review of risk movements, risk reporting framework etc.
After the risk is identified, Risk Prioritisation is undertaken which involves assigning a score based on impact (potential outcome) & likelihood (probability of occurrence). The risks are also assessed for velocity (how fast a risk can impact an organisation) to assess the need for crisis plan. The risk response of the Company is of the following types:
l Avoidance i.e., not to start or continue with an activity which gives rise to a risk.
l Sharing the risk i.e., sharing with another party, the burden of loss or the benefit of gain, from a risk. l Mitigating risk, an action that reduces the impact or likelihood of a risk. l Retention, where no worthwhile controls actions are feasible, and the risk is within the organisation's risk tolerance.
Some of the risks associated with the business and the related mitigation plans are given below. However, the risks given below are not exhaustive and assessment of risk is based on management perception.
Raw Material commodity price increase
Why is it considered as a Risk?
l non availability due to pandemic and global unrest. l scarcity of raw material. l logistics issues-supply chain disruption. l Increased price with surging commodity price.
Mitigation Plan/Counter Measure to address
l Identifying alternate source of raw material. l Bulk ordering and fixing annual price of critical raw materials. l Premium price for faster delivery. l Better forecasting and advance ordering in bulk. l Vendor managed inventory to mitigate supply chain disruption.
User Industry concentration Risk
l Disruption in the overall automotive market landscape due to transition of the automobile industry towards hybrids and electric vehicles. l Effect on Customer Relationship with change in ownership. l Disruptive innovation & process changes. l Newer technology like Integrated Starter Generator and Belt-Driven Starter Generator that are likely to replace alternator and generator in the automobile.
l Identifying alternate Industry base Segments based on Mega Trends- Aerospace, Bearings, Razor Blade, Glass, Power (Solar, Nuclear, Wind and Gas). l Widening the customer base/new industry segment & new geographies thereby de-risking the business. l Pursuing product innovation and new application development as per government norms. l Building relationship and engagement with the customer by adopting new initiatives conducting Technical Seminar - both online and onsite, participation in international exhibitions, CRM & Knowledge Management application. l Focus on Digital Marketing, to acquire new customers and pursue new applications. l Working with renowned research universities and technical consultants, to develop new products.
Competition Risk
l Loss in share of business for standard and low precision products, due to presence of many unorganised regional players often adopting measures like pricing strategy, free samples, longer credit period etc. l Disruption in global competition by low-cost products. l Organised players spending on Research and Development and coming up with new products. l Major companies acquiring local dealers/ manufacturers and entering partnerships with major end users to continuously supply products.
Mitigation Plan/Counter measure to address l Launching High Performance standard products, with competitive price and branding products by conducting seminar at Tier 1 & Tier 2 cities, Melas at dealer locations and participating in various exhibitions. l Measures like New product development, lost business regain, gain from competition, horizontal deployment of successful applications. l Association with external agency for developing new products for different applications. l Automation and Robotisation to address lower manufacturing cost and enhance competitiveness. l Offering products against import substitute by focusing on cost, delivery, quality and technical support. l Conventional Abrasives application migrating to Super Abrasives. l Collaborating and partnering. l Leveraging the three verticals -Super Abrasives, Machines and Precision components.
Technology Risk
l Elimination of Machining Process (Turning, Milling, Grinding, Honing).
l High investment on Technology by key global players. l Access to advanced technologies.
l Enhance in-house R&D efforts (DSIR approved R&D) to strengthen existing technology, complemented by new methods of manufacturing. l Association with external Research laboratories/ Technical institutes for technology upgradation. l Collaboration with external consultants for product and process Innovations. l Initiated overseas partnership for Additive Manufacturing.
HR Risk
l Millennial work force - no long-term interest. l Attrition of skilled/trained manpower by competition leading to disruption of operations or knowledge gap. l Delay in recruitment of talents as per business needs. l Succession planning for key roles.
l Facilitate to enhance technical and behavioural capabilities through e-learning modes and Webinars. l Improve leadership readiness to manage the growth initiatives by identifying internal and external incumbent for next set of leadership positions through the Internal Development Programs (IDP). l Focus on acquiring high skilled talents from best-in-class domains/organisations. l Design & implement career road map through structured development plan for career enhancement based on roles and job descriptions. l Mentoring and Coaching programme for employees for enhancing engagement level. l JD mapping and identifying training needs to fill gaps for employee development ensuring right person on right job.
Regulatory or Legal Risk
l Non-adherence to government advisories, Standard Operating Procedures etc., exposes the Company to legal and compliance risks.
l Closely monitoring information on government circulars, notification, advisories and disseminating the same to the operating team for implementation as well as monitoring adherence through robust compliance management system.
