You are here » Home » Companies » Company Overview » Aditya Birla Fashion & Retail Ltd

Aditya Birla Fashion & Retail Ltd.

BSE: 535755 Sector: Industrials
NSE: ABFRL ISIN Code: INE647O01011
BSE LIVE 15:40 | 22 Sep 164.55 -3.45
(-2.05%)
OPEN

167.00

HIGH

167.60

LOW

163.75

NSE 15:52 | 22 Sep 164.10 -3.35
(-2.00%)
OPEN

167.10

HIGH

167.55

LOW

163.20

OPEN 167.00
PREVIOUS CLOSE 168.00
VOLUME 42351
52-Week high 188.60
52-Week low 127.00
P/E 231.76
Mkt Cap.(Rs cr) 12,697
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 167.00
CLOSE 168.00
VOLUME 42351
52-Week high 188.60
52-Week low 127.00
P/E 231.76
Mkt Cap.(Rs cr) 12,697
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Aditya Birla Fashion & Retail Ltd. (ABFRL) - Director Report

Company director report

DIRECTORS

Dear Members

Your Directors are pleased to present the Seventh Annual Report of your Companytogether with the Audited Statement of Accounts for the financial year ended 31st March2014.

Financial Performance

During the year business invested in organisation building stores expansion peopleand processes. The Company opened 14 new Pantaloons stores and closed two stores duringthe year.

The Company reported revenue at Rs. 1661 Crore during fiscal 2013-14. Merchandiseavailability issue and subdued consumer sentiments impacted the sales growth. Gross marginimproved year on year owing to improved product mix and better pricing. Howeverbottom-line was strained reflecting full effect of organisation building costs comparedto allocation of costs till last year. The Company posted EBITDA excluding other income atRs. 33 Crore as against Rs. 66 Crore during last year.

(Rs. in Crore)

Particulars 2013-14 2012-13
Revenue 1661 1285
EBITDA* 39 129
Finance cost 117 144
EBDT (79) (14)
Depreciation 109 54
Earnings before tax (188) (69)
Provision for Taxation
Net Profit/(Loss) (188) (69)

* Includes other income of Rs. 5 Crore (Previous year: Rs. 63 Crore)

The Company's financials for 2012-13 include nine months financials of Pantaloonsbusiness transferred to the Company with effect from the appointed date i.e. 1st July2012. Hence to that extent performance is not comparable with that of the current year.

Scheme of Demerger

During the year under review the Scheme of Arrangement under Sections 391-394 of theCompanies Act 1956 entered into between Future Retail Limited (earlier known asPantaloon Retail (India) Limited) ("FRL") the Company and their respectiveshareholders and creditors and Indigold Trade and Services Limited ("ITSL") (asthe shareholder of the Company) regarding the demerger of "the Pantaloons FormatBusiness" ("DemergedUndertaking")of the FRL ("Scheme") was madeeffective by us (i.e. the Board of Directors of your Company) in our meeting held on 8thApril 2013 ("Effective Date") after receipt of all the requisite approvals andon completion of all the conditions precedents enumerated in the Scheme. Accordingly asper the terms of the Scheme the entire Demerged Undertaking was transferred to and vestedin your Company w.e.f. 1st July 2012 ("Appointed Date under the Scheme").

In terms of the Scheme

- the name of the Company was changed from "Peter England Fashions and RetailLimited" to "Pantaloons Fashion & Retail Limited"; and

- the Authorised Equity Share Capital of the Company was increased from Rs. 10 Crore toRs. 100 Crore.

Effectiveness of the Scheme

Upon this Scheme coming into effect in consideration of the transfer of the DemergedUndertaking your Company allotted 1 Equity Share of Rs. 10/- (each credited as fullypaid) in the capital of the Company to all the Equity Shareholders of FRL (as per theinformation available as on 18th April 2013 i.e. the Record Date) for every 5 (five)fully paid up FRL Equity Shares/FRL DVRs held by them (the "Share EntitlementRatio").

