The Directors are pleased to present the 41st Annual Report, with the statement of the audited accounts for the financial year ended 31st March, 2016.

1. Financial Performance

The standalone and consolidated audited financial results for the year ended 31^st March, 2016 are as follows:

[Rupees in lacs]

Performance review amidst challenging times

The complex nature of the legacy issues of the power sector is daunting the economy in more ways than one. Recasting the mammoth Rs.4.3 trillion of debt is huge task for the Government. Different states have been suffering from a combination of problems, including low tariffs, high technical losses and high percentage of subsidized consumers and so on. All this combined factors have impacted fresh investments in the T&D sector.

Most of the State Electricity Boards and the Discoms are struggling with insurmountable financial losses aggregating close to US$ 60 billion. They are in a position whereby they are unable to purchase power or pay Gencos and equipment suppliers. Such bottlenecks have deeply impacted T&D sector. With the launch of the Ujwal Discom Assurance Yojana (UDAY) scheme, the Government is trying to address this issue.

Your Company has been facing losses for last three years which is mainly attributable due to macro economic factors as stated hereinabove apart from a combination of factors namely, delay in commissioning of projects by some State Electricity Boards due to which reason the working capital cycle got affected. These factors have adversely affected the profitability of the Company. In spite of the adversities, the Company is still an accredited contractor to major State Electricity Boards and will no sooner or later win over their confidence.

With the ongoing dialogue with the bankers and investors, the imbroglio will end soon and the Company will come out of the impasse to win orders from domestic and overseas customers. The Company is leaving no stone unturned to reduce its losses in the immediate financial year and in the subsequent year thereafter, should turnaround. A detailed note on funding is given elsewhere in this Report.

Future beholds promises

There is plenty of optimism in the current financial year with internal and external factors which would contribute towards the turnaround. The key drivers of the growth from an internal perspective would be expanded product lines in Relays, in Primary & Secondary Switchgear and Automation. From a macro economic perspective, the thrust given by the present Government in debottlenecking stalled projects, increased investments in renewable energy would fuel growth.

As far as external factors are concerned, the Company’s inherent strength viz., its overseas operations especially Middle East and African markets looks promising. In this direction, the Company has entered into a Partnership with Saudi Transformer Company, the largest transformer manufacturer in the Middle East to assemble ERL range of secondary Switchgears locally. In addition to this, ERLPhase Products has been approved by SEC, Saudi Arabia during July, 2016. With this, ERLPhase products are approved in majority of Middle East Markets.

2. Dividend

Your Directors do not recommend payment of dividend for the year under review on equity shares in view of the loss incurred.

3. Management Discussions and Analysis:

a. Industry Overview and Developments

The year 2015-16 continued to be quite difficult like the preceding three to four years due to low investments, slow execution of projects and poor cash flow. The opportunity was primarily driven by Central and State Utilities, while Power Generation, Industries and Infrastructure sectors continue to be affected. Owing to the economic slowdown in the past years, the ratio of bad loans or NPAs at the Indian banks has increased exponentially forcing the RBI to tighten the liquidity and funding norms of banks limiting their exposure to industry and infrastructure projects. Thus, the overall investment climate, in power generation, industry and infrastructure sectors remains cautious and suppressed. Consequently, market witnessed a phase of consolidation and asset sale by struggling private developers in order to avoid Non Performing assets (NPAs) with Banks & Financial Institutions.

Most of the State T&D network infrastructure is in poor condition leading to congestion of power flow in the States due to under investment in the T&D network over the last decade. Only few States are investing in the State T&D network to unblock T&D network congestion to improve power flow. Many State electricity boards / Discoms, continue to struggle with huge financial losses significantly affecting the entire value chain of the Power and T&D Sectors.

All these market uncertainties impacted the sales plan and cash flow of your Company. However, on the positive side, the present govt. has undertaken significant measures to energise the power sector. One of the significant initiatives of Central Government has been the launch of UDAY Scheme & amendments in National Tariff Policy (NTP) which will aid in improving operational efficiency, reducing the cost of power purchase and enforcing fiscal discipline on various state Discoms.

