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Blue Star Ltd.

BSE: 500067 Sector: Engineering
NSE: BLUESTARCO ISIN Code: INE472A01039
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OPEN 468.55
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VOLUME 120
52-Week high 581.00
52-Week low 306.10
P/E 37.61
Mkt Cap.(Rs cr) 4461.81
Buy Price 467.45
Buy Qty 2.00
Sell Price 469.85
Sell Qty 20.00
OPEN 468.55
CLOSE 470.50
VOLUME 120
52-Week high 581.00
52-Week low 306.10
P/E 37.61
Mkt Cap.(Rs cr) 4461.81
Buy Price 467.45
Buy Qty 2.00
Sell Price 469.85
Sell Qty 20.00

Blue Star Ltd. (BLUESTARCO) - Director Report

Company director report

The Directors are pleased to present the 68th Annual Report and the AuditedFinancial Statement for the year ended March 31 2016 together with the Auditors’Report thereon.

FINANCIAL SUMMARY (STANDALONE) (Rs. in crores)
Particulars 2015-16 2014-15
Total Income 3547.37 3090.94
Profit before Interest Depreciation Amortisation Taxation and Exceptional Items 208.49 183.73
Financing costs 35.71 43.47
Depreciation and Amortisation 54.28 39.34
Profit before tax and exceptional items 118.50 100.92
Exceptional income 30.08 41.90
Profit after exceptional items before tax 148.58 142.82
Taxes (benefit) 25.81 (9.71)
Profit after tax 122.77 152.53
Add: Balance brought forward 302.70 222.46
Less: Adjustment to WDV of assets fully depreciated pursuant to Sch II of Companies Act 2013 - 2.91
Total available for appropriation 425.47 372.08
Less: Transfer to General Reserve 12.28 15.25
Interim Equity Dividend 58.47 -
Dividend payable on shares arising from amalgamation 3.50 -
Proposed Dividend - 44.97
Corporate Dividend Tax 12.62 9.16
Balance carried forward 338.61 302.70

DIVIDEND

Your Directors had declared first interim dividend of Rs.6.50 per equity share of Rs.2each on March 11 2016 for the financial year 2015-16. This dividend was paid on March 282016 to the shareholders of the Company as on record date of March 23 2016. Havingdeclared this interim dividend your Board has not recommended a final dividend for thefinancial year 2015-16.

TRANSFER TO RESERVES

With a view to conserve reserves for future growth your Directors propose to transferRs.12.28 crores from the Net Profits to the General Reserve.

OPERATING PERFORMANCE

Total Revenue of the Company increased by over 15% to Rs.3547.37 crores during the yearunder review.

Revenue from Electro-Mechanical Projects and Packaged Air Conditioning Systems hasgrown by 10% to Rs.1770.39 crores from Rs.1602.41 crores. This resulted in an increase of18% in the Segment Result from Rs.60.67 crores to Rs.71.58 crores.

Unitary Products’ revenue grew significantly by 19% to Rs.1579.43 crores asagainst last year. This resulted in an increase of 15% in the Segment Result fromRs.144.78 crores to Rs.165.93 crores.

EXPANSION

Blue Star Limited is in the process of expanding its manufacturing footprint. TheCompany would be setting up two plants one at Samba in the State of Jammu & Kashmirand another at Sri City in Andhra Pradesh. Total investment on this expansion is expectedto be Rs.215 crores over the next 3-4 years.

PERFORMANCE/FINANCIAL POSITION OF SUBSIDIARIES AND JOINT VENTURE COMPANIES

Subsidiary Companies:

a) Blue Star Engineering & Electronics Limited (formerly known as Blue StarElectro-Mechanical Limited)

During the year under review the Bombay High Court vide its order dated December 182015 had sanctioned the Scheme of Amalgamation of Blue Star Design and Engineering Limitedwith Blue Star Engineering & Electronics Limited and their respective shareholders andcreditors with effect from Appointed Date of February 1 2015. This amalgamation tookeffect from January 29 2016 and as a consequence Blue Star Design and EngineeringLimited has been wound up.

Total revenue of Blue Star Engineering & Electronics Limited was Rs.132.47 croresas against its previous year’s revenue ofRs.36.02 crores primarily due to theperformance of the Professional Electronics & Industrial Systems business which wastransferred from the Company to this subsidiary effective March 31 2015. This subsidiaryachieved a net profit of Rs.2.15 crores for the year under review as against lastyear’s loss of Rs.18.48 crores.

b) Blue Star Qatar (WLL)

This company is principally engaged in the business of designing engineeringinstallation maintenance mechanical electrical and plumbing contracts and all worksrelating to heating ventilation and air conditioning systems.