Accordingly total of 46316518 Equity Shares of the Company were allotted to theshareholders of FRL on 19th April 2013.

Also the 800 OFCDs (Optionally Fully Convertible Debentures) of Rs. 10000000 eachof the Company issued by your Company to ITSL which were convertible into 45977011Equity shares of Rs. 10/-each on effectiveness of the Scheme were converted into45977011 Equity shares of Rs. 10/- each of the Company on 8th April 2013.

Categorywise shareholding pattern of your Company as on 31st March 2014 isseparately provided under the Shareholding Information Section of this Annual Report.

Open Offer

Also pursuant to the terms of the Scheme ITSL and Aditya Birla Nuvo Limited (i.e.Ultimate Holding Company of your Company) made an Open Offer to the shareholders of theCompany for acquiring 23114868 Equity Shares representing 24.91% of Voting Capital ofthe Company.

On completion of Open Offer ITSL alongwith ABNL acquired 16579185 Equity Shares ofRs. 10/- each constituting 17.87% of post issue paid up capital of the Company.

Change of Registered Office

The Registered office of the Company was also changed from "A-4 Aditya BirlaCentre S. K. Ahire Marg Worli Mumbai 400 030 Maharashtra India" to"701-704 7th Floor Skyline Icon Business Park 86-92 Off. Andheri-Kurla RoadMarol Village Andheri (East) Mumbai 400059 Maharashtra India".

Listing of Shares on Stock Exchanges

During the year the Equity Shares of the Company also got listed on BSE Limited("BSE") and National Stock Exchange of India Limited ("NSE") on 17thJuly 2013 and accordingly provisions of the Equity Listing Agreement as entered intowith BSE and NSE became applicable from such date.

Management Discussion and Analysis Report

As stipulated under Clause 49 of the Equity Listing Agreement entered into with BSE andNSE the Management Discussion and Analysis Report for the year under review is providedin a separate section forming part of this Annual Report.

Dividend

In view of the loss for the year under review your Directors do not recommend paymentof any dividend for the financial year 2013-14.

Finance

Pursuant to the Scheme a debt of Rs. 1600 Crore was transferred to the Company withhuge interest burden. With a view to optimise the Finance Cost it was decided toreshuffle the debt portfolio. Accordingly post effectiveness of the Scheme the Companyraised term loan of Rs. 600 Crore and Non-convertible Debentures (NCDs) of Rs. 300 Croreand repaid Rs. 800 Crore out of the transferred debt.

Your Company continues to explore various options for bringing down the cost ofborrowings and also for procuring funds at competitive cost which inter-alia includeavailment of short-term instruments like commercial paper working capital borrowing longterm loans for expansion at competitive terms. The average interest rate of long termportfolio got reduced to ~ 10.40%.

Fixed Deposits

During the year under review the Company has not accepted any deposit under Section58A of the Companies Act 1956 read with Companies (Acceptance of Deposits) Rules 1975.

As on 31 st March 2014 there were no deposits which were unclaimed and due forrepayment.

Awards and Recognition

Award for "Best Usage of Twitter" at Social Media Awards- 2013

During the year the Company in a marketing campaign created a micro site on Twitterunder the name of "Wish Wardrobe" whereon the followers of the Company couldpost their wishes about the products of the Company that they wished to include in theirwardrobe. Over the course of the said campaign which lasted for seven days total of 5091wish requests were received out of which 15 were fulfilled by the Company. The campaignwas a huge success and the same ended up winning an award at the "Social Media Awards- 2013" held on 13th February 2014 for the "Best usage of Twitter for amarketing campaign".

Recognised as the "Most Trusted Brand in Apparel Retail Category"

Nielsen an independent agency which specialises in conducting nationwidesurveys/research projects conducts an Independent survey for "Economic Times' BrandEquity" on annual basis which is among the largest research project of its kind inIndia. The intention of the survey is to identify the "Most Trusted Brands" thatpossess the most special ingredient - the consumer's trust and the Company is proud tohave been recognised as the "Most Trusted Brand in Apparel Retail Category" asper the results of the survey conducted during the year under review.