Thus the year 2016-17 is expected to improve the market conditions based on the implementation of the reforms process.

b. Opportunities and Threats

India is the world’s second fast growing major economy @ 7.56% and is keen to achieve a growth rate up to 9%. In the next two decades, current size of economy of USD five trillion is expected to grow four to five times as per various studies and estimates. Being the second most populous country in the world, the hunger for power is definitely going to be more in coming five years for India. All the factors indicate potential for high growth of power demand consequently high market demand for T&D products & solutions. Power generation and T&D sectors are the key pillars to achieve this accelerated GDP growth. India’s per capita electricity consumption is at a very low level of 1048 kwh. Ministry of Power (MoP) is keen to double the consumption level over the next 5 to 6 years. This would require strong investment growth in the Power and T&D domains.

The Central Government of India has initiated several reforms to unclog the power sector bottlenecks and facilitate investments in the power and T&D sectors. New initiatives like Ujwal Discom Assurance Yojana (UDAY) scheme for Discoms, ramp up in Solar power generation, Integrated Power Distribution Scheme (IPDS), Deen Dayal Upadhaya Gram Jyoti Yojna (DDUGJY), Power for All (PFA) , Power System Development Fund(PSDF) for strengthening of transmission and sub-transmission network are moves in the right direction and expected to deliver opportunities for equipment manufacturers.

Further, significant attempts are being made by the Govt. of India to improve the efficiency of power consumption through National Mission on Energy Efficiency (PAT, DELP and SLNP scheme) and modernize the distribution grid through the Smart Cities Mission, the National Mission on Electric Mobility and the National Smart Grid Mission (NSGM). The concept of Smart Cities and the first list of chosen 20 smart cities will see augmentation of the energy infrastructure and automation of Grid in these 20 cities. Further 40 cities are expected to be selected in Phase II of the Smart city program. Smart city ecosystem will demand the latest grid efficiency, protection & automation as well as introduction of new technologies to deal with the challenges of alternative energy grid integration to ensure the efficient, sustainable and reliable dispatch ability of clean power.

Power Grid and various state Discoms are also planning to introduce new technologies such as Wide Area monitoring systems (WAMS), Energy Storage and Renewable control and asset management solutions in the national network. Given our robust & advanced product line, eventually this will benefit ERL in the form of upcoming future business opportunities.

Developers of Power Plants have been facing numerous constraints like coal/gas allocation, environmental clearance, land acquisition, financing and funds tie-ups etc, for the last 4 years. This has resulted in only very few new projects coming up and the demand for T&D products considerably reduced.

The declined growth of the core industries has remained a drag on industrial production. Eight core industries consisting 38% in Index of Industrial production have decelerated further after registering only 3.59%, the lowest in the last five years, due to a decline in crude oil, natural gas production and steel.

c. Segment-wise or Product-wise performance

Given the dynamic market shifts in current power sector eg. capacity addition in alternative power/energy sources, power deficit vs power availability, energy-efficient programmes like NEEAPP & NEEFP implementation of discom beneficial/revival initiatives like NSGM, UDAY, DDUGJY PFA, DEEP e-bidding etc., ERL is totally dedicated towards developing customer-oriented power solutions providing substantial growth and extending the foothold it has in the power sector. ERL’S R&D team are strongly focused at improving the performance and efficiency of the existing products as well as aimed at developing new products using state-of-the-art technologies meeting the challenges in day-to-day’s activities.

d. Outlook

ERL has significant presence in the field of Power Protection & Automation in India and abroad with a wide range of products and solutions. Industrial power demand is also expected to pick up with signs of revival visible in the economic growth rate and index of industrial production. As per business point of view, sustained & productive improvement will be seen in this financial year.

To maintain and enhance its presence in the T&D segment, ERL has taken some concrete steps for improving the performance parameters of existing products.

e. Risks and Concerns

ERL has in place a Board approved Risk Management Policy, which provides over all frame work for Risk Management in the company.

Some of the key risks the company faces:

- Increasing competition

- Delayed delivery of products leading to LDs, penalties and customer dis-satisfaction

- Rising debtors may lead to working capital pressure

Company has competitive manufacturing facilities. We are always upgrading our technologies and product mix in accordance with market requirements, which will help us to reduce our burdens at large extent.

f. Internal Control Systems and their adequacy

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit (IA) function is defined in the Internal Audit Charter. To maintain its objectivity and independence, the Internal Audit function reports to the Audit Committee.