Its total income for the year ended March 31 2016 was Rs.71.36 crores as compared toRs.87.62 crores in the previous financial year. Net profit after tax of this venture forthe year ended March 31 2016 was Rs.1.84 crores as compared to Rs.3.90 crores in theprevious year. The Company has reassessed its effective control and interest in thisventure and has given necessary accounting treatment of the same in the ConsolidatedFinancial Statement.

The Company shall provide a copy of the annual accounts of subsidiary companies to themembers on their request in writing. Its annual accounts will also be kept open forinspection by any member at the registered office of the Company. It will also be uploadedon the corporate website.

Joint Venture Companies:

a) Blue Star M & E Engineering (Sdn) Bhd

This company is principally engaged in the field of mechanical electrical and plumbingcontracting which includes operation and maintenance of heating ventilation and airconditioning systems. There have been no significant changes in the nature of itsactivities during the financial year.

Its total income for the year ended March 31 2016 was Rs.102.97 crores as compared toRs.52.59 crores in the previous financial year. Net profit after tax for the year endedMarch 31 2016 was Rs.4.97 crores as compared to Rs.2.99 crores in the previous year.

b) Blue Star Oman Electro-Mechanical Company LLC

During the financial year the Company had acquired 50% voting rights in Oman ElectroMechanical Contracting Co LLC a company registered under the Commercial Companies Law ofOman which was a 100% subsidiary of W J Towell & Co LLC. This entity was thereafterrenamed as Blue Star Oman Electro-Mechanical Company LLC. This company is engaged inmechanical electrical and plumbing contracting services in Oman. The income for the yearended March 31 2016 wasRs. 17.90 crores. Net profit after tax of this venture for theyear ended March 31 2016 was Rs.0.47 crores.

CORPORATE RESTRUCTURING

Composite Scheme of Amalgamation of Blue Star Infotech Limited and Blue Star InfotechBusiness Intelligence & Analytics Private Limited with the Company and theirrespective Shareholders and Creditors:

During the year as a part of the Blue Star Group’s strategic corporaterestructuring Blue Star Infotech Limited (BSIL) sold its IT business undertaking toInfogain India Private Limited and divested its shareholding in its three overseassubsidiaries to Infogain Corporation USA. In addition at its meeting held on September29 2015 your Board of Directors had approved the Composite Scheme of Amalgamation ofBSIL and Blue Star Infotech Business Intelligence & Analytics Private Limited(BSIBIA) a subsidiary of BSIL with the Company and their respective Shareholders andCreditors subject to applicable approvals from the relevant authorities and sanction bythe High Court of Judicature at Mumbai.

This merger integrates and enables consolidation of the Group’s resources andassets for optimal deployment and enhanced overall efficiencies. Availability ofadditional resources would help to grow the core air conditioning and refrigerationbusiness of the Company and improve returns to create long-term sustainable value for allshareholders.

The Bombay High Court vide its order dated April 16 2016 sanctioned the saidComposite Scheme of Amalgamation with effect from the Appointed Date of April 1 2015.

Subsequent to the financial year under review the Composite Scheme of Amalgamationbecame effective on May 21 2016. A record date would be accordingly fixed for issuance ofequity shares to BSIL shareholders in the approved share swap ratio of seven equity sharesof Rs.2 each in the Company for every ten equity shares of Rs.10 each held in BSIL.

CLOSURE OF FACTORIES

During the year under review the Company closed its manufacturing operations of itsplant at Bharuch subsequent to the Voluntary Retirement Scheme announced for its workmenof the said plant in the preceding year.

The Company had also introduced a Voluntary Retirement Scheme for its workmen at Thaneas operating the said plant had become unviable due to high cost of manufacturing leadingto incurring losses for the last four years. All the manufacturing activities at the saidplant have since been closed.

CHANGES IN SHARE CAPITAL

Consequent to the amalgamation of BSIL and BSIBIA with the Company the issued capitalof your Company would increase by 5391383 equity shares of Rs.2 each. Further yourCompany had allotted 15000 equity shares of Rs.2 each on March 16 2016 and 14000equity shares of Rs.2 each on May 25 2016 on the exercise of stock options under the BlueStar Limited Employee Stock Option Scheme.