Subsidiary Company

The Company does not have any subsidiary as on 31 st March 2014 and as on date of thisReport.

Directors

Resignation of Director(s)

During the year under review Mr. Ashish Dikshit (din: 01842066) Mr. S. Visvanathan(din: 02312556) Mr. Anil Rustogi (din: 02678608) Mr. Devendra Bhandari (din: 00339397)and Mr. Manoj Kedia (DIN: 00020419) resigned from their respective Directorships of theCompany w.e.f. 19th April 2013.

Appointments of the Director(s)

During the year under review i.e. on 19th April 2013 Mr. P. Murari (DIN: 00020437)Mr. Bharat Patel (DIN: 00060998) and Dr. Rakesh Jain (din: 00020425) were appointed asAdditional Directors on the Board of the Company pursuant to Articles of Association ofthe Company and provisions of Section 260 of the Companies Act 1956 and theirappointments as Non-executive Directors of the Company were approved by the Shareholdersof the Company at the Sixth Annual General Meeting held on 23rd August 2013.

Further as per Articles of Association of the Company and provisions of the CompaniesAct 2013 Mr. Sushil Agarwal (DIN: 00060017) retires by rotation at the ensuing SeventhAnnual General Meeting and being eligible for re-appointment he seeks re-appointment assuch.

Appointment of Managing Director

Pursuant to a letter dated 17th October 2013 from Aditya Birla Nuvo Limited therebynominating Mr. Pranab Barua (DIN: 00230152) for the post of Managing Director of yourCompany and also considering his position as the Business Director of Apparel Business ofthe Aditya Birla Group alongwith his rich experience and expertise the Board of Directorsof your Company at its meeting held on 25th October 2013 appointed Mr. Pranab Barua(then Non-executive Director of the Company) as the Managing Director of the Company fora period of 5 years w.e.f. 25th October 2013 subject to the approval of theShareholders of the Company in the ensuing Seventh Annual General Meeting of the Company.Resolution for Mr. Barua's appointment as Managing Director alongwith the detailed termsof his appointment is more particularly set out in the Notice of the ensuing SeventhAnnual General Meeting.

Appointment of Independent Director(s)

Mr. P. Murari and Mr. Bharat Patel were appointed as the Non-executive Directors of theCompany in the Sixth Annual General Meeting and were liable to retire by rotation. Alsoin terms of the provisions of Clause 49 of the Equity Listing Agreement entered into withBSE and NSE Mr. Murari and Mr. Patel were considered as "Independent Non-executiveDirectors".

However pursuant to the enactment of Companies Act 2013 and in terms of theprovisions of Section 149 150 152 and other applicable provisions of the Companies Act2013 read with Schedule IV and the Companies (Appointment and Qualification of Directors)Rules 2014 and Clause 49 of the Equity Listing Agreement the Company needs tospecifically appoint "Independent Director(s)" on its Board. Accordingly theBoard has vide a Circular Resolution dated 3rd July 2014 approved the appointment ofMr. P. Murari and Mr. Bharat Patel as "Independent Director(s)" for a term offive years beginning from the conclusion of the ensuing Seventh Annual General Meeting ofthe Company till the conclusion of the Twelfth Annual General Meeting of the Company. TheCompany has also received the requisite notice in writing from shareholder(s) of theCompany under Section 160 of the Companies Act 2013 signifying their intention topropose the candidature of Mr. Murari and Mr. Patel for the office of IndependentDirectors of the Company. Accordingly resolutions for their appointment as IndependentDirector(s) are more particularly set out in the Notice of the ensuing Seventh AnnualGeneral Meeting of your Company.

Items seeking your approval on the above are included in the Notice convening theAnnual General Meeting together with a brief particulars of the Directors being appointed/ re-appointed.

