Your Companys Directors hereby present the Ninth Annual Report of the Companytogether with the Audited Financial Statements of the Company for the Financial Year endedMarch 31 2016 ("year under review/ FY 16").
COMPOSITE SCHEME OF ARRANGEMENT
Creation of Indias Largest Pure Play Fashion and Lifestyle Company with a strongbouquet of leading fashion brands and retail formats
During the year under review the apparel retail businesses of the Aditya Birla Grouphoused under separate entities viz. the Company Aditya Birla Nuvo Limited("ABNL") and Madura Garments Lifestyle Retail Company Limited("MGLRCL") were consolidated under the Company vide the Composite Scheme ofArrangement amongst the Company ABNL MGLRCL and their respective shareholders andcreditors under Sections 391 to 394 of the Companies Act 1956 ("CompositeScheme").
Composite Scheme was undertaken with a view to enable the business activities to becarried out with greater focus and specialisation for sustained growth and also to benefitfrom the potential synergies of combining with the similar and related businesses therebyresulting in enhancement of shareholder value. This consolidation is also expected tounlock value and accrue potential synergy benefits for the business arising inter alia onaccount of operational efficiency in matters such as sourcing infrastructure andinformation technology.
Composite Scheme was approved by the Board of Directors ("Board") of theCompany ABNL and MGLRCL at their respective meetings held on May 3 2015 and later wasmade and declared effective on January 9 2016 ("Effective Date") afterconsidering the status of all conditions to the effectiveness of the Composite Scheme asset out therein and receipt of necessary statutory and regulatory approvals includingapprovals from the:
a) Equity Shareholders and Unsecured Creditors of the Company vide a SpecialResolution passed at the Court Convened Meeting held on September 7 2015 and
b) Honble High Court of Judicature at Gujarat and Bombay by virtue of theirrespective orders dated October 23 2015 and December 5 2015.
Pursuant to the Composite Scheme becoming effective Madura Fashion - the brandedapparel retailing division of ABNL and Madura Lifestyle - the luxury branded apparelretailing division of MGLRCL were demerged from ABNL and MGLRCL respectively to theCompany to collectively form a division of the Company viz. Madura Fashion &Lifestyle ("Madura Fashion & Lifestyle Division") w.e.f. April 1 2015 (i.e.the Appointed Date as per the Composite Scheme). Pantaloons Format business forms anotherseparate division of the Company ("Pantaloons Division").
Change of Name
To reflect the enhanced scope of the operations post consolidation vide the CompositeScheme name of the Company was changed from "Pantaloons Fashion & RetailLimited" to "Aditya Birla Fashion and Retail Limited" ("ABFRL").A fresh Certificate of Incorporation pursuant to the change of name of the Company wasissued by the Registrar of Companies Mumbai on January 12 2016.
Changes in Share Capital
During the year under review pursuant to the Composite Scheme the Authorised ShareCapital of the Company was increased from Rs. 1601500000/- (Rupees One Hundred SixtyCrore Fifteen Lakh only) to Rs. 10101500000/- (Rupees One Thousand Ten Crore FifteenLakh only).
Also upon the Composite Scheme becoming effective and after determining the respectiveentitlements of the shareholders of ABNL and MGLRCL as on January 21 2016 (i.e. theRecord Date fixed by ABNL and MGLRCL in terms of the Composite Scheme) High PowerCommittee of the Board vide its Circular Resolution passed on January 27 2016 allotted676037600 (Sixty Seven Crore Sixty Lakh Thirty Seven Thousand Six Hundred) EquityShares of Rs. 10/- (Rupees Ten only) each (ranking pari passu with the then existingEquity Shares of the Company) to the eligible shareholders of ABNL and MGLRCL whose nameswere recorded in their respective Register of Members as on the Record Date ("mergerallotment") in the following swap ratio recommended by the independent valuers:-
a) in consideration of the demerger of Madura Fashion from ABNL into the Company - 26(Twenty Six) Equity Shares of Rs. 10/- (Rupees Ten only) each credited as fully paid-upfor every 5 (Five) Equity Shares of Rs. 10/- (Rupees Ten only) each fully paid up held byeach member in ABNL.
b) in consideration of the demerger of Madura Lifestyle from MGLRCL into the Company -
- 7 (Seven) Equity Shares of Rs. 10/- (Rupees Ten only) each credited as fully paid-upfor every 500 (Five) Equity Shares of Rs. 10/- (Rupees Ten only) each fully paid up heldby each member in MGLRCL;
- 1 (One) Equity Share of Rs. 10/- (Rupees Ten only) each credited as fully paid-up forall 10000000 (One Crore) Preference Shares of face value Rs. 10/- (Rupees Ten only)each fully paid up held by a Preference Shareholder of MGLRCL.
Consequent to the allotment the paid-up Equity Share Capital of the Company increasedfrom Rs. 928051260/- (Rupees Ninty Two Crore Eighty Lakh Fifty One Thousand Two HundredSixty only) (92805126 Fully Paid-up Equity Shares of Rs. 10/- each) to Rs.7688427260/- (Rupees Seven Hundred Sixty Eight Crore Eighty Four Lakh Twenty SevenThousand Two Hundred Sixty only) (768842726 Fully Paid-up Equity Shares of Rs. 10/-each).
Allotment of 3782178 Equity Shares representing 0.49% of the total paid-up capitalto NRI Shareholders of ABNL holding shares on Repatriation basis ("NREShareholders") is kept pending. Details w.r.t. the same are provided hereinbelowseparately.
Equity Shares allotted pursuant to the Composite Scheme were listed and permitted fortrading on BSE Limited ("BSE") and the National Stock Exchange of India Limited("NSE") w.e.f. February 4 2016.
Settlement of Fractional Entitlements
The fractional entitlements arising out of allotment of Equity Shares issued pursuantto the Composite Scheme were consolidated and sold in the Open Market in terms of theClause 19 of the Composite Scheme. The fractional entitlements were duly paid to therespective shareholders in the month of April 2016 through demand drafts and otherprescribed electronic modes of payments along with necessary intimations of such paymentsto each of such Equity Shareholders.
Allotment to NRI Shareholders of ABNL holding shares on Repatriation basis
In terms of applicable FEMA Regulations and extant FDI Policy of the Government ofIndia ("FDI Policy") Company was required to obtain an approval from theForeign Investor Promotion Board ("FIPB") for allotment of Equity Shares to NREShareholders pursuant to the Composite Scheme.
Accordingly the Company had made an application to the FIPB for seeking its approvalw.r.t. the allotment of its Equity Shares to such NRE Shareholders. However theDepartment of Industrial Policy and Promotion - Government of India conveyed that in viewof the provisions of the extant FDI Policy application of the Company cannot be accededto. Hence the allotment of 3782178 Equity Shares representing 0.49% of the totalpaid-up capital to such NRE Shareholders has been kept pending.
In order to settle such lawful entitlements of such NRE Shareholders the Companyevaluated various options. It has been advised that as per the prevailing law(s) anon-resident shareholder is permitted to hold both NRE and NRO accounts in India and theCompany can credit their entitlements to such NRO account. Accordingly the Company hassent out a detailed communication to the registered addresses of all such NRE Shareholdersinter alia stating that such NRE shareholders may provide details of their respective NROaccounts vide a duly filled in Consent Form and opt for allotment of Equity Shares of theCompany in their NRO accounts. In absence of such consent share allotment to such NREShareholders of ABNL shall continue to be pending till the time there is a favorablechange in the applicable laws.
The aforesaid communication alongwith the necessary Consent Form is available on thewebsite of the Company i.e. www.abfrl.com.
Cessation from being a subsidiary of Indigold Trade and Services Limited and AdityaBirla Nuvo Limited
As mentioned above on January 27 2016 the Company allotted Equity Shares of theCompany to all the eligible shareholders of ABNL and MGLRCL pursuant to the CompositeScheme. Consequently shareholding percentage of Indigold Trade and Services Limited wasreduced from 72.62% to 8.77% and the Company ceased to be a subsidiary of Indigold Tradeand Services Limited a wholly owned subsidiary of ABNL ("ITSL") and alsoceased to be a step-down subsidiary of ABNL w.e.f. January 27 2016.