Cyber Security Risk
l Disruption of technology service providers (in Work from Home conditions) l Data breach, loss or exposure increase due to a remote/mobile workforce. l Security breaches, compliance, bugs due to unauthorised access and potential attacks Mitigation Plan/Counter Measure to address l The Company has a robust IT Security Policyimplemented with a periodic review mechanism. l The Company has a backup process available for data restoration. The Company has identified alternate service providers in case of switch over. l Implemented SIEM (Security Information and Event Management) for identifying, monitoring, recording and analysing security events or incidents in a real-time IT environment. l Continuous review of the Disaster Recovery Strategy & Business Continuity Policy in place for Technical Controls. l Data Center access limited to authorised personnel. l Crisis Management Group in Place. l Strengthening network security. l Enhancing Information Security policies & procedures. l Vulnerability Assessment and Penetration Testing (VAPT) for information system conducted periodically. l Updating patches monthly and monitoring for issues antivirus update for entire environment including standalone IT assets. l Periodic awareness emailers to employees on Do's and Don'ts to ward off cyber threats like phishing and malware attacks. l Information shared on 'Need to Know Basis'.
INDIAN ACCOUNTING STANDARDS (IND AS) - IFRS CONVERGED STANDARDS
The Company had adopted Ind AS with effect from 1 April 2016 pursuant to the Companies (Indian Accounting Standard) Rules, 2015 notified by theMinistry of Corporate Affairs on 16 February 2015.
INTERNAL CONTROL SYSTEM &
ADEQUACY
The Company has an Internal Control system commensurate with the size, scale and complexity of its operations. The controls have been designed and categorised based on the nature, type and the risk rating so as to effectively ensure the reliability of operations with adequate checks and balances.
The Company's internal control system covers the following aspects:
l Safeguarding the assets of the Company.
l Financial proprietary of business transactions.
l Compliance with prevalent statues, regulations, policies and procedures.
l Control over capital and revenue expenditure with reference to approved budgets.
The Internal Audit function is delegated to an external firm which evaluates the effectiveness and adequacy of internal controls, compliance with operating systems, policies and procedures of the Company and recommends improvements. The scope of the Internal Audit is annually determined by the Audit Committee considering inputs from the Statutory Auditors and the Management Team. Significant audit observations and the corrective/ preventive actions taken by the process owners is presented to the Audit Committee. Periodic review of the adherence to the agreed action plan is carried out.
The Audit Committee of the Board periodically reviews audit plans, observations, and recommendations of the internal and external auditors, with reference to the significant risk areas and adequacy of internal controls and keeps the Board of Directors informed of its observations, if any, from time to time.
During the year, there were no changes in internal control over financial reporting that have materially affected or are likely to have any financial reporting lapse.
INTERNAL FINANCIAL CONTROLS (IFC)
Internal Control is a process, effected by an entity's Board of Directors, Management and other personnel, designed to provide reasonable assurance relating to operations, reporting and compliance as defined by the Committee of Sponsoring Organisations (COSO) of the Treadway Commission (appointed by SEC, USA).
As per Section 134 of the Companies Act, 2013 the term Internal Financial Control (IFC) means the policies and the procedures adopted by the Company for ensuring:
a) orderly and efficient conduct of its business,
including adherence to accounting policies,
b) safeguarding of its assets,
c) prevention and detection of frauds and errors,
d) accuracy and completeness of accounting records
and
e) timely preparation of reliable financial information.
The key components of IFC followed by the Company
are:
1. Entity Level Controls (ELC) that the management relies on to establish appropriate Code of Conduct, Enforcement and Delegation of Authority, Hiring and Retention practices, Whistle Blower mechanism, and other policies and procedures.
2. Process Level Controls (PLC) to ensure processes are stable, predictable and consistently operating at targeted level of performance classified into Manual or Automated Controls. They are also classified as Preventive or Detective.
3. General IT Controls to ensure appropriate functioning of IT applications and systems built by Company to enable accurate and timely processing of financial data are - User Access rights Management and Logical Access; Change Management controls; password policies and practices; Patch management and License management; backup and recovery of data.
The adequacy of IFC is ensured by:
l Documentation of risks and controls associated with major processes.
l Validation classification of existing Controls to mitigate risks.
l Improving the effectiveness of controls through data analytics.
l Performing testing of controls by Independent Internal Audit firm.
l Implementation of sustainable solutions to Audit observations.
The IFC Audit is conducted annually by an independent firm of Chartered Accountants by testing of controls to ensure that all controls are operational, effective, adequate and identifying improvements to controls wherever necessary which is reviewed by the Audit Committee.
FINANCIAL REVIEW
Liquidity and Cash Equivalents
The Company follows efficient working capital management practices. This requires being prudent in capital expenditure. Also, making its cash conversion cycle more efficient through faster collections from debtors, faster conversion from raw materials to finished goods through QRM resulting in healthy cash generation. Thereby the Company was able to maintain its debt free status. The Company holds sufficient cash and cash equivalents to meet its futuristic strategic growth initiatives by following prudent investment policy. The Company's cash surplus position helps to eliminate short and medium-term liquidity risks.