Directors' Responsibility Statement

The financial statements of the Company for the FY 2013-14 are prepared in accordancewith the applicable Accounting Standards issued by the Institute of Chartered Accountantsof India the requirements of the Companies Act 1956 the regulations/guidelines issuedby SEBI and the provisions of Equity Listing Agreement to the extent they are applicableas such. There are no material departures from the applicable accounting standards.

The Board of Directors of the Company accepts the responsibility for the integrity andobjectivity of the financial statements. The Accounting Policies used in the preparationof the financial statements have been consistently applied unless specifically statedotherwise in the notes accompanying relevant tables of the financial statements. Theestimates and judgements related to the financial statements have been made in a prudentand responsible manner so as to give a true and fair view of the state of affairs of theCompany as at 31st March 2014 and of the accounts for the FY 2013-14.

The Board of Directors has taken sufficient care to maintain adequate accountingrecords in accordance with the provisions of the Companies Act 1956 to safeguard theassets of the Company and to prevent and detect fraud and other irregularities. The Boardof Directors also confirm that the annual accounts of the Company are prepared on a goingconcern basis.

Corporate Governance

As mentioned above Equity Shares of the Company were listed on BSE and NSE w.e.f. 17thJuly 2013 and since then the Company has duly complied with the Corporate Governancerequirements as set out under Clause 49 of the Equity Listing Agreement entered into withBSE and NSE.

The Company is committed to follow the best practices of good Corporate Governanceincluding the requirements under Clause 49 of Equity Listing Agreement and Board ofDirectors is responsible to ensure the same from time to time.

M/s. S.R. Batliboi Co & LLP Chartered Accountants Statutory Auditors of theCompany have vide their certificate dated 5th May 2014 confirmed that the Company iscompliant with the conditions stipulated in the Clause 49 of the Equity Listing Agreement.The said certificate is annexed to this report as Annexure A.

A separate section on Corporate Governance forms part of this Annual Report.

Human Resource

The Human Resource philosophy and strategy of your Company is to build a highperforming organization with aligned and engaged employees in a culture of leadershipcollaboration and growth. Deployment of this strategy through a planned implementation ofHuman Resources interventions and programs has successfully built and sustained yourCompany's standing as one of India's most admired and valuable corporations.

Employees Stock Options (ESOPs)

The grant of stock options 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.

Your Company has constituted an ESOP Compensation Committee of the Board of Directors("the Committee") on 23rd May 2013 for the purpose of administrationimplementation and monitoring of Employees Stock Options Scheme and plans thereunder moreparticularly as per the provisions of the Securities and Exchange Board of India(Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines 1999.

The Committee and Board of Directors approved the "Pantaloons Employees StockOptions Plan Scheme - 2013" (the "ESOS - 2013" or the "Scheme")on 22nd July 2013. The same was approved by the Shareholders of the Company in the SixthAnnual General Meeting of the Company held on 23rd August 2013.

Pursuant to the approval of the Members at the Sixth Annual General Meeting of theCompany the Committee at its meeting held on 25th October 2013 finalised the Scheme andapproved the grant of Employees Stock Options ("options") Restricted StockUnits ("RSUs") (each being convertible into one equity share of the face valueof Rs. 10/- each of the Company) and Stock Appreciation Rights ("SARs") to theeligible permanent employees of the Company and to its holding and/or subsidiaryCompanies.

The particulars of Options / RSUs / SARs issued under ESOS - 2013 as required underClause 12 of Securities and Exchange Board of India (Employees Stock Option Scheme andEmployee Stock Purchase Scheme) Guidelines 1999 forms part of this Report and are moreparticularly set out in the Annexure B hereto.

Particulars of Employees

In terms of the provisions of Section 217(2A) of the Companies Act 1956("Act") read with Companies (Particulars of Employees) Rules 1975 as amendedthe names and other particulars of employees are set out in the Annexure to this Report.

However having regard to the provisions of Section 219(1)(b)(iv) of the said Act theAnnual Report excluding the aforesaid information is being sent to all the members of theCompany and others entitled thereto. The said information is available for inspection atthe Registered Office of the Company during its working hours. Any member interested inobtaining such particulars may write to the Company Secretary at the Registered Office ofthe Company.