CONSOLIDATED RESULTS

As required under Regulation 33 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 (hereinafter referred as the ‘ListingRegulations’) and Section 129 of the Companies Act 2013 (hereinafter referred to asthe ‘Act’) the Consolidated Financial Statement has been prepared by theCompany in accordance with the applicable Accounting Standards which forms part of thisAnnual Report. A statement containing the salient features of the financial statements ofthe subsidiaries joint ventures and associate companies in Form AOC-1 as required underRule 5 of the Companies (Accounts) Rules 2014 forms part of the Consolidated FinancialStatement.

The Consolidated Financial Statement for the year reflects a total income ofRs.3786.95 crores as compared to Rs.3190.43 crores for the previous year. The Companyhas achieved a consolidated net profit of Rs.108.38 crores as compared to Rs.54.18 croresin the previous year.

ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The Company incurred a total expenditure of Rs.49.82 crores on research and developmentfor the year as against Rs.40.74 crores in the previous year.

During the year the Company clocked a significant increase in its foreign exchangeearnings from export of its products software services commission and other incomeaggregating to Rs.349.09 crores as against Rs.197.15 crores in the previous year. Therewas a corresponding increase in foreign exchange outflow which stood at Rs.925.46 croresas compared to Rs. 861.14 crores in the previous year.

The information on Energy Conservation Technology Absorption and Foreign ExchangeEarnings and Outgo as required under Section 134(3)(m) of the Act read with Rule 8 ofthe Companies (Accounts) Rules 2014 is annexed herewith as Annexure 1.

DIRECTORS

a) Directors and Key Managerial Personnel (KMP):

In accordance with the provisions of Section 203 of the Act the following have beendesignated as KMP of the Company:

Names of KMP Designation
Mr Satish Jamdar (up to March 31 2016) Managing Director
Mr Vir S Advani (w.e.f. April 1 2016) Managing Director
Mr B Thiagarajan (w.e.f. April 1 2016) Joint Managing Director
Mr Neeraj Basur Chief Financial Officer
Mr Vijay Devadiga (w.e.f. June 1 2015)# Company Secretary

# Mr Sangameshwar Iyer officiated as the Company Secretary up to May 31 2015.

Mr Satish Jamdar Managing Director of the Company opted for early retirement from theoffice of Managing Director and Director of the Company w.e.f. April 1 2016. He had beenassociated with the Company for about two decades in various capacities. The Board placeson record its appreciation of the invaluable contribution and guidance provided by him.

In view of the said early retirement there was a vacancy in the office of the ManagingDirector in the Company. Mr Vir S Advani was considered for being appointed as ManagingDirector of the Company and Mr B Thiagarajan as Joint Managing Director of the Companyw.e.f. April 1 2016.

Mr Vir S Advani has contributed immensely to the Company’s growth and has beeninstrumental in leading the strategic transformation of its various business processes toposition it on the growth path as a highly competitive player in the global HVAC space.With his strategic thinking Mr B Thiagarajan has successfully steered the Company toacquire increased market share and profits in the white goods space in India andpositioned it as a contender in international markets.

The terms and conditions of their appointment and remuneration have been provided inthe Notice convening the 68th Annual General Meeting.

Mr Suneel M Advani Director of the Company who is retiring by rotation at the ensuingAnnual General Meeting offers himself for re-appointment.

b) Declaration by Independent Directors

The Company has received necessary declaration from each Independent Director of theCompany under Section 149(7) of the Act that they meet with the criteria of theirindependence laid down in Section 149(6) of the Act read with Regulation 25 of theListing Regulations.

c) Formal Annual Evaluation

Pursuant to the provisions of Section 178 of the Act read with Regulation 17 of theListing Regulations the Board of Directors carried out an annual evaluation of theperformance of the Board as a whole the Directors individually and the working of thecommittees of the Board. In a separate meeting of Independent Directors held on March 232016 the performance of Non-Independent Directors performance of the Board and theperformance of the Chairman were evaluated taking into account the views of the Executiveand Non-Executive Directors. This would be further deliberated by the Board to ensureeffective implementation of the findings of the evaluation.

