TO THE MEMBERS

The Directors are pleased to present the 46^th Annual Report and the Audited Financial Statements for the year ended 31 March, 2018.

(Rs./Crores) Financial year ended

DIVIDEND

In order to conserve the resources and make them available for growth initiatives of the Company, the directors of the Company have decided not to recommend any dividend on equity shares of the Company for the year ended 31 March, 2018.

FINANCIAL PERFORMANCE

The continued growth momentum especially in the agricultural sector lead to a steady demand from Domestic OEM’s and Overseas customer(s). This resulted in growth of 18% in revenue from operations during the year ended 31 March, 2018 vis a vis previous year.

Higher volumes led to better absorption of fixed costs and resulted in better EBIDTA margins; which was partially offset due to additional costs incurred to meet customer requirements. Further, employee benefits expense has increased on account of revision in statutory limit of maximum gratuity.

Profit after tax for the year ended 31 March, 2018 was Rs. 6.30 crores against loss of Rs. 1.46 crores in previous year.

During the year, outflow on account of Voluntary Retirement Scheme compensation was Rs. 1.16 crores.

During the year, the Company has availed the term loan of Rs. 80 crores from KKR India Financial Services Private Limited (KKR). This was primarily used for repayment of existing term debts, augmentation of long term working capital and capital expenditure. The Company has repaid Rs. 49.78 crores of existing borrowings to financial institutions and banks.

Interest free unsecured loan of Rs. 5.00 Crores infused by promoter in the previous year was fully repaid during the year.

During the year, 3,25,000 equity shares of face value Rs. 10/- each was allotted to promoter at a price of Rs. 157.32 per share (including a premium of Rs. 147.32 per share), aggregating to Rs. 5.11 crores on Preferential Allotment basis.

In order to support volume growth as a result of increase in offtake by customers across the segments, the Company embarked on capital expenditure program in FY 2017-18. Most of the machines/equipment are in place and thus enabled the Company to register significant increase in turnover. In the coming year, the Company envisages a similar growth in volumes. As a result, the Company has drawn up fresh plans for investment in capex and allied infrastructure. The capex plan shall be financed by way of a mix of equity, debt and internal accruals.

ADOPTION OF INDIAN ACCOUNTING STANDARDS (“IND AS”)

The Company has adopted Indian Accounting Standards (“Ind AS”) and accordingly these financial statements have been prepared in accordance with the same as required under section 133 of the Companies Act, 2013 read with rules made there under. The date of transition to Ind AS is 01 April, 2016. These financial statements for the year ended 31 March, 2018 are the Company’s first Ind AS financial statements. The impact of transition has been accounted for in the opening reserves and the comparative period figures have been reinstated accordingly.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed analysis of the Company’s operations in terms of performance in markets, manufacturing activities, business outlook, risks and concerns forms part of the Management Discussion and Analysis, a separate section of this report.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) read with 134(5) of the Companies Act, 2013, your Directors confirm that:-

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistently and made 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 31 March, 2018 and of the profit and loss of the Company for the period ended on that date;

(c) the directors had taken proper and sufficient care 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;

(d) the directors had prepared the annual accounts on a going concern basis;

(e) the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

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

RELATED PARTY CONTRACTS AND ARRANGEMENTS

The contracts or arrangements of the Company with related parties during the period under review referred to in Section 188(1) of the Companies Act, 2013 were in ordinary course of business and on arm’s length basis. During the year, the Company had not entered into the contract/arrangement/transaction with related parties which could be considered material in accordance with the related party transaction policy of the Company. The said policy as approved by the Board in terms of provisions of Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“the Regulations”) is available on the website of the Company i.e. www.bharatgears.com under the link http://bharatgears.com/documents/related party transaction policy.pdf.

The prescribed form AOC-2 of the Companies (Accounts) Rules, 2014 is enclosed as Annexure -”A” to this report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENT

During the period under review, the Company has not made any loan, guarantee or investment in terms of provisions of Section 186 of the Companies Act, 2013.

DIRECTORS

During the year, Mr. S.G. Awasthi ceased to be a Director of the Company pursuant to his resignation w.e.f. 09 August, 2017.