Change in promoters of the Company
As mentioned above upon effectiveness of the Composite Scheme Equity Shares of theCompany were allotted to the eligible shareholders of ABNL and MGLRCL including thepromoters of ABNL and MGLRCL. Accordingly the promoters of ABNL and MGLRCL becamepromoters of the Company w.e.f. the date of allotment i.e. January 27 2016.
Further ABNL IT & ITES Limited and ITSL ceased to be the promoters of the Companyw.e.f. March 31 2016 consequent to their amalgamation with ABNL ("ABNLamalgamation").
ACQUISITION OF FOREVER 21 INDIA BUSINESS*
With a view to create a strong foothold in the womens wear business in thewestern wear segment the Board approved the proposal to acquire the exclusive online andoffline rights of the global brand -Forever 21 for the Indian market and its existingstore network in India from the current franchise of Forever 21 i.e. Diana Retail PrivateLimited ("Diana Retail") ("said Acquisition"). Further a Committee ofthe Board constituted specifically for the matters relating to the said Acquisition videits circular resolution passed on July 1 2016 approved the finalized terms of thetransaction and authorized officers of the Company for signing of binding transactiondocuments.
On July 5 2016 the Company executed a Business Transfer Agreement with Diana Retailand DLF Brands Limited (the promoter of Diana Retail) for the acquisition of the businessundertaking of Diana Retail relating to the business of operating retail stores in Indiafor the sale of clothing artificial jewellery accessories and related merchandise underthe Forever 21 brand and also through E-Commerce channels ("Forever 21Undertaking") on a going concern basis by means of a "slump sale" (asdefined in Section 2 (42C) of the Income Tax Act 1961) for a lump sum consideration.Company also executed a Franchise Agreement with Forever 21 Inc. in terms of which theCompany has acquired the exclusive franchise rights for the brand "Forever 21"for the Indian market.
* Material change and commitment affecting the financial position of your Companybetween end of the financial year and the date of this report.
Pursuant to the said acquisition and upon completion of the transactions/ conditionsprecedents mentioned in the Business Transfer Agreement the Forever 21 Undertaking willform part of Madura Fashion & Lifestyle division of the Company w.e.f. July 1 2016.
MANAGEMENT DISCUSSION AND ANALYSIS
To avoid repetition of information the Management Discussion and Analysis onperformance of the Company is presented below.
The Financial Year 2015-16 was another year of mixed trends across the globe aseconomic political trade and financial factors interacted in a dynamically changingenvironment. Global growth has been projected at 3.2% in 2016 and 3.5% in 2017.
Indian economy remained a bright spot buoyed by the reform oriented policy initiativesand increasing FDI investment in the country. India became the fastest growing economy (asper World Bank estimates growth for FY 16 is estimated at 7.5%) surpassing China interms of GDP growth.
However the year also saw challenges with subdued exports on account of lower globaldemand fluctuating Rupee against the US Dollar weak rural economy due to poor monsoonsand drought and the resultant tepid demand conditions in the economy. Index of IndustrialProduction ("IIP") also witnessed lukewarm growth over the period owing tolower capacity utilization in the manufacturing sector along with decline in domesticdemand and consumption.
On the consumption side while consumer confidence has not resulted in higher spendsindicating that consumers have been cautious about spending. Several consumer facingindustries witnessed single digit growth rate in FY16 unlike much higher growth recordedin previous years. The announcement of the Seventh Pay Commission is a positivedevelopment as it enhances the discretionary spending power.
GST is expected to come into force during the course of coming year. This legislationis likely to simplify the distribution structure and reduce the operational complexitiesof overall supply chain. The financial impact of the legislation will depend on the rateapplicable for apparel and textiles.
Industry Structure and Developments
The apparel industry has evolved rapidly over the past few years. Some of the majorshifts are as follows:
Women and Youth have emerged as two important new demographic segments drivingdemand for younger casual and more fashionable products. Womens wear business hasbeen gaining prominence and demand for casual wear was seen to be growing faster than theindustry.
Rapid growth of digital ecosystem with improvement in telecom infrastructurepenetration of smart phones and rapid growth of social media is changing the way consumersinteract with fashion category and shop for their clothes. E-Commerce is evolving as asignificant channel with consumer shift being aided by deep investments in marketing anddiscounting by E-Commerce players.
Entry of international brands has created greater choice for consumers at thehigher end of the market.
At lower price points value fashion retailers have been rapidly expanding theirretail footprint offering good quality fashionable products at affordable prices to thefast growing middle class which is upgrading from unbranded products.
While the underlying drivers of growth are strong the overall consumption remainedmuted during most of the year. At such times demand for discretionary products comesunder pressure as consumers shift their spending to more basic products. In thischallenging environment the industry registered one of its slowest growths in FY16. YourCompanys performance needs to be viewed in the context of the aforesaid economic andmarket environment.
As mentioned above the Composite Scheme became effective on January 9 2016 therebycreating Indias largest pure play branded apparels Company.
The combined entity has the largest retail network in fashion space in theCountry.
The portfolio of the Company is well positioned for growth with the combinedstrengths of Madura Fashion & Lifestyle in mens wear and Pantaloons strength inwomens wear.
In this challenging environment the Company focused on improving the customerexperience and providing greater choice to the consumers across all its formats andchannels. The base of loyal customers for the Company continued to grow with more repeatbusiness being generated by these loyal customers. Today the Company has over 13 millionloyal customers who are the ambassadors of Companys products.
Companys major brands - Louis Philippe Van Heusen Allen Solly and PeterEngland continue to be leading brands in their respective segments. These brandscontinued to successfully expand their franchise by building new brand extensions to covermore wearing occasions and product categories spanning formals casual denim andaccessories.
In the Value Fashion segment Pantaloons has expanded its network at an aggressive paceand has added several new in-house brands across various categories. During the year itlaunched a stand-alone format targeted towards kids - Pantaloons Kids and isready to launch Pantaloons Woman to accelerate its distribution expansion.
Companys vision is to offer Indian consumers needs in fashion style andvalue across wearing occasions in Apparel and Accessories through strong brands andhigh-quality consumer experience with the ultimate purpose of delivering superior value toall stakeholders.
In pursuance of its vision and in line with the rapid development in the industry andconsumer landscape your Company has identified the following areas for strategic responseand growth:
Expand the portfolio through strategic entry in faster growing segments
Your Company continuously identifies the emerging segments in the market and seeks toenhance its play in these segments through sub-brand extensions new product launches andorganic and inorganic actions. In the last few years the Company has expanded its play incasual wear segment through brand extensions while acquisition of Pantaloons has giventhe Company a strong play in the fast growing value fashion segment. The Company willcontinue to explore further growth opportunities in womens wear casual and super-premiumsegments of the market. In line with this strategy the Company in July 2016 has acquiredthe offline and online rights of Forever 21 a leading fast fashion brand targetedtowards young women.
Drive digital transformation across key consumer touch points
Your Company has embarked on an aggressive digital transformation to meet the evolvingneed of digital consumer of tomorrow. To enable this the company has created amulti-pronged strategy of enhancing investment in own E-Commerce business launch ofomni-channel initiative and building deeper partnership with E-Commerce players. In thenext 18-24 months all the retail stores of the Company will offer a rich seamless andintegrated online offline experience to all its consumers.
Continue to expand retail distribution
Your Company has been growing rapidly through its multi-channel distribution strategy.To further deepen the penetration the Company has identified markets in Tier II/ IIIcities for further retail expansion. This expansion will provide the Company an earlymover advantage and position it strongly to meet the growing demand for high-qualityready-made branded apparel in emerging markets across India.
Deepen consumer centricity
Over the past few years your Company has created a strong culture ofconsumer-centricity in all aspects of its operations. The consumer-centricity framework isbased on continuous consumer research real-time consumer feedback from retail outlets andstrong loyalty program. Towards this the Company has embraced the Net Promoter Score(NPS) framework to assess customer satisfaction through a Company-wide program -Mission Happiness. This program will progressively cover the entire retailnetwork and is well integrated across all functions of the business.
Your Company has set-up an in-house Epic Centre through which itcontinuously listens to consumer views and feedback in the digital space. These inputs arehelping the company to develop a single view of the consumer and enhance its ability todynamically cater to the growing as well as changing consumer demand.