MEETINGS OF BOARD OF DIRECTORS

There were 7 Meetings of the Board of Directors during the year under review; i.e. onMay 29 2015; July 28 2015; September 29 2015; October 26 2015; January 29 2016; March8 2016 and March 11 2016. The gap between these Meetings was within the periodprescribed under the Act and Regulation 17 of the Listing Regulations.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the provisions contained in Section 134(3)(c) read with Section 134(5) ofthe Act the Directors would like to state that: a) in the preparation of the annualaccounts for the financial year ended March 31 2016 the applicable accounting standardshave been followed along with proper explanation relating to material departures; b) theDirectors 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 fairview of the state of affairs of the Company as at March 31 2016 and of the profit of theCompany for that period; c) the Directors have taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; d) the Directors have prepared the annual accounts for the yearended March 31 2016 on a going concern basis; e) the Directors have laid down internalfinancial controls to be followed by the Company and that such internal financialcontrols are adequate and are operating effectively; and f ) the Directors have devisedproper systems to ensure compliance with the provisions of all applicable laws and thatsuch systems are adequate and operating effectively.

STATUTORY AUDITORS

M/s S R B C & CO LLP Chartered Accountants (Regn No. 324982E/E300003) wereappointed as the Statutory Auditors of the Company at the Annual General Meeting held onJuly 28 2014 to hold office for a term of five years i.e. till the conclusion of theAnnual General Meeting to be held for the financial year 2018-19 subject to ratificationof their appointment at every Annual General Meeting during the said term. The Board ofDirectors of the Company at its meeting held on May 30 2016 has recommendedratification of appointment of M/s S R B C & CO LLP as the Statutory Auditors of theCompany for financial year 2016-2017 by the members at the ensuing Annual General Meeting.

The Company has received a letter from M/s S R B C & CO LLP Chartered Accountantsto the effect that ratification of their appointment if made would be in accordance withthe relevant provisions of Chapter X of the Act read with Rule 4(1) of the Companies(Audit and Auditors) Rules 2014.

The Report given by the Auditors on the Financial Statement of the Company is part ofthe Annual Report. There has been no qualification reservation adverse remark ordisclaimer given by the Auditors in their Report.

AUDIT COMMITTEE

The Audit Committee of the Company comprises Mr Shailesh Haribhakti Mr Pradeep Mallickand Mr M K Sharma. Mr Shailesh Haribhakti is the Chairman of the Committee. Mr Vir SAdvani has stepped down as a member of the Audit Committee w.e.f. May 30 2016 consequentto his elevation to the position of Managing Director of the Company.

The composition of the Audit Committee is in compliance with the requirements ofSection 177 of the Act and Regulation 18 of the Listing Regulations. The charter of thecommittee is in conformity with the Act and the Listing Regulations as more particularlyset out in the Corporate Governance Report which forms a part of this Report.

During the year under review there was no instance wherein the Board had not acceptedany recommendation of the Audit Committee.

VIGIL MECHANISM FOR DIRECTORS AND EMPLOYEES

Pursuant to the provisions of sub-sections 9 and 10 of Section 177 of the Act and asper the Listing Regulations the Company has established a Vigil Mechanism to enable theDirectors and employees of the Company to report concerns of any unethical behaviourunacceptable and improper practices or suspected fraud. The Company has a Whistle BlowerPolicy in place which has also been uploaded on its website. An Ethics Committee has beenconstituted comprising the Chief Financial Officer HR Head and Company Secretary (EthicsOfficer) to administer this Policy.

This Policy has adequate safeguards against victimisation of the whistle blower andensures protection of the whistle blower’s identity. In addition as part of thevigil mechanism framework an independent internal audit mechanism has also been put inplace to review and report instances of non compliances with laws regulations andpolicies to the Audit Committee. The Company has also adopted a Code of Conduct which isuploaded on the website of the Company.

The Audit Committee reviews on a quarterly basis complaints if any and implementscorrective actions whenever necessary.

INTERNAL FINANCIAL CONTROLS

The Company has established an internal control system commensurate with the sizescale and complexity of its operations. In order to enhance the standards of controls andgovernance the Company has adopted COSO 2013 framework to ensure that robust internalfinancial controls exist in relation to operations financial reporting and compliance.

Significant features of the Company’s internal control system are:

• A well-established independent Internal Audit team operates in line with bestgovernance practices. It reviews and reports to the Audit Committee about compliance withinternal controls and the efficiency and effectiveness of operations as well as keyprocess risks.

• The Audit Committee annually reviews internal audit plans significant auditfindings and adequacy of internal controls.

• Self certification of adherence to key internal controls as part of controlself assurance by process owners monitors and reviewers.

• The Company also maintains a comprehensive information security policy andundertakes continuous upgrades to its IT systems for strengthening automated controls.