The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company and its subsidiaries. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

The Company has in place adequate internal financial controls with reference to financial statements and other matters.

g. Discussion on financial performance with respect to operational performance

On a standalone basis, the Company achieved revenue from operations of Rs.3,503.61 Lacs and EBIT of Rs.(954.21 Lacs) as against Rs.6,241.42 Lacs and Rs.(959.17 Lacs) respectively in the previous year. Net loss for the year is Rs.4,487.38 Lacs as compared to net loss of Rs.3,729.33 Lacs in the previous year. The increase in loss during the year compared to previous year is primarily due to slow collection from the projects and the Government sector undertakings, the working capital cycle got affected due to the lack of working capital, the existing orders got backlog and delayed in executions. Hence the company turnover not achieved the expected breakeven to absorb the admin and other overheads.

On consolidated basis, the Group achieved revenue from operations of Rs.9,288.37 lacs and EBIT of Rs.1239.91 lakhs as against Rs.11,793.10 lakhs and Rs.1,520.41 lakhs respectively in the previous year. Net loss for the year is Rs.4,839.22 lakhs as compared to loss of Rs.4,048.66 Lacs in the previous year.

h. Material developments in Human Resources / Industrial Relations front, including number of people employed

There is no increase in number of people except replacement of any resignation/ retirements. During the year no strikes or lock-outs and the industrial relations is cordial. Due to cost reduction, we have reduced the manpower cost during the current year.

4. Human Resource Development

During the year, employee relations at all the Units remained cordial. This has helped your Company to build robust and motivated workforce inspite of adversities. The Company is continuously striving to improve employees skill sets through adequate training and development programs.

5. Material changes and commitments affecting the financial position of the Company which have occurred between 31st March, 2016 and 17th August, 2016 (date of the Report)

There were no material changes and commitments affecting the financial position of the Company between the end of financial year (31st March, 2016) and the date of the Report (17th August, 2016).

6. Internal Control Systems and their Adequacy

The Company has an Internal Control Framework which is commensurate with the size, scale and complexity of its operations. This framework ensures adequate safeguards and processes to address the evolving business requirements. Key controls have been identified along with risks and mitigation processes covering major areas. The details in respect of internal financial control and their adequacy are included in the Management Discussion & Analysis, which forms part of this report.

The Company is in the process of implementing the new financial controls in terms of Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 and is in the process of engaging an external agency to undertake this exercise.

7. Subsidiary Companies and Consolidated Financial Statements

The Company has 7 subsidiaries, which includes six step-down subsidiaries as on 31st March, 2016. There are no associate companies within the meaning of Section 2(6) of the Companies Act, 2013 (“Act”). There has been no material change in the nature of the business of the subsidiaries.

Pursuant to Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, the statement containing salient features of the financial statements of the Company’s Subsidiaries, (in Form AOC-1) is attached to the financial statements as Annexure-D.

Pursuant to the provisions of section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the Company.

8. Deposits from public

The Company did not invite or accept any fixed deposit pursuant to provisions of Section 76 of the Companies Act, 2013. During the year no amount either on interest or principal, remained outstanding as on the date of the Balance Sheet.

9. Corporate Governance Report

As has been the ethos of the Company, it strives to maintain high standards of Corporate Governance practices. Pursuant to regulation 34 (3) read with Schedule V of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Reports on Management Discussion and Analysis and on Corporate Governance have been included elsewhere in this Report as separate sections. A certificate from Statutory Auditors regarding compliance of conditions of Corporate Governance as stipulated in regulation 34 (3) read with Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 has also been included in the Annual Report.

10. Auditors

M/s. Brahmayya & Co., Chartered Accountants and M/s R Subramanian & Co., Chartered Accountants, Joint Statutory Auditors of the Company, retire at the forth coming Annual General Meeting and are eligible for re-appointment.

The Company has received confirmation from M/s. Brahmayya & Co., and M/s R Subramanian & Co regarding their consent and eligibility under Sections 139 and 141 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 for appointment as the joint auditors of the Company.

The Audit Committee and the Board of Directors have recommended the re-appointment of M/s. Brahmayya & Co. and M/s R Subramanian & Co, Chartered Accountants as joint auditors for the year 2016-17. The necessary resolution is being placed before the shareholders for approval.

11. Secretarial Audit

Pursuant to provisions of Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, your Company engaged the services of Mr. S. Viswanathan, Company Secretary in Practice, Bangalore to conduct the Secretarial Audit of the Company for the financial year ended 31st March, 2016. The Secretarial Audit Report (in Form MR-3) is attached as Annexure - C to this Report.