The Company's robust Cash Management Policy is
based on:
a. Uses cash to provide sufficient working capital to address business objectives of the Company and to add value to all stakeholders by continued enhancement.
b. Conserves sufficient cash as reserves that will aid the Company in venturing into meaningful business opportunities that unfold in future.
c. Prudently invests surplus funds that the business generates in liquid investments including AAA rated debt schemes of mutual funds as per the Board approved policy. This ensures availability, safety and liquidity of the Company's funds while allowing reasonable yield as per the prevailing market rates. The surplus funds are generated through stringent control on working capital.
As on 31 March 2023, the Company's investment in debt mutual funds was Rs. 6563 lakhs in securities holding papers with high credit rating and Rs. 500 lakhs in Corporate Fixed Deposits.
Costs
The year continued with high commodity price along with supply chain disruption. The Company managed its cost by negotiating annual price with critical suppliers and buying in bulk based on annual demand projection. To combat supply chain disruption, the Company continues developing alternate suppliers as a part of its de-risking strategy. Also, the Company continues looking at indigenisation of some of the supplies. Initiatives like Vendor Managed Inventory
(VMI) has ensured continuity of supplies of critical items including rationalisation of costs. Focus on Cost Optimisation has yielded savings in all the business segments Super Abrasives, Machines and Precision Components. The rigorous variable and fixed cost reduction initiatives undertaken in the previous year has resulted in good improvement in the bottom line.
FINANCIAL POSITION
Share Capital
The paid-up equity share capital as on 31 March 2023 was 200 lakhs. During the year under review, the Company has not issued shares with differential voting
rights nor granted stock options nor sweat equity.
Shareholders' Funds
The shareholders' fund as on 31 March 2023 was Rs. 16,933 lakhs against Rs. 14,414 lakhs of previous year. Accordingly, the book value of the share stands at Rs. 847/- as compared to Rs. 721/- during the previous year.
Loan Funds
The Company continues its debt free status as it does not have any long-term borrowing. It continues to utilise its cash credit limit with the banks to bridge the short-term fund requirement and for meeting the temporary mismatches in its cash flow.
During the current year as well, the working capital limits of the Company continued to be rated by ICRA as AA- (pronounced ICRA double A minus) rating assigned to the Rs. 2 Crore Long-term Fund facilities of the Company which signifies low credit risk and stable. The short-term rating assigned to Rs. 19 crore Non-Fund Based working capital limit also continued to be reaffirmed as A1+ (pronounced ICRA A one plus). There are no material changes and commitments,
affecting the financial position of the Company which have occurred between 31 March 2023 and the date of this Report.
ASSETS
CAPITAL EXPENDITURE
The Company follows the policy of being prudent in its capex spend. During the current year, the capital expenditure was Rs. 1152 lakhs (Previous year: 608 Lakhs). The major capex spent was on addition of new plant & machinery towards capability building in fast growing products and new products capacity enhancements, which are critical for the future growth of the Company. As in the past, the Company follows the policy of funding all the capex through internal accruals. The Company reviews all its capex investments performance periodically against the projected ROI and Payback period.
INVENTORIES AND SUNDRY DEBTORS
The Company follows rigorous Working Capital Management, based on a well-organised process of continuous monitoring and control on Receivables, Inventories and other parameters. The overall inventory levels as on 31 March 2023 is Rs. 3155 lakhs which is higher than previous year by Rs. 587 lakhs, increase by 23%. In order to mitigate the supply chain disruption and ensure continuity of production, company hold strategic inventory of around Rs 350 lakhs.
Receivables (Gross) as on 31 March 2023, were at Rs. 3849 lakhs against Rs. 3312 lakhs during the previous year. The Company closely monitors the DSO (Days Sales Outstanding) through aggressive receivable management system including close follow ups and credit lock through the SAP system. This ensures that receivables are kept under control and payments received in time. The Company has reduced the receivable average credit days to 67 days from 76 days in the previous year.
FOREIGN EXCHANGE HEDGING
The Company, being a net exporter, continues to practice natural hedging of foreign exchange earnings and outflow and does not take forward covers. The net forex gain during the year has been Rs. 107 lakhs (Previous Year Rs. 82 lakhs).
HUMAN RESOURCE
Wendt being an engineering-knowledge-based Company, considers employees as its most precious assets. The Company has a strong and diverse workforce where every employee is involved as “partners” in the progress. The intangible asset comprises all the competencies of the people within the organisation in terms of education, experience, potential and capacity. The Company encourages & motivates diversity amongst employees and encourages them to take active part in activities such as Cross Functional Teams (CFTs), Kaizens, Small Group Activities (SGAs), and Suggestions.
The company emphasises Safety at the workplace with focused and highest attention from the Board. Periodic training and awareness sessions continue to be conducted for identification and elimination of unsafe working conditions.