The tenure of Mr. Sameer Kanwar as Joint Managing Director of the Company shall be expiring on 31 May, 2018. The Board of Directors of the Company in its meeting held on 30 May, 2018 has re-appointed Mr. Sameer Kanwar as Joint Managing Director of the Company for a further period of 3 (Three) years w.e.f. 01 June, 2018 subject to the approval of shareholders at the ensuing Annual General Meeting of the Company.

Mr. N.V. Srinivasan had been appointed as an Additional Director of the Company w.e.f. 03 November, 2017 till the conclusion of the ensuing Annual General Meeting.

Therefore, in terms of Section 152 of the Companies Act, 2013, it has been proposed to appoint Mr. N.V. Srinivasan as Non-Executive Director at the ensuing Annual General Meeting (AGM) of the Company upto the conclusion of the next Annual General Meeting (AGM) of the Company in the Calendar year 2019.

NUMBER OF MEETINGS OF THE BOARD

During the financial year 2017-18, 5 (Five) Board Meetings were held on the following dates:-

- 23 May, 2017;

- 09 August, 2017;

- 03 November, 2017;

- 31 January, 2018; and

- 26 March, 2018

The gap between any two meetings was not more than one hundred twenty days as mandated under the provisions of Section 173 of the Companies Act, 2013 and Regulation 17(2) of the Regulations.

INDEPENDENT DIRECTORS

In terms of provisions of Section 149(7) of the Companies Act, 2013, all the Independent Directors of the Company have furnished a declaration to the Compliance Officer of the Company at the meeting of the Board of Directors held on 30 May, 2018 stating that they fulfill the criteria of Independent Director as prescribed under Section 149(6) of the Companies Act, 2013 and are not being disqualified to act as an Independent Director.

In terms of the Regulation 25(7) of the Regulations, the Company has adopted a familiarization programme for the Independent Directors to familiarize them with working of the Company, nature of the industry in which the Company operates, business model of the Company, their roles, rights, responsibilities and other relevant details. The details of familiarization programme during the Financial Year 2017-18 are available on the official website of the Company i.e. www.bharatgears.com under the link i.e. http://bharatgears.com/documents/ details-of-familiarization-programme-for-independent-director-FY17-18.pdf.

POLICY ON DIRECTORS’ APPOINTMENT AND REMUNERATION

In terms of provisions of Section 178 of the Companies Act, 2013 read with Regulation 19 of the Regulations, a policy relating to remuneration for the Directors, Key Managerial Personnel and other employees has been adopted by the Board of Directors of the Company in pursuance of its formulation and recommendation by the Nomination and Remuneration Committee thereby analyzing the criteria for determining qualifications, positive attributes and independence of a Director. The said policy is annexed as Annexure -”B” to this report and is also available on the website of the Company i.e. www.bharatgears.com under the link http://bharatgears. com/documents/company policy on remuneration.pdf .

EVALUATION PROCESS

The Board of Directors of the Company has established a framework for the evaluation of its own performance and individual Directors of the Company in consultation with the engaged consultant and fixed certain parameters covering the evaluation of the Chairman,

Executive Directors, Non-executive Directors and Independent Directors on the basis of which the evaluation is being carried out on annual basis in terms of provisions of the Companies Act, 2013 and the Regulations.

During the year under review, the Board of Directors, at its meeting held on 26 March, 2018 have carried out the evaluation of its own performance and Independent Directors of the Company and the Independent Directors in their separate meeting held on even date have evaluated the performance of the Chairman and Non-Independent Director(s) of the Company respectively in accordance with the framework approved by the Board.

KEY MANAGERIAL PERSONNEL

The following Directors/Officials of the Company have been designated as Key Managerial Personnel (KMP) of the Company by the Board of Directors in terms of provisions of Section 203 of the Companies Act, 2013 and the Regulations:

1. Mr. Surinder Paul Kanwar, Chairman & Managing Director

2. Mr. Sameer Kanwar, Joint Managing Director

3. Mr. Milind Pujari, Chief Financial Officer

4. Mr. Prashant Khattry, Head (Legal) & Company Secretary

No Key Managerial Personnel (KMP) of the Company has resigned during the financial year ended 31 March, 2018.