12. Management reply to the Statutory Auditor’s & Secretarial Auditor’s Report

The explanations and comments by the Board on qualifications made by Statutory Auditors is attached as Annexure - G to this Report.

13. Extract of Annual Return

An extract of Annual Return in Form MGT-9 as on 31st March, 2016 is attached as Annexure-F to this Report.

14. Directors and Key Managerial Personnel

In compliance with Section 149 of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors of the Company appointed Ms. Sweta Mandora Prajapati as Additional Director and Woman Director of the Company in the capacity of ‘Non-Executive Independent Director’ effective from 22nd January, 2016. In accordance with Section 161 of the Companies Act, 2013, she will hold office of Director up to date of ensuing Annual General Meeting. The Company has received requisite notice in writing from a member proposing her candidature for office of Director.

The resolution seeking approval of the Members for the appointment of Ms. Sweta Mandora Prajapati for a term of 3 years, have been incorporated in the notice of the forthcoming Annual General Meeting of the Company.

The brief resume and other details relating to the Directors who are proposed to be appointed / re-appointed, as required to be disclosed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, forms part of the Corporate Governance Report.

The terms and conditions of appointment of independent directors are as per Schedule IV of the Act. They have submitted a declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Act and there has been no change in the circumstances which may affect their status as independent director during the year. Mr Hari Eswaran, Director retires by rotation and being eligible and has offered himself for re-appointment. A brief background of Mr Hari Eswaran, Director is given in the Corporate Governance Report.

During the year under review,

(1) Mr P Chandrasekaran, CFO has resigned the company and in his place, Mr Raj H Eswaran, Managing Director has been appointed as CFO w.e.f. 3rd June, 2016.

(2) Mr. Praveen Hegde, Company Secretary has resigned and in his place Mr. Sudhir Anand has joined as Head - Legal & Company Secretary cum Compliance Officer.

Declaration by Independent Directors

All the Independent Directors of your Company have made declaration to the Company that they meet all the criteria of independence laid down under section 149(6) of Companies Act, 2013 and regulation 16(1) (b) of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Familiarization Programme for Independent Directors

Your Company has during the year under review has taken steps to apprise the Independent Directors on macro-economic environment, market scenario, regulatory updates, business operations, operations, financial statements, update on statutory and legal compliances for Board members, etc.

15. Policy on Directors’ appointment and remuneration and other details

The Company’s policy on Directors’ appointment and remuneration and other matters provided in Section 178(3) of the Act has been disclosed in the corporate governance report, which forms part of the Directors’ Report.

A statement containing the details of the Remuneration of Key Management Personnel as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in the Corporate Governance report, which forms part of the Directors’ Report.

16. Number of Meetings of the Board

Four meetings of the board were held during the year. For details of the meetings of the board, please refer to the corporate governance report, which forms part of this report.

17. Board evaluation

The Board of directors has carried out an annual evaluation of its own performance, Board committees and individual directors pursuant to the provisions of the Act and the corporate governance requirements as prescribed by SEBI (Listing Obligations and Disclosure Requirements) LODR Regulations, 2015 under Regulation No.17(10).

The performance of the Board was evaluated by the Board after seeking inputs from all the directors on the basis of the criteria such as the Board composition and structure, effectiveness of board processes, information and functioning, etc.

The performance of the committees was evaluated by the Board after seeking inputs from the committee members on the basis of the criteria such as the composition of committees, effectiveness of committee meetings, etc.

The Board and the Nomination and Remuneration Committee (“NRC”) reviewed the performance of the individual directors on the basis of the criteria such as the contribution of the individual director to the Board and committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc.

In addition, the Chairman was also evaluated on the key aspects of his role. In a separate meeting of independent Directors, performance of non-independent directors, performance of the board as a whole and performance of the Chairman was evaluated, taking into account the views of executive and non-executive directors.

18. Directors’ Responsibility Statement

As required under Section 134(5) of the Companies Act, 2013, the Directors of the Company hereby state and confirm that:

(i) in the preparation of Annual Accounts for the year, applicable Accounting Standards have been followed along with proper explanations relating to material departures;

(ii) the Directors have selected such accounting policies and applied them consistently, and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit and loss of the Company for the year under review;

(iii) the Directors have 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; and

(iv) the Directors have prepared the Annual Accounts on a going concern basis.