Cordial relations continue to be maintained with the employees and the work atmosphere remained congenial throughout the year. The manpower strength of confirmed employees of the Company as on 31 March 2023 remained 388.
The Company has a policy on prevention of sexual harassment at workplace in line with the requirement of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. The Company had constituted an Internal Complaints Committee as required under Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. No complaints were received during the year under review.
The Company is in the process of evaluating the New Labour Codes, which are yet to be notified and identifying its impact on the business of the Company.
Major HR initiatives deployed during 2022-23
Enabling Change Management
l Initiated change management by encouraging employees to transform from "Command and Control" environment to "Empower & Enable" culture. l Organisation restructuring has been done to ensure right people are placed at right place. l HI potential employees are identified and initiated Individual Development Plan (IDPs), Business Leadership Programme (BLP), CUMI Leadership Programme (CLP) and other professional programs. l Conducted DISC intervention for understanding behavioral style of functional heads. l Strategy & Business Development workshop are conducted to large audience so that they can understand Business plan process and contribute to its success which gives a sense of belongingness to all employees. l Elevated all Team members in Support function to MMS level as a strategic initiative. l Created opportunities for all employees to interact with CEO and Senior Leadership Team to showcase their accomplishments, aspirations etc.
Hiring & Skill Development
l Recruited around 30 key talents laterally to support business needs.
l As part of competency enhancement, specific programs have been organised through Subject Matter Experts towards Customer centricity, Sales
37 excellence, Supervisory Development, Advanced communications etc., and Knowledge sharing sessions were conducted for the benefit of larger groups.
l Exclusive development program conducted for all Sales team including Key account management and Field Coaching Tool.
l Around 4 man days of trainings have been provided for each employee as part of capability enhancement on various competencies.
Improving employee engagement levels
l Interaction with every shopfloor employee by HR team to understand workplace issues, safety, grievances, scope for improvement etc., and taking timely action. l Established business partnership of HR to extend focused support to business. l Platforms are provided to employees by way of monthly structured reviews to share their highlights & plans and to seek support. Employees started focusing on Common objective as business goal rather than individual focus. l Implemented Sales incentive scheme away from Balance Score Card system for field sales team to recognise their performance and motivate them. l Revived existing Reward scheme to make it more transparent and exhaustive to cover all possible accomplishments with aforementioned changes. l Change Agent - Video campaign is done to share positive experience of employees to all employees to bring in culture of growth mind set. l Emphasised focus on TEI through various celebrations, competitions, communications etc.
With all the above interventions, employee engagement scores have been increased from 55% to 73%
Digitalisation of HR process
l Identified partner and started working on digitisation of all HR functions starting from Hire to Exit/Retire.
RELATED PARTY TRANSACTIONS
The Company as per the requirements of the Companies Act, 2013 and Regulation 23 of the Listing Regulations has a Policy for dealing with Related Parties. Further, in line with the amendments made in Listing Regulations pertaining to related party transactions which are effective on prospective basis
i.e. w.e.f. 1 April 2022 onwards, the policy on dealing with related party transactions was amended to adapt to the changes.
In line with its stated policy, all Related Party transactions are placed before the Audit Committee for review and approval. Prior approval of the Committee is taken for the estimated value of transactions which are foreseen and repetitive in nature. Omnibus approval in respect of transactions which are not routine, or which cannot be foreseen or envisaged are also obtained as permitted under the applicable laws. The list of related parties is reviewed and periodically updated as per the prevailing regulatory conditions.
Further considering the regulatory changes in the SEBI Listing Regulations on the enhanced monitoring of transactions with Related Parties effective April 2022 as well as April 2023 an awareness session for the Thailand subsidiary was conducted to brief the requirements of the amended Listing Regulations. Following this, the changes were effected in their reporting framework as well as monitoring process at the entity level.
The details of transactions proposed to be entered with Related Parties are placed before the Audit Committee for approval on an annual basis before the commencement of the financial year. Thereafter, a statement containing the nature and value of the transactions entered by the Company with Related Parties is presented for quarterly review by the Committee. Further, revised estimates or changes, if any to the proposed transactions for the remaining period are also placed for approval of the Committee on a quarterly basis. Besides, the Related Party transactions entered during the year are also reviewed by the Board on an annual basis.
All transactions with Related Parties entered during the financial year were in the ordinary course of business and on an arm's length basis and hence no particulars are required to be entered in the Form AOC-2. Further, all transactions entered into with Related Parties during the year even at arms' length basis in the ordinary course did not exceed the thresholds prescribed under the Companies (Meetings of Board and its Powers) Rules, 2014 or Listing Regulations or the Company's Policy in this regard and hence no disclosure was required to be made in Form AOC-2. Accordingly, there are no contracts or arrangements entered with Related Parties during the year to be disclosed under Sections 188(1) and 134(h) of the Companies Act, 2013 in Form AOC- 2. The Form AOC-2 in the prescribed format is annexed to this report as Annexure-B.