During the year the internal controls were tested and found effective as part of theManagement’s control testing initiative. Accordingly the Board with concurrence ofthe Audit committee is of the opinion that the Company’s Internal Financial Controlswere adequate and effective for the year ended March 31 2016.

LOANS GUARANTEES AND INVESTMENTS

Details of loans guarantees and investments covered under the provisions of Section186 of the Act as may be applicable are given in the Financial Statement.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions that were entered into during the financial year were onan arm’s length basis and in the ordinary course of business. All the related partytransactions are approved by the Audit Committee. In view of this disclosure in formAOC-2 has not been provided as the same is not applicable to the Company.

There are no material transactions with any related party as defined under Section 188of the Act read with Companies (Meetings of Board and its Powers) Rules 2014. A policygoverning the related party transactions has been adopted and the same has been uploadedon the Company’s website.

RISK MANAGEMENT

The Company has constituted a Risk Committee comprising Mr Suneel M Advani Mr Vir SAdvani Mr B Thiagarajan and Mr Neeraj Basur. Mr Vir S Advani is the Chairman of thisCommittee. Mr Satish Jamdar Chairman of the Committee stepped down as a member w.e.f.January 29 2016 due to his impending retirement from the Company.

The Committee has adopted a formal charter outlining its terms of reference. TheCommittee also oversees and monitors effectiveness of the implementation of variouselements of the risk management framework across the Company. The Company has also set upa core risk management team comprising its senior management. As a part of theenterprise-wide risk management initiative a process and framework have been establishedthat involve identification of key risks significant to the Company assigning appropriaterisk rating formulating adequate mitigation plans and institutionalising implementationof these action plans to manage and mitigate all the identified risks.

Key residual risks along with their mitigation action plans are reviewed by the Board.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The CSR Committee comprises Mr Suneel M Advani Mr B Thiagarajan and Ms ShobanaKamineni. Mr Suneel M Advani is the Chairman of this Committee. Mr Satish Jamdar steppeddown as a member of the Committee w.e.f. January 29 2016 due to his impending retirementfrom the Company.

During the year under review the Company was required to spend an amount of Rs.134lakhs towards activities as stipulated under Schedule VII of the Act of which an amountof Rs.118.56 lakhs has been spent. The brief outline of the CSR Policy and the initiativesundertaken by the Company on CSR activities during the year along with the rationale forthe amount that could not be spent are set out in Annexure 2 of this Report in the formatas prescribed in the Companies (Corporate Social Responsibility Policy) Rules 2014. ThePolicy is also available on the website of the Company.

NOMINATION AND REMUNERATION COMMITTEE

The Nomination and Remuneration Committee comprises Mr Gurdeep Singh Mr Ashok MAdvani Mr Suneel M Advani and Mr Pradeep Mallick. Mr Gurdeep Singh is the Chairman ofthis Committee.

The Committee is constituted in line with the requirements mandated by the Act and ofthe Listing Regulations. The terms of reference of the Committee are in conformity withthe said requirements as more particularly set out in the Corporate Governance Reportwhich forms a part of this Report.

MANAGERIAL REMUNERATION

Details of the ratio of the remuneration of each Director to the median employee’sremuneration and other details in terms of Section 197(12) of the Act read with Rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is given below:

i. The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year

Mr Satish Jamdar

48x

Mr Vir S Advani

32x

Mr B Thiagarajan

33x

ii. The percentage increase in remuneration of each Director Chief

Mr Satish Jamdar

26.44%

Financial Officer Chief Executive Officer Company Secretary or Manager if any in the financial year

Mr Vir S Advani

36.28%

Mr B Thiagarajan

28.07%

Mr Neeraj Basur*

NA

Mr Sangameshwar Iyer**

NA

Mr Vijay Devadiga***

NA

iii. The percentage increase in the median remuneration of employees

6.39%

in the financial year
iv. The number of permanent employees on the rolls of Company

2342

v. The explanation on the relationship between average increase in remuneration and Company performance

Increments are based on the individual employee performance market benchmarking of salary and net profit of the Company.

vi. Comparison of the remuneration of the Key Managerial Personnel against the performance of the Company

Total remuneration paid to the Key Managerial Personnel as mentioned in (ii) above constituted 7.82% of the net profit of the Company for FY 2015-16.

vii. Variations in the market capitalisation of the Company price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the Company in comparison to the rate at which the Company came out with the last public offer in case of listed companies and in case of unlisted companies the variations in the net worth of the Company as at the close of the current financial year and previous financial year

2015-16

2014-15
Market

3510.79

2768.23
Capitalisation (Rs. in crores)
PE ratio

30.30

18.15

In the recent past the Company has not made any public offer.

viii. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration Average increase to employees other than Managerial Personnel and justification thereof.