Invest in cutting-edge design and merchandising capability
Your Company has constantly built its brands through incorporation of latest designsand trends in its products as well as launching innovative products. To ensure thesustained pipeline of new products the Company has invested in a Knowledge ManagementCentre to centrally collate latest developments in fashion fabrics fits and styling sothat its design and product teams have continuous access to world class products andtechnologies. The Company also ensures that its designers are updated with latest fashionthrough structured exposure to global trends.
During the year under review by virtue of the Composite Scheme Madura Fashion &Lifestyle division was demerged into the Company w.e.f. April 1 2015 in addition to thePantaloons division of the Company as explained in detail hereinabove. Accordingly thefinancial figures as on March 31 2016 i.e. for the year under review include figures ofthe Madura Fashion & Lifestyle division whereas the figures as on March 31 2015represent figures only w.r.t. Pantaloons division. Therefore the figures for the yearunder review same are not comparable with the figures as on March 31 2015 for thefinancial year 2014-15 ("the previous year").
Profit and Loss Account
| || ||(Amount in Rs. Crore) |
|Particulars ||As on March 31 2016# ||As on March 31 2015# |
|Revenue ||6060 ||1851 |
|EBITDA* ||409 ||75 |
|Finance Cost ||175 ||120 |
|EBDT ||234 ||(45) |
|Depreciation ||338 ||183 |
|Earnings Before Tax ||(104) ||(228) |
|Provision for Taxation ||- ||- |
|Net Profit/(Loss)* ||(104) ||(228) |
* Includes other income of Rs.12 Crore (Previous year: Rs. 3 Crore)
# The figures as on March 31 2016 include figures of the Madura Fashion &Lifestyle division alongwith the figures of the Pantaloons division whereas the figuresas on March 31 2015 represent figures only w.r.t. Pantaloons division and therefore bothare not comparable.
Your Company reported revenue of Rs. 6060 Crore during the year under reviewrecording a growth of 227.4% over previous year mainly attributable to inclusion offigures of Madura Fashion & Lifestyle division as mentioned above.
Segment: Madura Fashion & Lifestyle
It reported revenue of Rs. 3996 Crore. During the year it added 142 stores (net ofclosures). Its retail channel which comprises of 1877 Exclusive Brand Outlets("EBOs") and 148 value stores spanning 2.6 million square feet accounts for 44%of Maduras revenue and reaches out to 8.5 million loyalty customers base. Besidesthese EBOs Madura is reaching customers through 7000+ additional points of salesincluding Multi Brand Outlets ("MBOs") and Department Stores.
It reported revenue of Rs. 2164 Crore recording growth of 17% over previous year.During the year it added 29 stores (net of closures) taking the total number of stores to163 including 1 Pantaloons Kids store and 27 Factory Outlets spanning 2.9 million sq ft.It reaches out to 5 million loyalty customer base. Pantaloons has a diversified customerbase with Men Women Kids and Non-Apparels and has increased its share of exclusivebrands from 52% to 62%.
Combined EBITDA of both the Divisions excluding other income is Rs. 397 Crore ascompared to previous year EBITDA of Rs. 73 Crore representing only the Pantaloonsdivision.
The depreciation cost was higher during the year as the Company had reassessed theuseful life of leasehold improvements and immovable fixtures w.r.t. its"Pantaloons" business from the period of lease to six years as the same betterreflects the expected usage of such assets.
| || ||(Amount in Rs. Crore) |
|Particulars ||As on March 31 2016# ||As on March 31 2015# |
|Net Fixed Assets (Including Capital Advances and CWIP) ||566 ||422 |
|Goodwill* ||1795 ||1168 |
|Net Working Capital ||463 ||99 |
|Capital Employed ||2824 ||1689 |
|Net Worth ||944 ||346 |
|Debt^ ||1880 ||1343 |
# The figures as on March 31 2016 include figures of the Madura Fashion &Lifestyle division alongwith the figures of the Pantaloons division whereas the figures ason March 31 2015 represent figures only w.r.t. Pantaloons division and therefore bothare not comparable.
* Arising on account of transfer of Pantaloons format business (duringFinancial Year 2012-13) and Madura Fashion & Lifestyle businesses (during FinancialYear 2015-16) to the Company.
^ Includes interest accrued but not due on borrowings. Previous year numbers have beenregrouped accordingly.
As on March 31 2016 Goodwill (after testing for impairment in accordance with theAccounting Standard - 28 issued by the Institute of Chartered Accountants of India) standsat Rs. 1795 Crore.
Net Working Capital as on March 31 2016 includes Inventory of Rs. 1388 Crore TradeReceivables of Rs. 391 Crore Cash and Bank Balance of Rs. 20 Crore and Trade Payables ofRs. 1437 Crore.
In view of the loss for the year under review no amount is proposed to be transferredto the reserve(s) and your Directors have not recommended payment of any dividend for theyear under review.
During the year under review there is a reduction in the average borrowing cost from~10.17% in previous year to ~9.3%. Your Company explored various options for bringing downthe cost of borrowings and also for procuring funds which included availing of short-terminstruments like commercial paper working capital borrowing and long term loans which wasaided by the reduction in the overall interest rates in the economy.
Further during the year at the Eighth Annual General Meeting of the Company approvalof the Members was obtained by way of a Special Resolution to raise funds by issuance ofNon-Convertible Debentures for an amount of upto Rs. 1000 Crore on private placementbasis within the overall borrowing limits of the Company as approved by the Members fromtime to time ("issuance of NCDs") in order to continue to avail greaterfinancial flexibility and optimal financing structure.
With its portfolio of established brands and large format fashion retail presence yourCompany has a leading position in the Indian apparel market and caters to consumers acrossall segments from Luxury to Value straddling men women and kids in the formal andcasual space.
Your Company has developed strong product portfolio amongst its brands based on highquality constant innovation strong internal design setup large and deep distributionnetwork and an agile and robust supply chain system. The company produces large share ofits high value garments at its state-of-art manufacturing facilities to ensure higheststandards of product quality.
Your Company attracts the best talent in the apparel industry and has strong systems ofnurturing the talent backed by robust people development processes mentoring and employeeengagement programs.
While the Company has a strong presence and brands in mens wear segment it has arelatively lower presence in western womens wear casual wear denims and kids-wearsegments. As part of its strategy your Company is keenly focusing to quickly buildcapabilities in these segments.
Rising incomes favourable demographics increasing disposition towards fashiongreater access and awareness about brands is creating a large shift towards brandedfashion across the Country. While consumers in larger cities have had access to brands andorganized retailers the overall market continues to remain under-penetrated. This offersgrowth opportunities in Tier II/ III cities. Your Company has taken strategic calls toexpand in these areas in response to these growing opportunities.
The emerging E-Commerce channel opens up opportunities for the Branded Apparel businessto reach out to a large base of consumers.
Company is also looking to tap the opportunity in the super-premium segment as moreaffluent consumers seek international brands and global experiences.
Threats and Risks
Retail space in India is limited to key markets and a few successful malls leading toa scarcity of good retail spaces.
The share of online business is growing rapidly and traditional channels ofdistribution will be under pressure.
Company faces constant threat on its talent pool from competition and increasingly fromthe new international players and E-Commerce companies in the industry.
Propelled by steady rise in income levels favourable demographics and greaterpenetration of organised retail the branded apparel business is poised for strong growthin the coming years.
The Company is well positioned to exploit this growth with its strong brandsdistribution reach and product offerings across various categories and price points forvarying consumer needs.
Risk Management and Internal Controls
Effective governance and risk management form the bedrock of a companys sustainedperformance and revolve around rigorous implementation of standardized policies andprocesses and development of strong internal control systems.
Board has constituted a Risk Management Committee ("RMC") to assist theBoard with regard to the identification evaluation and mitigation of operationalstrategic and external risks. RMC has a defined role and overall responsibility formonitoring and reviewing the Risk Management Plan and associated practices of the Company.Details of the composition of the RMC have been disclosed separately as part of theCorporate Governance Report.