There are no materially significant Related Party transactions made by the Company with its Promoters, Directors, Key Managerial Personnel or their relatives may have a potential conflict with the interest of the Company at large.
The Policy on Related Party Transactions as approved by the Board is uploaded on the Company's website https://wendtindia.com/wp-content/themes/ wendtindia/pdf/policy-on-related-party-transactions.pdf. None of the Directors and KMPs had any pecuniary relationship or transaction with the Company other than those relating to remuneration in their capacity as Directors/Executives and corporate action entitlements in their capacity as shareholders of the Company.
BUSINESS RESPONSIBILITY AND
SUSTAINABILITY REPORT (BRSR)
The Company's ethical and responsible behaviour complements its corporate culture. Being a public listed company, the Company recognises that its accountability is not limited only to its shareholders from a financial perspective but also to the larger society in which it operates. During the year 2019-20, consequent to the mandatory reporting of its business responsibility initiatives under the Listing Regulations, the Company had formulated a consolidated policy on Business Responsibility which lays down the broad principles guiding the Company in delivering its various responsibilities to its stakeholders. The policy is intended to ensure that the Company adopts responsible business practices in the interest of the social set up and the environment so that it contributes beyond financial and operational performance.
A copy of the Policy is available at https://wendtindia.com/wp-content/uploads/2023/ 06/busines-responsibility-policy.pdf.
SEBI, vide its circular dated May 10, 2021, introduced new reporting requirements on ESG parameters called the Business Responsibility and Sustainability Report (BRSR) replacing the existing Business Responsibility Report (BRR) mandating the top 1,000 listed companies (by market capitalisation) from FY 2022-2023. BRSR is a performance based disclosure on nine defined principles of the 'National Guidelines on Responsible Business Conduct'. It is intended towards having quantitative and standardised disclosures on ESG parameters to enable comparability across companies, sectors and time.
The Business Responsibility and sustainability Report
for the year ended 31 March 2023 in terms of amended Regulation 34 of the Listing Regulations is annexed to this Report as Annexure E.
GOVERNANCE
BOARD OF DIRECTORS
As on 31 March 2023, the Board of the Company comprised six Directors of which majority (four) are independent.
th
During the FY 2022-23, at the 40 AGM of the
Company, Mr. Rajesh Khanna retired from the Board of
the Company as a Non-Executive Director with effect
nd
from 22 July 2022.
Mr. Muthiah Venkatachalam was appointed as an
additional Director at the Board meeting held on
2 August 2022. Approval of the Members by way of
Postal ballot was obtained on 29 September 2022. Consequent to the changes in the Board composition, the constitution of Stakeholders Relationship Committee was reviewed and revised more fully detailed in the Corporate Governance section of the Report.
Mr. Muthiah Venkatachalam retires by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re-appointment. A proposal
for his re-appointment is included in the Notice
convening the 41 Annual General Meeting for
consideration and approval by the shareholders.
The Company has received declarations from all its Independent Directors confirming that they meet the criteria of independence prescribed both under the Companies Act, 2013 and the Listing Regulations. In the opinion of the Board, all the Directors appointed during the year are persons with integrity, expertise and possess relevant experience in their respective fields.
All the Independent Directors of the Company have registered their names in the Independent Directors Databank and had completed test/exempted as required under the Companies Act, 2013 and the Rules referred therein.
KEY MANAGERIAL PERSONNEL (KMP)
Mr. C Srikanth, Chief Executive Officer, Mr. Mukesh Kumar Hamirwasia, Chief Financial Officer and Mr. P Arjun Raj, Company Secretary are the Key Managerial
Personnel of the Company as per Section 203 of the Companies Act, 2013.
BOARD MEETINGS
A calendar of Board Meetings is prepared and circulated in advance to the Directors. During the year, six (6) Board Meetings were convened and held in accordance with the provisions of the Act. The date(s) of the Board Meeting, attendance of the directors are given in the Corporate Governance Report forming an integral part of this report.
BOARD EVALUATION
Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the Board carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its various Committees as per the evaluation framework adopted by the Board on the recommendation of the Nomination and Remuneration Committee. Structured assessment forms were used in the overall Board evaluation comprising various aspects of the Board's functioning in terms of structure, its meetings, strategy, governance and other dynamics of its functioning besides the financial reporting process, internal controls and risk management. The evaluation of the Committees was based on their terms of reference fixed by the Board besides the dynamics of their functioning in terms of meeting frequency, effectiveness of contribution etc. Separate questionnaires were used to evaluate the performance of individual Directors on parameters such as their level of engagement and contribution, objective judgement etc. The Executive Director's evaluation was based on leadership qualities, strategic planning, communication, engagement with the Board etc. The Chairman was also evaluated based on the key aspects of his role. The performance evaluation of the Independent Directors was carried out by the entire Board. The performance evaluation of the Chairman, the Board as whole and the Non-Independent Directors was carried out by the Independent Directors at their separate meeting held during the year.