Auditors and Auditors' Report

M/s. S.R. Batliboi Co & LLP Chartered Accountants re-appointed as the StatutoryAuditors of the Company by the Shareholders of the Company at the Sixth Annual GeneralMeeting for the Financial Year 2013-14 would be retiring at the conclusion of the ensuingSeventh Annual General Meeting.

However M/s. S.R. Batliboi Co & LLP Chartered Accountants have expressed theirunwillingness to continue as the Statutory Auditors of your Company vide their letterdated 18th April 2014 ("said letter"). The said letter was placed before theAudit Committee of the Board of Directors and Board of Directors separately at theirrespective meetings held on 5th May 2014 and the Audit Committee and Board of Directorshave taken the same on record. Accordingly they shall hold office only till theconclusion of the forthcoming Annual General Meeting of your Company.

It is proposed to appoint M/s. S. R. B. C & Co. LLP a firm of CharteredAccountants in the same network of firms as M/s. S.R. Batliboi Co & LLP CharteredAccountants to act as the Statutory Auditors of your

Company. M/s. S. R. B. C & Co. LLP have confirmed their willingness to be appointedas the Statutory Auditors of the Company more particularly as per the provisions ofSection 139 and other applicable provisions of the Companies Act 2013 vide their letterdated 21st April 2014. The Audit Committee of the Board of Directors and Board ofDirectors in their meeting held on 5th May 2014 have approved the appointment of M/s. S.R. B. C & Co. LLP Chartered Accountants as the Statutory Auditors of your Companyfrom the conclusion of the Seventh Annual General Meeting until the conclusion of theEighth Annual General Meeting of the Company; however subject to the approval of theShareholders of the Company in the ensuing Annual General Meeting.

M/s. S.R. Batliboi Co & LLP Chartered Accountants i.e. the retiring auditors ofthe Company have duly audited the Annual Accounts of the Company and have provided theirreport thereon which forms a part of this Annual Report. The Notes to the FinancialStatements are self-explanatory and do not call for any further comments.

Sustainable Development

Sustainability Mission of your Company has been detailed in a separate section whichforms part of this Annual Report.

Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo

The Company consciously makes all efforts to conserve energy across all its operations.Technology Absorption: Nil

Foreign Exchange Earnings and Outgo: Foreign Exchange Earnings and Outgo are stated onpage 74 in the notes to the Balance Sheet and Profit and Loss Account. The Company earnedNIL in foreign currency from Export of Goods and Foreign Exchange outgo was Rs. 6 Lakhs.

Acknowledgements

We place on record our sincere appreciation for the continued support which the Companyhas received from its customers suppliers investors promoters bankers group companiesand above all its employees.

Your Directors hereby state that the Company has devised proper system to ensurecompliance of all laws applicable to the Company.

For and on behalf of the Board of Directors
Place : Mumbai Pranab Barua
Date : 3rd July 2014 Managing Director

ANNEXURE A TO THE DIRECTORS' REPORT

AUDITORS' CERTIFICATE ON CORPORATE GOVERNANCE

To

The Members

Pantaloons Fashion & Retail Limited

701-704 7th Floor

Skyline Icon Business Park

86-92 Off A. K. Road

Marol Village

Andheri East Mumbai

We have examined the compliance of conditions of corporate governance by PantaloonsFashion & Retail Limited for the year ended on 31 st March 2014 as stipulated inClause 49 of the Equity Listing Agreement of the said Company with Stock Exchanges.

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 above mentioned Equity Listing Agreement.