Company also has an Internal Risk Management Committee ("internal committee")to support and assist the RMC in identifying evaluating and mitigating operationalstrategic and external risks. This internal committee is headed by the Chief FinancialOfficer of the Company who is also the Chief Risk Officer of the Company and it issupported by individual Risk Officers covering legal supply chain manufacturing humanresources finance business development IT sales and marketing functions. This internalcommittee assists the RMC in defining the framework for risk management and compliance andundertakes assessment of risks adopts the risk mitigation plans and regularly monitorsthem in a structured controlled environment. It also reviews developments in thesocio-economic environment and identifies internal threats and opportunities updates theframework and refines processes and systems for mitigation.
Further Company has set up internal controls and policies related to financialreporting of transactions and efficient business operations in compliance with relevantlaws and regulations. Internal reporting systems are in place for effective measurement ofvarious business parameters related to revenue expenses and reporting in line with theprovisions of the Companies Act. Internal Audit Reports are tabled and reviewed by theAudit Committee and corrective measures are taken up promptly to improve the systems andprocesses.
Details w.r.t. the Risk Management Policy adopted by the Board have been disclosedseparately hereinbelow.
Companys Employee Value Proposition ("EVP") aims to deliver uniqueopportunities to its employees in terms of rich and diverse learning career developmentrecognition and quality of life.
Through structured capability building programs key talent is identified developedand assessed on functional as well as behavioural competencies before being deployed forspecific roles. Aditya Birla Centre for Retail Excellence ("ABCRE") one of itskind capability building function in the Retail industry develops state of art contentand training capability amongst its employees through leveraging multiple learning spaces.Company has built a strong in-store training capability by developing internal trainersacross its stores/ functions wherein learning is facilitated by focusing on"Learning by doing". Company uses the Aditya Birla Group state-of-the-artLearning and Knowledge centre - Gyanodaya for capability building and training of itsmanagerial staff.
Company has aggressive but performance anchored reward program both at stores as wellas corporate offices. There are multiple recognition platforms well entrenched in theCompany across Stores Zonal Offices and Head Office. Participative Management isencouraged through promoting and recognizing "Continuous Improvements" acrossthe Company.
The total number of employees on rolls of the Company as on March 31 2016 was ~18876.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the provisions of Sections 134(3)(c) and 134(5) of the Companies Act 2013the Directors to the best of their knowledge and ability confirm that:-
a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
b) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the company at the end of the financial year and of the profitand loss of the company for that period;
c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;
d) they have prepared the annual accounts on a going concern basis;
e) they have laid down internal financial controls to be followed by the company andthat such internal financial controls are adequate and were operating effectively and
f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
OTHER DISCLOSURES UNDER THE COMPANIES ACT 2013 READ WITH THE RULES MADE THEREUNDER ("ACT")AND OTHER APPLICABLE LAWS REGULATIONS ETC.
Details of Directors and Key Managerial Personnel who were appointed or have resignedduring the year
Members of the Company at the Eighth Annual General Meeting of the Company held onAugust 28 2015 approved the appointment of Ms. Sukanya Kripalu (holding DirectorsIdentification Number 06994202) and Mr. Arun Thiagarajan (holding Directors IdentificationNumber 00292757) as Independent Directors for a period of period of 5 (five) consecutiveyears w.e.f. October 13 2014 and May 11 2015 respectively.
During the year under review none of the Directors of the Company resigned from theirrespective Directorships in the Company.
B. Key Managerial Personnel ("KMP")
Pursuant to the effectiveness of the Composite Scheme and resultant demerger of MaduraFashion & Lifestyle division into the Company Mr. Ashish Dikshit- Business HeadMadura Fashion & Lifestyle was appointed as one of the KMP of the Company w.e.f.January 9 2016. Also Mr. Shital Mehta was re-designated as Chief Executive Officer-Pantaloons and continues to be one of the KMP of the Company.
During the year under review none of the KMP of the Company resigned from theirrespective positions in the Company.
The aforesaid appointments were based on the recommendation of the Nomination andRemuneration Committee of the Board ("NRC").
Further in accordance with the provisions of the Act and the Articles of Associationof the Company Mr. Sushil Agarwal Non-executive Director of the Company retires byrotation at the ensuing Ninth Annual General Meeting and being eligible offers himselffor re-appointment. Business of his re-appointment is one of the agendas of the ensuingNinth Annual General Meeting of the Company.
Further the list of the present Directors and KMP forms part of this Annual Reportunder the section Corporate Information.
Companys policy on appointment of Directors and KMP and remuneration includingcriteria for determining qualifications positive attributes independence of a directorand other matters provided under sub-section (3) of section 178 of the Act
Board has on the recommendation of the NRC adopted a Policy which inter aliaenumerates the Companys policy on appointment of Directors and KMP.
Further the Board has also on the recommendation of the NRC adopted a policy entailingExecutive Remuneration Philosophy which covers the Directors KMP and employees includedin Senior Management of the Company.
Both the aforesaid policies are annexed as Annexure I and Annexure II tothis report.
Company has framed a Familiarisation Programme for Independent Directors of theCompany which aims to provide an insight into the Company to enable the IndependentDirectors to understand their roles rights responsibilities in the Company nature ofthe industry in which the Company operates business model of the Company its business indepth and contribute significantly to the Company.
On appointment a formal letter of appointment is given to the Independent Directorbeing appointed which inter alia explains the role function duties and responsibilitiesexpected of him/ her as an Independent Director of the Company. By way of an introductionto the Company the new Director is presented with an Induction Kit essentially a set ofdocuments of the Company which may enable him/ her to have an adequate idea of the AdityaBirla Group and the Company such as Snapshot of the Company along with its majoractivities in last three years Corporate presentations along with other documents thatcan give him/ her broad idea of the Management of the Company various Codes of Conductand Policies applicable to the Company etc. The Director is also explained in detailthe compliances required from him/ her under the applicable laws. Also once appointedthe Directors are periodically updated on the new projects activities or processes of theCompany industry scenario changes in regulatory framework and the impact thereof on theworking of the Company. Details of said Familiarization Programme(s) are also available onthe website of the Company i.e. www.abfrl.com.
During the year under review the Company conducted Familiarization Programmes forIndependent Directors of the Company on June 19 2015 and April 27 2016 to familiarizethem with the Pantaloons division and Madura Fashion & Lifestyle division of theCompany respectively. A detailed presentation thereby providing overview of thePantaloons and Madura Fashion & Lifestyle divisions was made to the IndependentDirectors at the said meetings and the same was followed by the visits to the stores ofrespective divisions.
Number of Meetings of the Board
During the year under review the Board met six times on following occasions:
|Sr. No. ||Date of Meeting ||Place |
|1. ||May 3 2015 ||Mumbai |
|2. ||May 13 2015 ||Mumbai |
|3. ||August 10 2015 ||Mumbai |
|4. ||November 2 2015 ||Mumbai |
|5. ||January 9 2016 ||Mumbai |
|6. ||February 12 2016 ||Bengaluru |
Details of meetings of the Board and its Committees alongwith the attendance of theDirectors therein have been disclosed as part of the Corporate Governance Report.
The intervening gap between the meetings was as prescribed under the Companies Act2013 and Securities Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 ("SEBI Listing Regulations").
Manner of formal annual evaluation by the Board of its own performance and that of itscommittees and individual directors
Pursuant to the provisions of the Act and the SEBI Listing Regulations the Board hasto evaluate its own performance and that of its committees and individual directors("Evaluation").
To enable such evaluation an evaluation framework has been adopted by all thecompanies of the Aditya Birla Group which is devised with a view to provide a morestructured approach for the evaluation and which lays down overall guidelines andprocesses to be adopted for the evaluation of performance. NRC and the Board have videtheir respective Resolutions dated May 8 2015 and May 13 2015 approved the EvaluationFramework.
The evaluation framework for assessing the performance of Directors of your Companycomprises of their contribution at the meeting(s) strategic perspective or inputsregarding the growth and performance of your Company among others. Pursuant to theprovisions of the Act and the SEBI Listing Regulations the Directors have carried out theannual performance evaluation of the Board Independent Directors Non-executiveDirectors Executive Directors and the Committees of the Board. Performance evaluationcriteria for Independent Directors is provided in the Corporate Governance Report. TheDirectors were satisfied with the evaluation results which reflected the overallengagement of the Individual Directors the Board as a whole and its Committees with theCompany.