8.09% To remain competitive in the market to attract and retain talent.

Average increase to Managerial Personnel. Please refer to (ii) of this table.
Exceptional circumstances for increase to managerial remuneration.

The average increase given in FY 2015-16 was based on the outcome of compensation and benefits benchmarking survey to align remuneration of Wholetime Directors to market median.

ix. Comparison of the remuneration of each Key Managerial Personnel against the performance of the Company Mr Satish Jamdar

2.68% of net profit

Mr Vir S Advani

1.74% of net profit

Mr B Thiagarajan

1.81% of net profit

Mr Neeraj Basur

1.22% of net profit

Mr Sangameshwar Iyer (part of the year)

0.09% of net profit

Mr Vijay Devadiga (part of the year)

0.28% of net profit

x. The key parameters for any variable component of remuneration availed by the Directors

The Nomination and Remuneration Committee evaluates the performance of the Directors against the key result areas determined by it and recommends payment of commission to the Directors.

xi. The ratio of the remuneration of the highest paid Director to that of the employees who are not Directors but receive remuneration in excess of the highest paid Director during the year

NA

xii. Affirmation that the remuneration is as per the Remuneration Policy of the Company

Affirmed

*Mr Neeraj Basur was appointed as Chief Financial Officer w.e.f. August 1 2014. Sincethe remuneration for FY 14-15 is for part of the year the same is not comparable with FY15-16.

**Mr Sangameshwar Iyer officiated as the Company Secretary for part of FY 15-16 i.e.up to May 31 2015. Hence the remuneration is not comparable with FY 14-15.

***Mr Vijay Devadiga was designated as Company Secretary w.e.f. June 1 2015. Since theremuneration is from FY 15-16 the same is not comparable with FY 14-15.

The Non-Executive Directors of the Company are paid sitting fees and commission as perthe statutory provisions and within the limits approved by the shareholders. The ratio ofremuneration and percentage increase for Non-Executive Directors Remuneration is thereforenot considered for the purposes above. The details of remuneration of Non-ExecutiveDirectors are provided in the Corporate Governance Report.

PARTICULARS OF EMPLOYEES

Particulars of employees as required under Rule 5(2) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are required to be annexed to theBoard’s Report. In accordance with the provisions of Section 136 of the Act theAnnual Report excluding the aforesaid information is being sent to all the members of theCompany and others entitled thereto. Any member interested in obtaining such particularsmay write to the Company Secretary at the Registered Office of the Company.

EMPLOYEE STOCK OPTIONS

The Nomination and Remuneration Committee of the Board of Directors of the Companyinter alia administers and monitors the Employees’ Stock Option Scheme of theCompany in accordance with the SEBI (Share Based Employee Benefits) Regulations 2014.Details of the shares issued under Employee Stock Option Plan (ESOP) as also thedisclosures in compliance with Section 62 of the Act and Rule 12 of Companies (ShareCapital and Debentures) Rules 2014 and SEBI (Share Based Employee Benefits) Regulations2014 are set out in Annexure 3 to this Report.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Act read with the Rules therein theSecretarial Audit Report given by M/s N L Bhatia & Associates Practicing CompanySecretaries has been provided as per Annexure 4 to this Report. The Secretarial AuditReport does not contain any qualification reservation or adverse remark.

COST AUDITORS

In terms of the provisions of Section 148 of the Act read with the Companies (CostRecords and Audit) Amendment Rules 2014 the Board of Directors has on therecommendation of the Audit Committee appointed M/s Narasimha Murthy & Co HyderabadCost Accountants as Cost Auditors to conduct cost audit for the financial year endedMarch 31 2016.

As required under the Act the remuneration payable to the cost auditor is required tobe placed before the members in a general meeting for their ratification. Accordingly aresolution seeking members’ ratification for the remuneration payable to CostAuditors forms part of the Notice.

EXTRACT OF THE ANNUAL RETURN

Pursuant to Section 92(3) and Section 134(3)(a) of the Act read with Rule 12(1) of theCompanies (Management and Administration) Rules 2014 an extract of annual return in FormMGT-9 has been provided as per Annexure 5 to this Report.