DISCLOSURES UNDER THE COMPANIES (APPOINTMENT & REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

Details pertaining to remuneration as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are enclosed as Annexure -”C” to this report.

PARTICULARS OF EMPLOYEES

Information regarding employees in accordance with the provisions of Rule 5(2) and Rule 5(3) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 is given in Annexure- “D” to this Report.

RISK MANAGEMENT

A robust and integrated enterprise risk management framework is in existence under which the common prevailing risks in the Company are identified, the risks so identified are reviewed on periodic basis by the Audit Committee and the management’s actions to mitigate the risk exposure in a timely manner are assessed.

A risk management policy under the above said enterprise risk management framework as approved by the Board has been adopted by the Company and being reviewed on yearly basis.

CORPORATE SOCIAL RESPONSIBILITY

In terms of provisions of Section 135 of the Companies Act, 2013, the Corporate Social Responsibility Committee (“CSR Committee”) is in existence to monitor the Corporate Social Responsibility Policy of the Company as approved by the Board and the said policy is available on website of the Company i.e. www.bharatgears.com.

The CSR Committee comprises of Mr. Surinder Paul Kanwar, Mr. Sameer Kanwar and Mr. Rakesh Chopra.

During the Financial Year 2017-18, the provisions of Section 135 of the Companies Act, 2013 were not applicable on the Company since the Company does not fall under the conditions necessary for complying with CSR provisions. Hence, no amount was required to be spent during the year.

AUDIT COMMITTEE

The Audit Committee comprises of Mr. Rakesh Chopra, Mr. V.K. Pargal and Ms. Hiroo Suresh Advani.

During the year, Mr. S.G. Awasthi (the erstwhile member of Committee) ceased to be a member of the Committee due to his resignation with effect from 09 August, 2017. Pursuant to his resignation, Ms. Hiroo Suresh Advani has been inducted as a member of the Committee on 01 September, 2017, accordingly the Audit Committee had been reconstituted.

INTERNAL COMPLAINTS COMMITTEE FOR PREVENTION OF SEXUAL HARASSMENT

Pursuant to Section 21 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 read with Rule 14 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Rules, 2013, the Company has constituted Internal Complaints Committee (ICC) at all its Units (i.e. Faridabad, Mumbra and Lonand) where any grievance of sexual harassment at workplace can be reported.

The Company has also adopted a policy on Prevention of Sexual Harassment at workplace. The objective of the policy is to provide its women employees, a workplace free from harassment/discrimination and every employee is treated with dignity and respect. The said policy is available on the website of the Company i.e. www.bharatgears.com under the link http://bharatgears. com/documents/policy-for-prevention-of-sexual-harassment.pdf.

During the year under review, ICC of all units of the Company has not received any complaint pertaining to sexual harassment of women at workplace.

SUBSIDIARIES/JOINT VENTURES/ASSOCIATE COMPANIES

During the year under review, no Company has become or ceased to be subsidiary, joint venture or associate of the Company.

DEPOSITS

During the year under review, the Company did not accept any deposits.

Investor Education and Protection Fund (IEPF)

In terms of provisions of Section 124(5) of the Companies Act, 2013 read with the lnvestor Education and Protection Fund (IEPF) Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 as amended, the Unclaimed Final Dividend pertaining to the Financial Year 2009-10 amount aggregating to Rs. 1,24,013.00 (Rupees One Lac Twenty Four Thousand Thirteen Only) had been transferred to the “Investor Education and Protection Fund” established by the Central Government.

Further, in terms of provisions of Section 124(6) of the Companies Act, 2013 read with the Investor Education & Protection Fund (IEPF) Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (“the Rules”) and the Investor Education & Protection Fund (IEPF) Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2017 (“the Amended Rules”), the Company is required to transfer the equity shares in respect of which dividends have remained unclaimed for a period of seven consecutive years to the IEPF Account established by the Central Government and a statement containing such details are required to be filed with the Ministry of Corporate Affairs (MCA).

In pursuance of the above, pursuant to the transfer of the unclaimed dividend for the year 2009-10 to the IEPF on 27 August, 2017 i.e. upon completion of seven years from transfer of dividend into unclaimed dividend account, 43,669 (Forty Three Thousand Six Hundred Sixty Nine) Equity Shares relating to such dividend on which the dividend has not been claimed for the consecutive seven years since 2009-10 have been transferred into demat account of IEPF Authority.