Statement on declaration of Independence
All the Independent Directors of the Company have given their respective declarationsthat they meet the criteria of Independence as provided in Section 149(6) of the Act andRegulation 16(1)(b) of the SEBI Listing Regulations.
Composition of the Committees of the Board of Directors
|Name of the Committee ||Composition of Committee |
|Audit Committee ||- Mr. Arun Thiagarajan Independent Director (Chairperson) |
| ||- Mr. Bharat Patel Independent Director |
| ||- Ms. Sukanya Kripalu Independent Director |
| ||- Mr. Sushil Agarwal Non-executive Director |
| ||- Permanent Invitee - Mr. Pranab Barua Managing Director |
|Stakeholders Relationship Committee ||- Mr. Bharat Patel Independent Director (Chairperson) |
| ||- Ms. Sukanya Kripalu Independent Director |
| ||- Mr. Sushil Agarwal Non-executive Director |
|Nomination Remuneration Committee ||- Mr. Bharat Patel Independent Director (Chairperson) |
| ||- Ms. Sukanya Kripalu Independent Director |
| ||- Mr. Arun Thiagarajan Independent Director |
| ||- Mr. Sushil Agarwal Non-executive Director |
|CSR Committee ||- Mr. Bharat Patel Independent Director |
| ||- Mr. Sushil Agarwal Non-executive Director |
| ||- Mr. Pranab Barua Managing Director |
| ||- Permanent Invitee - Dr. Pragnya Ram Group Executive |
| ||President Corporate Communication & CSR Aditya Birla Group |
|Risk Management Committee ||- Mr. Bharat Patel Independent Director (Chairperson) |
| ||- Mr. Arun Thiagarajan Independent Director |
| ||- Mr. Sushil Agarwal Non-executive Director |
Company is committed to follow the best practices of Corporate Governance includingthe requirements under the SEBI Listing Regulations and the Board is responsible to ensurethe same from time to time. Company has duly complied with the Corporate Governancerequirements as set out under Chapter IV of the SEBI Listing Regulations from time totime and the Statutory Auditors of the Company viz. M/s. S R B C & CO LLP CharteredAccountants (ICAI Registration No. 324982E/E30003) have vide their certificate dated May25 2016 confirmed that the Company is and has been compliant with the conditionsstipulated in the Chapter IV of the SEBI Listing Regulations. The said certificate isannexed as Annexure III to this report.
Further a separate report on Corporate Governance forms part of this Annual Report.
Extract of Annual Return
As required under the provisions of Sections 92(3) and 134(3)(a) of the Act andCompanies (Management and Administration) Rules 2014 an Extract of the Annual Return inForm MGT-9 is annexed as Annexure IV to this report.
Explanations or comments by the Board on every qualification reservation or adverseremark or disclaimer made - (i) by the auditor in his report and (ii) by the companysecretary in practice in his secretarial audit report;
M/s. S R B C & CO LLP Chartered Accountants (ICAI Registration No.324982E/E30003) were appointed as Statutory Auditors of the Company at the Eighth AnnualGeneral Meeting of the Company held on August 28 2015 and they hold office till theconclusion of the ensuing Ninth Annual General Meeting and are eligible forre-appointment.
Report given by the Statutory Auditors on the financial statements of the Company isdisclosed as part of the Financial Statements of the Company for the year under review.
There has been no qualification reservation adverse remark or disclaimer given by theStatutory Auditors in their Report for the year under review and therefore does not callfor any further comments. The Notes to the Financial Statements are self-explanatory anddo not call for any further comments.
M/s. Dilip Bharadiya & Associates Practicing Company Secretaries were appointedas Secretarial Auditor of the Company to conduct Secretarial Audit for the year underreview pursuant to the provisions of Section 204 of the Act.
There has been no qualification reservation adverse remark or disclaimer given by theSecretarial Auditor in his Report for the year under review and therefore does not callfor any further comments. The Secretarial Audit Report is annexed as Annexure V tothis report.
M/s. Deloitte Haskins & Sells Chartered Accountants Bengaluru (ICAI FirmRegistration No. 008072S) were appointed as Branch Auditors of the Madura Fashion &Lifestyle division of the Company by the Board at its meeting held on January 9 2016 tohold office till the conclusion of the ensuing Ninth Annual General Meeting of theCompany.
The Branch Audit Report w.r.t. the Madura Fashion & Lifestyle division for theyear under review does not contain any qualification reservation or adverse remark.
Particulars of loans guarantees or investments under Section 186 of the Act
Particulars of the loans guarantees and investments as required under Section 186 ofthe Act have been disclosed in Note 4 of the Financial Statements of the Company for theyear under review.
Particulars of contracts or arrangements with related parties referred to insub-section (1) of Section 188 of the Act in the prescribed form
All contract(s)/ arrangement(s)/ transaction(s) entered into by the Company with itsrelated parties during the year under review were
in "ordinary course of business" of the Company
on "an arms length basis" and
as per the provisions of Section 188(1) of the Act read with Companies (Meetings ofBoard and its Powers) Rules 2014 and Regulation 23 of the SEBI Listing Regulations.
Accordingly Form AOC-2 prescribed under the provisions of Section 134(3)(h) of the Actand Rule 8 of the Companies (Accounts) Rules 2014 for disclosure of details of RelatedParty Transactions which are "not at arms length basis" and also whichare "material and at arms length basis" is not provided as an annexure ofthe Directors Report.
However all Related Party Transactions entered into during the year under review andas on March 31 2016 were approved by the Audit Committee of the Board and Board fromtime to time and the same are disclosed in Note 31 of the Financial Statements of theCompany for the year under review as per the applicable provisions of the Act and theSEBI Listing Regulations.
Further pursuant to the provisions of the Act and the SEBI Listing Regulations Boardhas on recommendation of its Audit Committee adopted a Policy on Related PartyTransactions and the said policy is available on the website of the Company i.e.www.abfrl.com.
Details relating to deposits
During the year under review the Company has not accepted any fixed deposits from thepublic falling under Section 73 of the Act read with the Companies (Acceptance ofDeposits) Rules 2014. Thus as on March 31 2016 there were no deposits which wereunpaid or unclaimed and due for repayment.
Names of companies which have become or ceased to be its Subsidiaries joint venturesor associate companies during the year
During the year no Company became/ ceased to be a Subsidiary/ Associate/ Joint Ventureof your Company.
As at the end of the year under review i.e. on March 31 2016 and also as on the dateof this report the Company does not have any subsidiary and/ or Associate Company and theCompany is also not a part of any Joint Venture(s).
As already mentioned above during the year under review the Company ceased to be asubsidiary of ITSL and also a step-down subsidiary of ABNL.
Details w.r.t. development and implementation of a Risk Management Policy
Considering the susceptibility of the Company to inherent business risks Board of theCompany on recommendation of RMC has adopted a Risk Management Policy to
develop and implement Risk Management procedure/ plan including identificationtherein of elements of risk if any which may threaten the existence of the Company;
enable the Company to proactively manage the uncertainty changes in theinternal and external environment to limit negative impacts; and
capitalize on opportunities along with minimization of identifiable risks
in compliance with the provisions of the Act and Regulation 4(2)(f)(ii)(7) andRegulation 17(9)(b) of the SEBI Listing Regulations which requires the Company to lay downprocedure for risk assessment and procedure for risk minimization.
More details on risks and threats have been disclosed above as part of the ManagementDiscussion and Analysis.
Further in view of the ever increasing size and complexity of the business operationsthe Company is exposed to the various risks emanating from fraud(s). Accordingly theBoard has on recommendation of the Audit Committee adopted an Anti-Fraud Policy and aWhistle Blower Policy to put in place a system for detecting and/ or preventing and/ ordeterring and/ or controlling the occurrence of fraud(s).
Details of establishment of Vigil Mechanism
Board has on recommendation of its Audit Committee adopted a Policy therebyenumerating the Vigil/ Whistle Blower Mechanism for Directors and employees of theCompany to report concerns about unethical behaviour actual or suspected fraud orviolation of your Companys Code of Conduct and to voice genuine concerns orgrievances about unprofessional conduct without fear of reprisal. Adequate safeguards areprovided against victimization to those who avail of the mechanism and direct access tothe Chairperson of the Audit Committee is provided to them. The Vigil Mechanism is alsoavailable on the website of the Company i.e. www.abfrl.com.