POLICY ON APPOINTMENT AND
REMUNERATION OF DIRECTORS
Pursuant to Section 178(3) of the Companies Act,
2013, the Nomination and Remuneration Committee of the Board has formulated the criteria for Board nominations as well as the policy on remuneration for Directors and employees of the Company.
The criteria for Board nominations lays down the qualification norms in terms of personal traits, experience, background and standards for independence besides the positive attributes required for a person to be inducted into the Board of the Company. Criteria for induction into Senior Management positions have also been laid down.
The Remuneration policy provides the framework for remunerating the members of the Board, Key Managerial Personnel and other employees of the Company. This Policy is guided by the principles and objectives enumerated in Section 178(4) of the Companies Act, 2013 and reflects the remuneration philosophy and principles of the Murugappa Group to ensure reasonableness and sufficiency of remuneration to attract, retain and motivate competent resources, a clear relationship of remuneration to performance and a balance between rewarding short and long-term performance of the Company. The policy lays down broad guidelines for payment of remuneration to Executive and Non-Executive Directors within the limits approved by the shareholders. Further details are available in the Corporate Governance Report.
The Board Nomination criteria and the Remuneration policy are available on the website of the Company at https://wendtindia.com/wp-content/themes/ wendtindia/pdf/Remuneration-Policy.pdf.
COMPOSITION OF AUDIT COMMITTEE
The Audit Committee of the Board comprises five members out of which four are independent. Mr. Shrinivas G. Shirgurkar is the Chairman and other members are Mr. M Lakshminarayan, Mrs. Hima Srinivas, Mr. Bhagya Chandra Rao and Mr. N Ananthaseshan. During the year, five Audit Committee meetings were held, the details of which are provided in the Corporate Governance Report.
COST AUDIT
Pursuant to Section 148 of the Companies Act, 2013 read with Companies (Cost Records and Audit) Rules, 2014 and amendments thereof, the Company does not fall under the category of companies required to mandatorily undertake Cost Audit. However, the
Company maintains cost accounting records in respect of products of the Company.
PARTICULARS OF EMPLOYEES
The information on employees and other details required to be disclosed under Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to and forms part of this Report as Annexure D.
STATUTORY AUDITORS AND AUDITORS' REPORT
In line with the requirements of the Companies Act, 2013, the Company, with the approval of the shareholders at the Annual General Meeting held on
22 July 2022. re-appointed M/s. Price Waterhouse Chartered Accountants LLP (Reg. No. FRN 012754N/ N500016) (PWC) as the Statutory Auditors of the
Company to hold office from the conclusion of 40
Annual General Meeting until the conclusion of the 45 Annual General Meeting (AGM) on a remuneration of Rs.12,50,000/- (excluding out of pocket expenses incurred by them in connection with the Audit and applicable taxes) for the FY 2022-23 and the remuneration to be decided by the Board for the subsequent years based on the recommendation of the Audit Committee.
As required under Regulation 33 of the Listing Regulations, the Auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.
The Report given by M/s. Price Waterhouse Chartered Accountants LLP on the Financial Statements of the
Company for the year ended 31 March 2023 is provided in the financial section of the Annual Report.
There are no qualifications, reservations, adverse remarks or disclaimers given by the Auditors in their report. During the year under review, the Auditors have not reported any matter under Section 143(12) of the Companies Act, 2013 and hence there are no details to be disclosed under Section 134(3)(ca) of the Act.
There were no material changes or commitments affecting the financial position after the end of the financial year and date of this report.
SECRETARIAL AUDIT
M/s. R Sridharan and Associates, Practicing Company Secretaries, Chennai were appointed as the Secretarial Auditor to undertake the Secretarial Audit of the Company for the FY 2022-23. The report of the
Secretarial Auditor for year ended 31 March 2023 is annexed to and forms part of this Report. There are no qualifications, reservations, adverse remarks or disclaimers given by the Secretarial Auditor in the Report.
In terms of Regulation 24A of the Listing Regulations, there is no material unlisted subsidiary incorporated in India. Material unlisted subsidiary for the purpose of this Regulation is a subsidiary whose income/net worth exceeds 10 per cent of the consolidated income/net worth respectively of the Company and its subsidiaries in the immediately preceding accounting year. Hence, the requirement prescribed under Regulation 24A of the Listing Regulations is not applicable to the Company, in so far as material subsidiary is concerned.
SECRETARIAL STANDARDS
The Company is in compliance with the Secretarial Standard on Meetings of the Board of Directors (SS-1) and Secretarial Standard on General Meetings (SS-2).