The unclaimed dividend for the year 2010-11 is proposed to be transferred to the Investor Education and Protection Fund (IEPF) on 24 August, 2018 i.e. upon completion of seven years from the transfer of said dividend into unclaimed dividend account. Subsequently, the equity shares relating to such dividend on which the dividend has not been claimed for the consecutive seven years since 2010-11 (net of the shares already transferred) shall also be transferred into IEPF.

In terms of the Rules dated 05 September, 2016 and the Amended Rules dated 28 February, 2017, the necessary communications have been made to the respective shareholders whose shares are required to be transferred to the IEPF during the Financial Year 2018-19 so as to enable them to claim their dividend attached to such shares before such dividend and shares are transferred to IEPF and further, the necessary information in this regard is available on the website of the Company i.e. www.bharatgears.com for the convenience of the shareholders.

The Equity shares once transferred into IEPF can only be claimed by the concerned shareholder from IEPF Authority after complying with the procedure prescribed under the Rules and the Amended Rules.

PREFERENTIAL ISSUE OF EQUITY SHARES

During the year under review, the Company has issued 3,25,000 (Three Lakhs Twenty Five Thousand) Equity Shares to Mr. Surinder Paul Kanwar, Chairman and Managing Director of the Company on preferential basis in terms of provisions of Section 42 & 62 and such other applicable provisions of the Companies Act, 2013 read with the rules framed thereunder and Chapter VII of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

RE-CLASSIFICATION OF SHARE CAPITAL

In terms of provisions of Section 61, 64 and other applicable provisions, if any, of the Companies Act, 2013 (including any amendment thereto or re-enactment thereof) and the rules framed there under, provisions of Articles of Association (AOA), SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and such other rules/regulations as applicable, the Board of Directors of the Company in its meeting held on 26 March, 2018 has considered and approved the re-classification of Share Capital of the Company as per the following details, subject to the approval of Shareholders in the ensuing Annual General Meeting:

- Cancellation of 10,00,000 (Ten Lacs) Cumulative Redeemable Convertible or Non-Convertible Preference Shares of Rs. 100/- (Rupees Hundred) each and creation/addition of 1,00,00,000 (One Crore) Equity Shares of Rs. 10/- (Rupees Ten) each in lieu thereof.

Pursuant to said re-classification, the Authorised Share Capital of the Company shall be Rs. 25,00,00,000/-(Rupees Twenty Five Crores) divided into:

- 2,00,00,000 (Two Crores) Equity Shares of Rs. 10/-(Rupees Ten) each; and

- 5,00,000 (Five Lacs) Cumulative Redeemable Convertible or Non-Convertible Preference Shares of Rs. 100/- (Rupees Hundred) each.

AUDITORS

The Statutory Auditors, M/s S R B C & CO LLP (SRBC), Chartered Accountants (ICAI Registration No. 324982E/ E300003) had been appointed as Statutory Auditors of the Company in the 45^th Annual General Meeting held on 09 August, 2017 for a period of 5 (Five) years in terms of provisions of Section 139 of the Companies Act, 2013 to hold office from the 45^th AGM to the 50^th AGM in the calendar year 2022.

REPORT ON FINANCIAL STATEMENTS

The report of M/s S R B C & CO LLP (SRBC), Chartered Accountants (ICAI Registration No. 324982E/E300003), the Statutory Auditors of the Company on the financial statements of the Company for the year ended 31 March, 2018 is annexed to the financial statements in terms of provisions of Section 134(2) of the Companies Act, 2013. The observations of the Auditors in their report are self-explanatory and/or explained suitably in the Notes to the Financial Statements. The report of the Statutory Auditors does not contain any qualification, reservation or adverse remark which needs any explanation or comment of the Board.

SECRETARIAL AUDIT

The Board has appointed M/s AGB & Associates, Practicing Company Secretaries as Secretarial Auditor for the Financial Year 2017-18 in terms of provisions of Section 204 of the Companies Act, 2013. The Secretarial Audit Report of the Company for the financial year ended 31 March, 2018 in the prescribed form MR-3 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed as Annexure -”E” to this report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark which needs any explanation or comment of the Board.

INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY

The Company has a proper and adequate system of internal financial controls which includes the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information. During the year, such controls were tested and no material weakness in the design or operations were observed.

COST AUDIT

During the year under review, the Company had not been mandatorily required to get its Cost Records audited in terms of provisions of Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014 notified by the Ministry of Corporate Affairs (MCA) on 31 December, 2014, as the Industry under which the Company falls has been exempted from the Cost Audit under the said rules.

CORPORATE GOVERNANCE

The Company is committed to maintain the quality standards of Corporate Governance. The Report on Corporate Governance as stipulated under Schedule V(C) of the Regulations forms part of this Report.

The requisite Certificate of Compliance from Statutory Auditors, M/s S R B C & CO LLP (SRBC), confirming compliance with the conditions of Corporate Governance is attached to this Report.

VIGIL MECHANISM

In terms of provisions of Section 177 of the Companies Act, 2013, the Company has established an effective mechanism called Vigil Mechanism (Whistle Blower Mechanism). The mechanism under the Policy has been appropriately communicated within the organisation. The purpose of this policy is to provide a framework to promote responsible whistle blowing by employees or by any other person who avails such mechanism. It protects employees or any other person who avails such mechanism wishing to raise a concern about serious irregularities, unethical behavior, actual or suspected fraud within the Company by reporting the same to the Audit Committee.

Protected disclosure can be made by the whistle blower in a closed and secured envelope or sent through e-mail to the Compliance Officer.

During the year under review, no employee was denied access to the Audit Committee.

The policy on vigil mechanism is available on the website of the Company i.e. www.bharatgears.com under the link http://bharatgears.com/documents/policy on vigil mechanism.pdf.

RECONCILIATION OF SHARE CAPITAL AUDIT

As per the directive of the Securities and Exchange Board of India (SEBI), the Reconciliation of Share Capital Audit is undertaken by a firm of Practicing Company Secretaries on quarterly basis. The audit is aimed at reconciliation of total shares held in CDSL, NSDL and in physical form with the admitted, issued and listed capital of the Company.

The Reconciliation of Share Capital Audit Reports as submitted by the Auditor on quarterly basis were filed with the National Stock Exchange of India Limited (NSE) through NSE Electronic Application Processing System (NEAPS) and with BSE Limited (BSE) through BSE Listing Centre, where the original shares of the Company are listed.

LISTING OF SHARES

The Equity Shares of the Company are listed on the BSE Limited, Mumbai and National Stock Exchange of India Limited, Mumbai.

DISCLOSURES UNDER SECTION 134 OF THE COMPANIES ACT, 2013

Except as disclosed elsewhere in the Annual Report, there have been no material changes and commitments, which can affect the financial position of the Company between the end of financial year and the date of this report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO

The information in accordance with the provisions of Section 134(3)(m) of the Companies Act, 2013 read with the Rule 8 of the Companies (Accounts) Rules, 2014 is given in Annexure-”F” to this Report.

ANNUAL RETURN

In terms of provisions of Section 92(3) of the Companies Act, 2013 read with the Companies (Amendment) Act, 2017 and the relevant rules made thereunder, a copy of the Annual return as prescribed under Section 92 of the Companies Act, 2013, as amended shall be made available on the website of the Company www.bharatgears.com under the link http://bharatgears. com/documents/annual-returns-2017-18.pdf.

COURT/TRIBUNAL ORDERS

There were no instances of any significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company’s operations in future.

INDUSTRIAL RELATIONS

During the year under review, industrial relations in the Company continued to be cordial and peaceful.

ACKNOWLEDGEMENTS

The Board of Directors thank the shareholders for their continued support and they would like to place on record their appreciation for the dedicated services rendered by the Employees at all levels.

The Directors wish to convey their gratitude to the Financial Institutions, Banks, Customers, Suppliers and Collaborators for the assistance and confidence reposed by them in the Company.

For and on behalf of the Board of Directors

Surinder Paul Kanwar

Place: Mumbai Chairman and Managing Director

Date: 30 May, 2018 DIN: 00033524