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. BATLIBOI & CO. LLP

Chartered Accountants

Firm Registration No. 301003E

Per Vijay Maniar

Partner

Membership No.: 36738

Place : Chennai

Date : 5th May 2014

ANNEXURE B TO THE DIRECTORS' REPORT

Disclosure pursuant to Clause 12 of the Securities and Exchange Board of India(Employee Stock Option Scheme) Guidelines 1999

Details of Employee Stock Options ("Options") and Restricted Stock Units("RSUs") as on 31st March 2014

Sr. Particulars

Tranche 1

No. Options RSUs
a) Number of Options/RSUs Granted 830382 259849
b) The pricing Formula The ESOP Compensation Commi Committee") at its meeting held < the Exercise Price for Options an of the Securities and Exchange Option Scheme) Guidelines 199 Employee Stock Options Sche particularly stated as follows:- ttee of the Board of Directors ("the on 25th October 2013 determined d RSUs in terms of the provisions Board of India (Employee Stock 9 and also in terms of "Pantaloons me - 2013" ("Scheme") more
Rs. 102.10/- i.e. the closing price of the Equity Shares of the Company on National Stock Exchange of India Limited ("NSE") on 24* October 2013 [a day prior to the grant date] was fixed as the Exercise Price for each option. Rs. 10/- i.e. the face value of the Equity Shares of the Company was fixed as the Exercise Price for each RSUs.
c) Options and/or RSUs Vested NIL NIL
d) Options and/or RSUs Exercised NIL NIL
e) The total number of shares arising as a result of exercise of Options and/or RSUs NIL NIL
f) Options and/or RSUs forfeited/cancelled/lapsed NIL NIL
g) Variation in terms of options N.A. N.A.
h) Money realized by exercise of Options and/ or RSUs NIL NIL
i) Total number of Options and/or RSUs in force 830382 259849
j) Employee wise details of options granted
i) Senior Managerial Personnel*
• Mr. Pranab Barua- Managing Director 478045 109091
• Mr. Shital Mehta- Chief Executive Officer 88527 37879
• Mr. Manoj Kedia- Chief Financial Officer 38952 16667
• Ms. Geetika Anand Talwar-Company Secretary and Compliance Officer 7435 3181
ii) Any other employee who received a grant in any one year of option amounting to 5% or more of options granted during that year. NIL NIL
iii) Identified employees who were granted option. During any one year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant. NIL NIL
k) Diluted earnings per share Rs. (20.24) Rs. (20.24)
l) Difference between the employee compensation cost computed using the intrinsic value of the stock options and the employee compensation cost that shall have been recognized if the fair value of the options was used.

Rs. 97 Lakhs

m) The impact of this difference on profits and on EPS of the Company

(Rs. In Lakhs)

Particulars 31st March 2014
A. Loss after tax to be considered for EPS (18778)
B. Add : Compensation Cost as per
Intrinsic Value
Option -
RSU 33
Sub-total 33
C. Less : Compensation Cost as per Fair Value
Option 96
RSU 35
Sub- total 131
Adjusted Net Loss (A) + (B) - (C) (18876)

 

Earnings per Share (Rs.) Basic Diluted
As reported (20.24) (20.24)
As adjusted (20.34) (20.34)

 

n) (i) Weighted-average exercise prices and weighted-average fair values of options whose exercise price equals the market price of the stock

NA

 

(ii) Weighted-average exercise prices and weighted-average fair values of options whose exercise price is less than the market price of the stock Weighted Average Exercise price of options: Rs. 102.10/- Weighted Average Exercise price of RSUs: Rs. 10/-
Weighted Average fair value of options: Rs. 53/- Weighted Average fair value of RSUs: Rs. 96/-

 

(iii) Weighted-average exercise prices and weighted-average fair values of options whose exercise exceeds the market price of the stock

NA

o) A description of the method and significant assumptions used during the year to estimate the fair values of options including the following weighted-average information:

Black - Scholes Merton Formula

p) On the date of Grant (w.r.t. Options)
(i) risk-free interest rate (%) 8.58 8.58
(ii) expected life (No. of years) 5 5
(iii) expected volatility (%) 45.93 45.93
(iv) dividend yield (%) NIL NIL
(v) the price of the underlying share in market
at the time of option grant Rs. 103.55 Rs. 103.55