Details about the policy developed and implemented by the Company on Corporate SocialResponsibility ("CSR") and the CSR initiatives taken during the year
Board has constituted a CSR Committee in terms of the provisions of Section 135 of theAct read with the Companies (Corporate Social Responsibility Policy) Rules 2014. Detailsof the composition of the CSR Committee are disclosed above and have also been disclosedseparately as part of the Corporate Governance Report.
Further the Board has with a vision "to actively contribute to the social andeconomic development of the communities and build a better sustainable way of life forweaker sections of society" adopted a CSR Policy and the same is available on thewebsite of the Company i.e. www.abfrl.com.
CSR Policy of the Company enumerates the Vision of the Aditya Birla Group and theCompany as a responsible corporate citizen and mentions the process to be implementedw.r.t. identification of projects and philosophy of the Company alongwith key endeavorsand goals viz.
In Education - to spark the desire for learning and knowledge;
In Health care - to render quality health care facilities to people living inthe villages and elsewhere through our Hospitals;
In Sustainable Livelihood - to provide livelihood in a locally appropriate andenvironmentally sustainable manner;
In Infrastructure Development - to set up essential services that form thefoundation of sustainable development and
to bring about Social Change we advocate and support.
In line with the same the CSR activities of the Company are mainly focused towards
Girl Child Education and Skilling;
Health and Sanitation.
In view of the losses for the year under review and also considering absence of profitsduring the three immediately preceding financial years the Company was not required tospend any amount towards the CSR activities as per the applicable provisions of Section135 of the Act. However during the year under review by virtue of the Composite SchemeMadura Fashion & Lifestyle division became part of the Company and accordingly areport on CSR Activities of the Company more particularly covering the CSR activities ofthe Madura Fashion & Lifestyle division of the Company during the year under reviewis annexed as Annexure VI to this Report.
Conservation of energy technology absorption foreign exchange earnings and outgo
Company consciously makes all efforts to conserve energy across all its operations.Information on conservation of energy technology absorption and foreign exchange earningsand outgo required to be disclosed pursuant to Section 134(3)(m) of the Act read with theCompanies (Accounts) Rules 2014 is given in Annexure VII to this Report.
Sustainability and Business Responsibility Report
Companys sustainability initiatives are aligned with the Aditya BirlaGroups sustainability vision which mainly comprises of Responsible StewardshipStakeholder Engagement and Future-proofing.
Accordingly under the aegis of the Aditya Birla Groups sustainability visionthe Company is strengthening its ReEarth program to design a roadmap whichwill align with the group level sustainability policies and international frameworks.
Through this mission we hope to create a future ready organization which can pre-emptimminent challenges address the needs of all stakeholders and continue to be a preferredpartner for its consumers thereby securing a common future for tomorrow.
In accordance with our sustainability vision and in terms of Regulation 34(2)(f) of theSEBI Listing Regulations a Sustainability and Business Responsibility Report forms a partof this Annual Report.
Details of significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and companys operations in future
No significant or material orders were passed by the Regulators or Courts or Tribunalswhich impact the going concern status and Companys operations in future other thanthe order(s) by the Honble High Courts of Judicature at Bombay and Gujarat w.r.t.Composite Scheme as enumerated hereinabove.
Employee Stock Option Scheme and Share Based Employee Benefits
Grant of share based benefits to employees is a mechanism to align the interest ofemployees with those of the Company to provide them with an opportunity to share thegrowth of the Company and also to foster the long-term commitment.
The SEBI (Share Based Employee Benefits) Regulations 2014 ("Regulations")govern the grant of share based benefits to the employees of the Company such as EmployeeStock Options ("Stock Options") Restricted Stock Units ("RSUs")Stock Appreciation Rights ("SARs") etc.
NRC inter alia administers implements and monitors the Schemes and plans therebygoverning the grant of Share Based Employee Benefits to the employees of the Company andaccordingly administration and implementation of the "Employee Stock Option Scheme -2013" ("Scheme") and "Stock Appreciation Rights Plan - 2013"("Plan") now comes under the scope of NRC.
During the year under review no Stock Options and/or RSUs and/ or SARs were grantedpursuant to the provisions of the Scheme and/ or plan. Pursuant to the provisions of theScheme and Plan 195116 Stock Options and 66152 SARs respectively vested in theeligible grantees. No RSUs were vested in the grantees pursuant to the provisions of theScheme. Further the Stakeholders Relationship Committee of the Board allotted 11597(Eleven Thousand Five Hundred Ninety Seven) Equity Shares of Rs. 10/-(Rupees Ten only)each credited as fully paid-up upon exercise of Stock Options by the eligible grantees.
Before effectiveness of the Composite Scheme ABNL had under its Employee Stock OptionScheme ("ABNL ESOS") granted RSUs to some of the employees of Madura Fashion& Lifestyle division by virtue of them then being employees of ABNL. Howeverpursuant to the effectiveness of the Composite Scheme such employees became employees ofthe Company w.e.f. January 9 2016 by when the RSUs granted by ABNL had not vested inthem as per the vesting terms of the ABNL ESOS. Accordingly for the benefit of all suchemployees NRC vide its Circular Resolution passed on May 11 2016 granted 279544 RSUsto such eligible employees.
In terms of the provisions of the regulations the details of the Stock Options and/ orRSUs and/ or SARs already granted under the abovementioned Scheme and/ or plan areavailable on the website of the Company i.e. www.abfrl.com. Further the same have beendisclosed as part of the Financial Statements of the Company for the year under review.
A certificate from the Statutory Auditor confirming that the Scheme has beenimplemented in accordance with the Guidelines and the Regulations will be placed at theensuing Ninth Annual General Meeting for inspection by the Members.
Particulars of Employees as per Section 197(12) of the Act and Rule 5 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014
Disclosures with respect to the remuneration of Directors and employees as requiredunder Section 197 (12) of the Act and Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is annexed as Annexure VIII tothis Report.
In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the names and other particulars of the employees drawing remuneration inexcess of the limits set out in the said rules forms part of the Annual Report. Howeverin line with the provisions of the first proviso to Section 136(1) of the Act the reportsand accounts as set out therein are being sent to all Members of the Company excludingthe aforesaid information about the employees and the same will be made available at theRegistered Office of the Company during working hours before 21 days of the Annual GeneralMeeting. Any member interested in obtaining such information may write to the CompanySecretary and the same will be made available to any such member on request. Such detailsare also available on the website of the Company i.e. www.abfrl.com.
Disclosures as per the Sexual Harassment of Women at the Workplace (PreventionProhibition and Redressal) Act 2013
Company is committed towards providing a work environment that is professional andmature free from animosity and one that reinforces our value of integrity that includesrespect for the individual and in pursuance to the same. Accordingly Company has a Policyon Prevention of Sexual Harassment at Workplace which is applicable to all employees ofthe Company as per the provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013.
During the year under review no cases were filed pursuant to the Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013 and 26 complaintswere received out of which all 26 complaints have been investigated and resolved aftertaking an appropriate action and none of the complaints remain pending as of March 312016.
AWARDS AND RECOGNITIONS
Your Company has been proud recipient of the following Awards and Recognitions duringthe year under review:
Madura Fashion & Lifestyle division
The Top Apparel Innovator 2016 for its Product Management LifecycleSolution by US-based "Apparel" Magazine.
One of the Best Corporate Brands 2016 at the Economic Times BestCorporate Brands Summit.
Most Trusted Premium Formal Wear brand at the 13thFranchisee Awards 2015.
'Golden Star - Six Sigma Award' for Service Quality Excellence by The WorldQuality Congress.
Gold for 4 projects in the Six Sigma and Kaizen category by TheCurriculum Concept of Quality Circle Bengaluru.