CORPORATE GOVERNANCE
In terms of Regulation 34(3) read with Schedule V of the Listing Regulations, a separate section on Corporate Governance including the certificate from a Practising Company Secretary confirming compliance is annexed to and forms an integral part of this Report.
CEO/CFO CERTIFICATE
Mr. C Srikanth, CEO and Mr. Mukesh Kumar Hamirwasia, Chief Financial Officer have submitted a certificate to the Board on the integrity of the financial statements and other matters as required under Regulation 17(8) of the Listing Regulations.
VIGIL MECHANISM UNDER WHISTLE BLOWER POLICY
The Company has a well-established whistle blower policy as part of vigil mechanism for Directors and employees to report concerns about unethical behaviour, actual or suspected fraud or violation of the Company's Code of conduct or ethics policy. This mechanism also provides for adequate safeguards against victimisation of Director(s)/employee(s) who avail of the mechanism and provides for direct access to the Chairman of the Audit Committee in exceptional cases. The Whistle blower policy is available on the Company's website at the following link https://wendtindia.com/wp-content/themes/ wendtindia/pdf/Whistle-Blower-Policy.pdf. It is affirmed that during the year, no employee was denied access to the Audit Committee.
ANNUAL RETURN
The Annual Return in Form MGT-7 is available at https://wendtindia.com/wp-content/uploads/ 2023/06/Annual-Return-Form-MGT-7.pdf.
DIRECTORS RESPONSIBILITY
STATEMENT
Pursuant to the provisions of Section 134(3)(c) of the Companies Act, 2013, the Board, to the best of its knowledge and belief and according to the information and explanations obtained by it confirm that:
l in the preparation of the annual accounts for the
year ended 31 March 2023, the applicable accounting standards have been followed and there have been no material departures from the same.
l they have selected appropriate 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 as at the end of the financial year and of the profits of the Company for that period.
l proper and sufficient care has been taken for the maintenance of adequate accounting
records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.
l the annual accounts have been prepared on a going concern basis.
l proper internal financial controls have been laid down to be followed by the Company and that
such internal financial controls are adequate and
were operating effectively.
l proper systems have been devised to ensure compliance with the provisions of all applicable
laws and that such systems were adequate and
operating effectively.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO
The information on energy conservation, technology absorption, expenditure incurred on Research & Development and forex earnings/outgo as required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is annexed to and forms part of this Report as Annexure A.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status of the Company and its future operations.
OTHER CONFIRMATIONS
No application under the Insolvency and Bankruptcy Code, 2016 (IBC) was made on the Company during the year. Further, no proceeding under the IBC was initiated
or is pending as at 31 March 2023. There was no instance of one-time settlement with any Bank or Financial Institution.
ACKNOWLEDGMENTS
The Board gratefully acknowledges the co-operation received from various stakeholders of the Company viz., customers, suppliers, partners, banks, government and other statutory authorities, auditors, business associates and shareholders. The Directors extend their gratitude to all the regulatory agencies like SEBI, Registrar of Companies, Stock Exchanges and other Central and State Government authorities/agencies, vendors and sub-contracting partners for their support. The Board also acknowledges the unstinted co-operation, commitment and dedication made by all the employees of the Company in the previous financial year.
The Directors also wish to place on record their gratitude to the members of the Company for their unrelenting Support & Confidence.
ANNEXURES TO THE DIRECTORS' REPORT
ANNEXURE A
A) Information under section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of Companies
(Accounts) Rules, 2014 and forming part of Directors' Report. a) Conservation of Energy
The Company does not fall under the category of power intensive industries. However, the Company adopts sustained efforts to reduce energy consumption. The organisation is an ISO 14001 certified Company. ISO 14001 is an International Management System Standard (IMS) on Environment Management. The environmental policy of the Company focusses on conservation of natural resources and minimisation of pollution. The following energy conservation measures were undertaken by the Company during the year:
l In office area 90% lights were converted into LED lights.
l Effluent Treated permeate water reused to Cooling towers & Plating shop.
l All wash basin water taps were converted into sensor type to reduce water consumption.
l New Pressure Equipment Directive Facilities adopted with polycarbonate sheet for natural lights & provided natural turbo ventilators.
l Cool coat for roof top in HR office & plant VIII- Precision Product Division
l Installed higher rating UPS in non-temperature controlled facility at plant VIII- Precision Product Division.
l Converted the Old wooden boxes/packing materials for new packing.
l Energy saving panel for lightings through main feeder.
l Dripping system in some areas for gardening.
l 100 per cent rainwater for flushing & washings in skill development centre.
l Conversion of aluminium scraps/chips in to melting /casting of our own use.
l Provided AHF (active harmonic filter) in main power distribution system to ensure the quality of power.
l Introduction of Natural Turbo Ventilation, which is reckoned as a perfect and natural air exhausting option for the industry.
l Installation of Solar Heater in many areas to increase dependency on clean energy. l Installation of APFC (Automatic Power Factor Controllers) to improve/stabilise power factor.
l Optimum utilisation of energy through process redesigning as well as maximum utilisation of
equipment that offers improved energy efficiency.
l Time switches installed at various places for automatic control of streetlights.
l Replacement of all conventional high energy consumption lightening, by installation of LED and
induction lights in major areas.
l Introduction of LDR-Light Dependent Resistance sensor harnessing natural daylight for all outdoor
lighting with automatic controls.
l The Company has taken measures to save water whereby 100 per cent of the domestic effluent and
the trade effluent are treated and used for gardening and electroplating processes (Zero discharge).