(v) That proper internal financial control was followed by the Company and that such internal financial control are adequate and were operating effectively

(vi) 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

19. Audit committee

The details pertaining to composition of audit committee are included in the Corporate Governance Report, which forms part of this report.

20. Particulars of Loans, Guarantees and Investments

The particulars of Loans, Guarantees and Investments have been disclosed in the financial statements.

21. Particulars of Employees

There are no employees whose remuneration exceeds the limits specified under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules.

22. Vigil Mechanism / Whistle Blower Policy

Pursuant to Section 177(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 22 of SEBI LODR Regulations, 2015, the Board of Directors had approved the Policy on Vigil Mechanism / Whistle Blower and the same was hosted on the website of the Company. This Policy inter-alia provides a direct access to the Chairman of the Audit Committee. Your Company hereby affirms that no Director/ employee has been denied access to the Chairman of the Audit Committee and that no complaints were received during the year. The policies have been uploaded on the Company’s website, under the web link: http://easunreyrolle.com/ investors_codeconduct.php

23. Related Party Transactions

In terms of Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, your Company has a Related Party Transactions Policy on dealing with Related Party Transactions. The policy may be accessed under the Corporate Governance section of the website http://www.easunreyrolle.com. All related party transactions during the year under review were on arm’s length basis and in the ordinary course of business. There were no material related party transactions made by the Company which could be considered material in accordance with Related Party Transactions Policy of the Company. The details of related party transactions are set out in the notes to the financial statements as well as Form AOC-2 is attached as Annexure - E to this Report.

24. Risk management

The Board of the Company has formed a risk management committee to frame, implement and monitor the risk management plan for the Company. The committee is responsible for reviewing the risk management plan and ensuring its effectiveness. The audit committee has additional oversight in the area of financial risks and controls. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. The development and implementation of risk management policy has been covered in the management discussion and analysis, which forms part of this report.

25. Environment, Health and Safety

The Company follows all the laws on Environment, Health, Safety (EHS) in all its operations. Occupational injury frequency rate remained almost NIL during the year under review. No severe accident was recorded for your Company employees.

26. Corporate social responsibility

Your Company is not under the purview of the Section 135 of the Companies Act, 2013 as Company having less Net worth or Turnover or Net profit as specified in the Section.

27. Policy on Prevention of Sexual Harassment

The Company has in place a Policy for prevention of sexual harassment at workplace. This inter alia provides a mechanism for the resolution, settlement or prosecution of acts or instances of Sexual Harassment at work and ensures that all employees are treated with respect and dignity. During the year under review, there were no complaints received by the Company.

28. Disclosure requirements

As per Clause 49 of the listing agreement and SEBI (LODR) Regulations, corporate governance report with auditors’ certificate and as per Regulation 15(2) of SEBI LODR, Regulations 2015, is attached which forms part of this report.

Policy on dealing with related party transactions is available on the website of the Company (URL: www.easunreyrolle.com/investors).

The Company has formulated and published a Whistle Blower Policy to provide Vigil Mechanism for employees including directors of the Company to report genuine concerns. The provisions of this policy are in line with the provisions of the Section 177(9) of the Act and Regulations 22 of SEBI LODR, Regulations 2015 with stock exchanges (URL: www.easunreyrolle.com/investors).

29. Particulars of Research and Development, Conservation of Energy, Technology Absorption, and Foreign Exchange Earnings/Outgo:

Information required under Section 134 of the Companies Act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules, 2014, is attached as Annexure B and forms part of this Report.

30. Cautionary Statement

Statements in this report, particularly those which relate to Management Discussion & Analysis, describing the Company’s objectives, projections, estimates and expectations may constitute ‘forward looking statements’ within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied.

31. Change in nature of Business of the Company

There is no change in nature of Business during the year compared to earlier year.

32. Concluding Remarks

The Directors wish to sincerely express their appreciation to all employees of the Company for their dedicated services during the year amidst tough times. The Directors take this opportunity to express their gratitude to all Shareholders, Bankers, Vendors and other Stakeholders who have reposed trust and extended their constant support.

For and on behalf of Board of Directors

Hari Eswaran

Chairman

(DIN No. 00196760)

Place: Chennai

Date: 17th August, 2016