Other Awards and accolades
|Name of the Brand ||Award/ Recognition ||By/ At |
|Louis Philippe ||Comfort Vote Quality Label ||German Testing and Research Centre Hohenstein Institute |
|Van Heusen ||The Most Admired Retailer of the Year for Store Design award ||Images Retail Awards 2015 |
| ||Best Loyalty Program award ||Single/ Speciality format at the 9th Loyalty Summit by AIMIA |
| ||Best Use of Customer Experience Technology award ||Customer Experience Summit |
| ||- Best Customer Loyalty Program ||Asia Retail Congress |
| ||- Best Retail Marketing Campaign Offline || |
| ||- Best Innovative Retail Concept || |
| ||Best Loyalty Program award in the single brand retail sector category ||8th Loyalty Summit by AIMIA |
| ||Most Trusted Premium Formal Wear brand award ||Brand Equity survey of The Economic Times |
| ||'Social Media Campaign of the Year' award ||Social Media Awards |
|Allen Solly ||Social Media award for The Best use of Twitter ||Global Youth Marketing Forum |
|Peter England ||Retail Excellence Award for Best Technology Initiative/ Implementation and Customer Loyalty Program ||Asia Retail Congress 2015 |
| ||'CII 5S Excellence Award' in the 3rd place under Large Scale Service Industry category ||CII 5S Excellence Award |
|Trendin.com ||Gold for the Best E-Commerce Website ||Internet and Mobile Association of India (IAMAI) |
Recognised as Indias Most Trusted Apparel Retail Brand for the3rd consecutive year in the Brand Equity survey of The Economic Times.
Greencard Loyalty program of Pantaloons was awarded with 3 trophiesat the 9th Loyalty Awards 2016 by AIMIA in the following categories:
Best Direct Marketing Campaign of the Year.
Best use of Customer Experience Technology Award of the Year.
Best use of Customer and Data Analytics in Loyalty Program.
Greencard Loyalty program of Pantaloons was awarded the BestDirect Marketing Campaign of the Year at the 8th Loyalty Awards 2015 byAIMIA.
Companys goal is no fatal accidents at work at any of our locations.In order to ensure this Company has several mechanisms in place to assess manage andprovide safety. An Operational Health and Safety ("OHS") policy has been rolledout in line with the Aditya Birla Group policy. OHS design development and implementationhas been carried out in all operations under direct control. Company has instilled anEnvironment Health & Safety ("EHS") committee which conducts monthlymeetings to track performance. Regular safety audits are conducted including third partyassessments. The system of 5S has been well implemented in warehouses and thesame is being worked on in the factories and offices.
During the year there were zero lost time injuries or fatalities in operations undercontrol of the Company.
Your Company has not issued any shares with differential voting rights.
There was no revision in the financial statements for the financial year/ duringthe year.
Your Company did not issue any sweat equity shares.
We place on record our sincere appreciation for the continued support which the Companyhas received from its customers vendors suppliers business associates bankersfinancial institutions investors Central and State Governments promoters groupcompanies and above all employees of the Company.
| ||For and on behalf of the Board of Directors || |
| ||Pranab Barua ||Bharat Patel |
| ||Managing Director ||Independent Director |
|Place : Bengaluru || || |
|Date : May 25 2016 || || |
1. Considering prominence of the matters pertaining to "Allotment to NRIShareholders of ABNL holding shares on Repatriation basis" and "Acquisition ofForever 21 India Business" Management of the Company has incorporated and reportedtheir latest status in the Directors Report for better understanding.
2. Certain statements in the "Managements Discussion and Analysis" maynot be based on historical information or facts and may be "forward lookingstatements" within the meaning of applicable securities laws and regulationsincluding but not limited to those relating to general business plans and strategy of theCompany its future outlook and growth prospects future developments in its businessesits competitive and regulatory environment and managements current views andassumptions which may not remain constant due to risks and uncertainties. Actual resultscould differ materially from those expressed or implied. Important factors that could makea difference to the Companys operations include global and Indian demand supplyconditions finished goods prices feed stock availability and prices cyclical demand andpricing in the Companys principal markets changes in Government regulations taxregimes competitors actions economic developments within India and the countries withinwhich the Company conducts business and other factors such as litigation and labournegotiations. Company assumes no responsibility to publicly amend modify or revise anystatement on basis of any subsequent development information or events or otherwise.The "Managements Discussion and Analysis" does not constitute aprospectus offering circular or offering memorandum or an offer to acquire any shares andshould not be considered as a recommendation that any investor should subscribe for orpurchase any of the Companys securities. The financial figures have been rounded offto the nearest Rupee One Crore.
The primary function of the Nomination and Remuneration Committee is to assist theBoard of Directors in fulfilling its governance and supervisory responsibilities relatingto human resource management and compensation.
Nomination and Remuneration Committee ("the Committee" or "NRC") isconstituted by the Board of Directors ("Board") of Aditya Birla Fashion andRetail Limited (formerly known as Pantaloons Fashion & Retail Limited)("Company") in its meeting held on July 31 2014 pursuant to the provisions ofSection 178 of the Companies Act 2013 and applicable rules made thereunder("Act") and Clause 49 of the erstwhile Equity Listing Agreement ("ListingAgreement"). The constitution composition and role of the Committee is also in linewith the provisions Regulation 19 read with Part D of Schedule II of the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015.
This policy is enacted mainly to deal with the following matters falling within thescope of the Committee:
a. To institute processes which enable the identification of individuals who arequalified to become Directors and who may be appointed as Key Managerial Personnel and/orin senior management and recommend to the Board of Directors their appointment and removalfrom time to time;
b. To devise a policy on Board Diversity;
c. To review and implement the succession and development plans for Managing DirectorExecutive Directors and Senior Managers(2);
d. To formulate the criteria for determining qualifications positive attributes andindependence of directors;
e. To establish evaluation criteria of Board its Committees and each Director.
2. BOARD OF DIRECTORS
i) Identification Nomination & Board Diversity
The Company recognises and embraces the benefits of having a diverse Board to enhancethe quality of its performance.
In designing the Boards composition Board diversity shall be considered from anumber of aspects including but not limited to gender age cultural and educationalbackground ethnicity professional experience skills knowledge and length of service.
The ultimate decision will be based on merit and contribution that the selectedcandidates will bring to the Board. The Boards composition (including genderethnicity age length of service) will be disclosed in the Corporate Governance Reportannually.
ii) Evaluation Process
The Committee shall annually evaluate the performance of the Board as per the approvedEvaluation Framework and conduct an assessment of the performance of each of the Directorsindividually against the criteria and Evaluation Framework as determined and approved bythe Board/ Committee.
(1) Amended vide a resolution of the Board of Directors of the Company passed at itsmeeting held on January 9 2016 for reflecting
- change of name of the Company pursuant to the Composite Scheme of Arrangement amongstthe Company Aditya Birla Nuvo Limited Madura Garments Lifestyle Retail Company Limitedand their respective shareholders and creditors under Sections 391 to 394 of theCompanies Act 1956 and
- change in applicable provisions pursuant to repeal of Equity Listing Agreement andenactment of Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015.
(2) "Senior Managers" means members of the Companys core managementteam as determined from time to time by the Committee excluding Board of Directors andcomprising at least all members of management one level below the executive directorsincluding the functional heads.
The performance evaluation of Independent Directors shall be done by the entire Boardof Directors on the basis of recommendations of the Committee (excluding the directorbeing evaluated).
iii) Training and Development
The Company shall periodically organise sessions under the familiarisation programmefor the Directors including Independent Directors to apprise them with the businessoperations of the Company and also let them know their roles rights and responsibilitiesin the Company to enable them to make effective contribution and discharge their functionsas a Board Member.
The Committee shall approve training policies including new director orientation andcontinuing education requirements or expectations for Non-executive and IndependentDirector.
iv) Succession Planning
The Committee shall review and implement succession and development plans.
v) Criteria for determining qualifications positive attributes and independence ofdirectors
The Committee shall follow the principles enshrined in the Act and the ListingRegulations while fixing the criteria for determining the qualifications positiveattributes and independence of Directors at all times.
3. KEY MANAGERIAL PERSONNEL ("KMP") AND OTHER SENIOR MANAGERS(2)
i) Identification & Nomination
The Committee shall identify the persons who may be appointed as KMP and other SeniorManagers taking into consideration qualifications experience positive attributesskills and competencies and such other factors as it deems appropriate.