DEPOSITS

The Company has not accepted any deposit from the public falling within the ambit ofSection 73 of the Act and the Companies (Acceptance of Deposits) Rules 2014.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report for the year under review as stipulatedunder the Listing Regulations is annexed to this report.

CORPORATE GOVERNANCE

The Company is committed to maintaining the highest standards of Corporate Governanceand adhering to the disclosure norms as set out by Securities and Exchange Board of India.The Report on Corporate Governance as stipulated under Regulation 27 of the ListingRegulations forms part of the Annual Report. The certificate from the Auditors of theCompany confirming compliance with the conditions of Corporate Governance as stipulatedunder Regulation 27 of the Listing Regulations has been annexed with this report.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There have been no material changes and commitments affecting the financial position ofthe Company which have occurred between the end of the financial year under review andthe date of this report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

There have been no significant and material orders passed by any regulators or courtsor tribunals impacting the going concern status of the Company and its future operations.

DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION& REDRESSAL) ACT 2013

Your Company has zero tolerance for sexual harassment at workplace and has adopted aPolicy on prevention prohibition and redressal of sexual harassment at workplace in linewith the provisions of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 and the Rules thereunder for prevention and redressalof complaints of sexual harassment at workplace. All employees (permanent contractualtemporary and trainees) are covered under this Policy.

The Company has set up an Internal Complaints Committee to redress complaints receivedregarding sexual harassment. The Company organises workshops and awareness programmes atregular intervals for sensitising the employees with the provisions of the Act. During theyear under review 2 complaints with allegations of sexual harassment were filed with theCompany and the same were investigated and resolved as per the provisions of the Act.

ACKNOWLEDGMENTS

The Directors place on record their sincere appreciation for the assistance guidanceand co-operation provided by the Government of India and other regulatory authorities. TheDirectors thank the financial institutions and banks associated with your Company fortheir support as well. The employees of Blue Star Limited are instrumental in the Companyscaling new heights year after year and their commitment and contribution is deeplyacknowledged. Shareholders’ involvements are greatly valued. The Directors lookforward to your continuing support.

For and on behalf of the Board of Directors
Ashok M Advani
Mumbai: May 30 2016 Chairman

Annexure 1 to Board’s Report

ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information pursuant to Rule 8 of Companies (Accounts) Rules 2014:

CONSERVATION OF ENERGY

Energy conservation measures taken:

The Company believes that energy provides the means for economic growth and hence itis important to conserve and use energy judiciously. Even though energy does notconstitute a major cost factor in the Company’s manufacturing facilities severalinitiatives have been undertaken to reduce energy consumption during the year underreview.

Himachal Plants

• The utility power factor has been improved by installing capacitors withAutomatic Power Factor Controller Relay (APFCR) at machine control centres. This hasresulted in low maximum demand indicator (MDI) and helped reduce energy costs.

• The set point for unloading all air compressors by 0.5 kg/cm2 hasbeen decreased resulting in energy savings by 4%. Air leakages in the low pressuredistribution system have been arrested. These initiatives have resulted in energy savingsand reduction of carbon footprint.

• Automatic ambient temperature controller has been installed on assembly lines aswell as in the performance test room which has led to energy savings.

• Auto lux level controller has been installed for switching on the street lightsresulting in energy savings.

• A single AC drive for the vacuum system for 24 pumps has been installed on theassembly line leading to low MDI power factor maintenance costs and an increase in thevacuum pumps’ capacity by 20% resulting in energy savings.

• Energy-efficient high volume low speed fans have been installed for comfortinside the Plant during summer.

• All the above initiatives have resulted in electrical energy saving of Rs.33.7lakhs and carbon footprint reduction by 205 ton/annum.

Ahmedabad Plant

• Automatic Power Factor Controller (APFC) panel has been installed to maintainthe power factor near to unity.

• Solar street lights have been set up outside the Plant for conservation ofenergy.

• Electrical motors have been replaced with a hydraulic system in the lifterequipment used at the assembly line which has reduced energy consumption by 50%.

• High Volume Low Speed (HVLS) wave fan with a diameter of 16 feet has been setup replacing the traditional industrial fans of 24 inches. This has reduced the energyconsumption by 50%.

Wada Plant

• Energy bill has been reduced through a rebate of Rs.8.30 lakhs/year bymaintaining the power factor near to unity.

• Solar lights with solar panels have replaced the conventional high pressuresodium vapour. This has helped save energy costs by Rs.1 lakh/year.

• Utility piping has been modified resulting in a direct saving of 20 HP load oflow pressure compressor and saving of Rs.3 lakhs/year in utility costs.