During the year, a capital investment of about Rs. 483. 76 Lakhs was made on energy conservation equipments.
b) Technology Absorption, Adaptation and
Innovation
The Company is continuously focussing on upskilling its employees in digital marketing, use of IT & digital technology, to complement our traditional way of reaching out to customers in a much cost-effective manner in order to enhance the customer experience.
The Company's R&D team has taken initiatives to develop own technologies and patent novel concepts/designs to become the front-line runners in the Super Abrasives technology and has put in efforts for indigenised bonding systems suitable for varied verticals in Super Abrasives.
The Company's in-house R&D also collaborates with renowned institutes & laboratories to further strengthen existing technology, complemented by new methods of manufacturing. Increasing implementation of these manufacturing technologies drive the demand of products for Bearing & Guide Ways, Gears, Cam & Crank shaft and in industries like Semi-conductor, Biomedical, Aerospace, Cutting Tool, Engineering & Auto Sectors.
The Company is also supported by the rich experience, knowledge pool and R&D facility of Carborundum Universal Limited, shareholder of the Company and pioneers in the field of conventional abrasive & material science for some of the application developments for specific areas. No technology was imported by the Company during the last three years.
RESEARCH & DEVELOPMENT (R&D)
The Research and Development function of the Company represents the activities it undertakes to innovate and introduce new Super Abrasive products and services to improve its existing offerings. The objective of R&D is to design and develop new processes/products through the advancement of Materials Science & Machining Techniques towards providing the “Complete Grinding Solutions” to its customers. The Company's R&D facilitates the development of future products or the improvement of current products and/or operating procedures. The Company's R&D centre is recognised by Department of Scientific and Industrial Research (DSIR) under the Ministry of Department of Science and
Technology, Government of India. This recognition was valid till 31 March 2023 and the Company is the process of renewing the same. The Company's R&D is keen on filing patents and publishing papers in the peer reviewed SCI journals. The R&D personnel also build their network by attending seminars, workshops, national & international conferences and develop transferable skills by undertaking required training and workshops. Industrial Research & Development plays an important role in the innovation process by developing future technology and future capabilities, which transforms into new products, processes and services. This offers a basic platform to conduct both fundamental and applied research for better understanding of the products and push the frontiers of the technology further. In this context, the R&D team has taken efforts to develop products for flute grinding, Brake Disc (2W and 4W) honing and products for solar and laminated glass. Efforts are also made to penetrate ceramic additive manufacturing space by developing products for customers and eventually working towards building 3D printing machines.
The Company is agile in adapting to situations and shifting their product baskets into the non-automobile sectors, electronic industries with the help of its R&D in fast growing areas like semi-conductor, biomedical which pose big challenge for sustainability. In this context, the R&D team is focussed to develop new products with superior performance. Addressing products to these sectors requires high competency and superior bonding systems to match ever growing market competition.
On the other hand, the Company also aims at addressing the gaps on account of process developments. New processes such as hot press sintering, vacuum brazing, advanced powder filling process, grit coating, and advanced electroplating process replaced the conventional methods. These processes substantially decreased the cycle time and enhanced the quality of the products being manufactured in an economical and effective way.
Following are the benefits accruing out of R&D activities:
1. Indigenisation of bonds for Super Abrasives as import substitution.
2. Development of alternate high-performance materials and processes for self-sufficiency.
3. Grinding Solutions for new applications like valve stem cut-off, grinding of plastic balls and belts, 2W & 4W brake disc, solar and tampered glass, razor blade, semi-conductor, biomedical and carbide grinding.
4. Upgrading Manufacturing Technologies to match the changing needs of the customer as well as to venture into new markets.
5. Development of precision products for auto and non-auto industries like compressor, and hydraulic pumps.
The Company mainly caters to niche market where majority of customers are OEMs and look for technologically superior products with consistent performance. Majority of the customers consider the Company as a One-Stop Shop for Complete Grinding Solutions offering technologically superior products with reliable performance. The Company can address the ever-changing needs & expectations of its customers, by virtue of its strong focus on R&D and customer centricity. This facilitates the Company to retain its position in the market and also enable justification of premium for its product.
(i) Expenditure on R&D (Rs. in lakhs)
(ii) Foreign Exchange Earnings and Outgo (Rs. in lakhs)