The Committee shall recommend to the Board the appointment and removal of KMP and otherSenior Managers persons of the Company.
ii) Training & Development
The Committee shall be responsible to maintain a framework for talent/ competencydevelopment strategy for KMP and other Senior Managers of the Company.
iii) Evaluation Process
The Committee shall review and approve the evaluation of performance of KMP and SeniorManagers of the Company.
iv) Terminations and Severances
The Committee shall also review terminations/ replacements/ severance of employments ofKMP and other Senior Managers.
v) Succession Planning
The Committee shall review approve and aid the Board in succession and emergencypreparedness plan for KMP and other Senior Managers as may be required from time to time.
4. REVIEW AND AMENDMENTS
i) The Committee may issue the guidelines procedures formats reporting mechanism andmanual in supplement and better implementation to this Policy if it thinks necessary.
ii) The Committee shall re-assess and review the adequacy of this charter annually andpropose and recommend changes to the Board for approval as and when necessary.
iii) This Policy may be amended or substituted by the Board as and when requiredspecifically where there are any statutory amendments necessitating the change in thepolicy.
Aditya Birla Fashion and Retail Limited (formerly known as Pantaloons Fashion &Retail Limited) ("the Company") an Aditya Birla Group Company adopts/ shalladopt this Executive Remuneration Philosophy/ Policy as applicable across Group Companies.This philosophy/ policy is detailed below.
ADITYA BIRLA GROUP: EXECUTIVE REMUNERATION PHILOSOPHY/ POLICY(1)
At the Aditya Birla Group we expect our executive team to foster a culture of growthand entrepreneurial risk-taking. Our Executive Remuneration Philosophy/ Policy supportsthe design of programs that align executive rewards - including incentive programsretirement benefit programs promotion and advancement opportunities - with the long-termsuccess of our stakeholders.
Our business and organisational model
Our Group is a conglomerate and organised in a manner such that there is sharing ofresources and infrastructure. This results in uniformity of business processes and systemsthereby promoting synergies and exemplary customer experiences.
I. Objectives of the Executive Remuneration Program
Our executive remuneration program is designed to attract retain and reward talentedexecutives who will contribute to our long-term success and thereby build value for ourshareholders. Our executive remuneration program is intended to:
1. Provide for monetary and non-monetary remuneration elements to our executives on aholistic basis.
2. Emphasize "Pay for Performance" by aligning incentives with businessstrategies to reward executives who achieve or exceed Group business and individualgoals.
Our Executive Remuneration Philosophy/ Policy applies to the following:
1. Directors of the Company.
2. Key Managerial Personnel: Chief Executive Officer and equivalent (eg: DeputyManaging Director) Chief Financial Officer and Company Secretary.
3. Senior Management.
III. Business and Talent Competitors
We benchmark our executive pay practices and levels against peer companies in similarindustries geographies and of similar size. In addition we look at secondary reference(internal and external) benchmarks in order to ensure that pay policies and levels acrossthe Group are broadly equitable and support the Groups global mobility objectivesfor executive talent. Secondary reference points bring to the table the executive paypractices and pay levels in other markets and industries to appreciate the differences inlevels and medium of pay and build in as appropriate for decision making.
IV. Executive Pay Positioning
We aim to provide competitive remuneration opportunities to our executives bypositioning target total remuneration (including perks and benefits annual incentivepay-outs long term incentive pay-outs at target performance) and target total cashcompensation (including annual incentive pay-outs) at target performance directionallybetween median and top quartile of the primary talent market. We recognise the size andscope of the role and the market standing skills and experience of incumbents whilepositioning our executives.
We use secondary market data only as a reference point for determining the types andamount of remuneration while principally believing that target total remuneration packagesshould reflect the typical cost of comparable executive talent available in the sector.
(1) Amended vide a resolution of the Board of Directors of the Company passed at itsmeeting held on January 9 2016 for reflecting:
- change of name of the Company pursuant to the Composite Scheme of Arrangement amongstthe Company Aditya Birla Nuvo Limited Madura Garments Lifestyle Retail Company Limitedand their respective shareholders and creditors under Sections 391 to 394 of the CompaniesAct 1956 and
- change in applicable provisions pursuant to repeal of Equity Listing Agreement andenactment of Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015.
V. Executive Pay-Mix
Our executive pay-mix aims to strike the appropriate balance between key components:(i) Fixed Cash compensation (Basic Salary + Allowances) (ii) Annual Incentive Plan (iii)Long-Term Incentives (iv) Perks and Benefits.
Annual Incentive Plan:
We tie annual incentive plan pay-outs of our executives to relevant financial andoperational metrics achievement and their individual performance. We annually align thefinancial and operational metrics with priorities/ focus areas for the business.
Our Long-term incentive plans incentivise stretch performance link executiveremuneration to sustained long term growth and act as a retention and reward tool.
We use stock options as the primary long-term incentive vehicles for our executives aswe believe that they best align executive incentives with stockholder interests.
We grant restricted stock units as a secondary long term incentive vehicle to motivateand retain our executives.
VI. Performance Goal Setting
We aim to ensure that for both annual incentive plans and long term incentive plansthe target performance goals shall be achievable and realistic.
Threshold performance (the point at which incentive plans are paid out at theirminimum but non-zero level) shall reflect a base-line level of performance reflectingan estimated 90% probability of achievement.
Target performance is the expected level of performance at the beginning of theperformance cycle taking into account all known relevant facts likely to impact measuredperformance.
Maximum performance (the point at which the maximum plan payout is made) shall be basedon an exceptional level of achievement reflecting no more than an estimated 10%probability of achievement.
VII. Executive Benefits and Perquisites
Our executives are eligible to participate in our broad-based retirement health andwelfare and other employee benefit plans. In addition to these broad-based plans theyare eligible for perquisites and benefits plans commensurate with their roles. Thesebenefits are designed to encourage long-term careers with the Group.
Other Remuneration Elements
Each of our executives is subject to an employment agreement. Each such agreementgenerally provides for a total remuneration package for our executives includingcontinuity of service across the Group Companies.
We limit other remuneration elements for e.g. Change in Control ("CIC")agreements severance agreements to instances of compelling business need or competitiverationale and generally do not provide for any tax gross-ups for our executives.
Risk and Compliance
We aim to ensure that the Groups remuneration programs do not encourage excessiverisk taking. We review our remuneration programs for factors such as remuneration mixoverly weighted towards annual incentives uncapped pay-outs unreasonable goals orthresholds steep pay-out cliffs at certain performance levels that may encourageshort-term decisions to meet pay-out thresholds.
Claw back Clause
In an incident of restatement of financial statements due to fraud or non-compliancewith any requirement of the Companies Act 2013 and the rules made thereafter we shallrecover from our executives the remuneration received in excess of what would be payableto him/ her as per restatement of financial statements pertaining to the relevantperformance year.
The Group and Business Centre of Expertise teams will assist the Nomination andRemuneration Committee in adopting interpreting and implementing the ExecutiveRemuneration Philosophy/ Policy. These services will be established through"arms length" agreements entered into as needs arise in the normal courseof business.
AUDITORS CERTIFICATE ON CORPORATE GOVERNANCE
Aditya Birla Fashion and Retail Limited
701-704 7th Floor
Skyline Icon Business Park
86-92 Off A.K.Road
Andheri (East) Mumbai - 400059
We have examined the compliance of conditions of corporate governance by Aditya BirlaFashion and Retail Limited (formerly Pantaloons Fashion & Retail Limited) for theyear ended on March 31 2016 as stipulated in chapter IV of Securities and Exchange Boardof India (Listing Obligations and Disclosure Requirements) Regulations 2015 pursuant tothe Listing Agreement of the said Company with stock exchange(s).
The compliance of conditions of corporate governance is the responsibility of themanagement. Our examination was limited to procedures and implementation thereof adoptedby the Company for ensuring the compliance of the conditions of the Corporate Governance.It is neither an audit nor an expression of opinion on the financial statements of theCompany.
In our opinion and to the best of our information and according to the explanationsgiven to us we certify that the Company has complied with the conditions of CorporateGovernance as stipulated in the provisions as specified in chapter IV Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 pursuant to Listing Agreement of the said Company with stock exchange(s).
We further state that such compliance is neither an assurance as to the futureviability of the Company nor the efficiency or effectiveness with which the management hasconducted the affairs of the Company.
For S R B C & CO LLP
ICAI Firm Registration Number: 324982E/E300003
Per Vijay Maniar
Membership No.: 36738
Date: May 25 2016