• The load pattern of high pressure compressor has been studied and modifiedunloading the operation of compressor to the auto on/off cycle saving Rs.1 lakh/year fromboth the compressors.

• Activation of 100 HP low pressure compressor using variable frequency drive(VFD) in place to star delta starting method which has given a benefit of Rs.1.5lakhs/year.

• Considering the evacuation operation for scroll and screw chillers theconventional on/off system was modified to smart on/off operation through mobile phone.This has resulted in energy savings of Rs.2 lakhs/year.

• Total energy savings/benefits achieved during the financial year is Rs.16.80lakhs.

Dadra Plant

• Installed a helium leak test set-up in coil shop resulting in an annual savingsof Rs.3.76 lakhs through reduction in consumption of water and electricity along with 60%improvement in productivity.

• Installed low-flow type water taps in all washrooms resulting in reduction ofwater consumption by approximately 1825 kl/year.

• Installed HVLS fans in export lines eliminating blowers and fans. These fansare run with VFDs reducing the power consumption by 2400 kWh/year.

• Installed LPG gas bank and reduced the gas pressure to 1 kg/cm2 from2.5 kg/cm2 saving Rs.1.8 lakhs/year.

• Switched off the vacuum pumps installed on F1 line by disconnecting the conveyorbus bar thus saving approximately 900 kWh/year.

• Installed water-level sensor for reverse osmosis (RO) reject water storage tankto switch off a pump after attaining full water-level saving approximately 180 kl/year.

• LED light fittings are provided in the R&D building instead of traditionallight fittings saving 2400 kWh/year.

• Inverter-based AC units are installed in the R&D section to reduce powerconsumption saving 1680 kWh/year.

TECHNOLOGY ABSORPTION a) Efforts made towards technology absorption:

Continuous efforts have been made to strengthen the R&D facility in the areas ofadoption of alternatives to low global warming potential (GWP) refrigerants whereverfeasible certification of labs formation of core cells for embedded technology andunderstanding of emerging regulatory standards which are mandatory for domestic andglobal sales. A complete new line of insulating panels with cyclopentane refrigeranthaving low GWP has been introduced. Inverter technology which is the need of the daycontinued to be absorbed and developed for high efficiency products. Blue Star labs forroom ACs ducted systems and refrigeration products are accredited by NationalAccreditation Board For Testing and Calibration Laboratories (NABL). The chiller lab iscertified by Air-Conditioning Heating and Refrigeration Institute (AHRI).

b) Benefits derived as a result of above efforts:

The Company launched inverter-based variable refrigerant flow (VRF) systems chillersand wall-mounted units during the year under review. Ultra-high efficiency wall-mountedunits for the local market as well as ducted systems for exports have also been launchedalong with a series of wall-mounted units with smart controllers.

c) Information regarding imported technology (imported during the last 3 years):

Falling Film Technology was imported during the financial year 2013-14.

d) Expenditure incurred on R&D:

(Rs. in crores)
2015-16 2014-15
(a) Capital 10.60 12.65
(b) Recurring 39.22 28.09
Total 49.82 40.74
Total R&D expenditure as a percentage of total turnover 1.41% 1.32%

FOREIGN EXCHANGE EARNINGS AND OUTGO

a) Activities relating to exports initiatives taken to increase exports developmentof new export markets for products and services and export plans:

Discussed in detail in the Management Discussion and Analysis section of the AnnualReport.

b) Total foreign exchange used and earned:

(Rs. in crores)
2015-16 2014-15
Total foreign exchange used 925.46 861.14
Total foreign exchange earned 349.09 197.15

Annexure 2 to Board’s Report

ANNUAL REPORT ON CSR ACTIVITIES

A brief outline of the Company's CSR policy including overview of projects orprogrammes proposed to be undertaken and a reference to the weblink to the CSR Policy andprojects or programmes:

Blue Star’s CSR Committee decides the CSR activities to be undertaken and theCompany undertakes such activities for a considerable period of time (minimum of 2 or 3years) in order to create and assess the impact.

1. In the long term Blue Star's CSR focus areas comprise air purification waterpurification and food preservation.

2. Contributing to the Government's "Skill India" mission the Company willundertake vocational education programmes in air conditioning plumbing and electricalinstallation and maintenance trades; apprentice programmes as well as scholarships foracademically deserving less privileged engineering/architecture students.

3. Pursuant to the 'Swachh Bharat" initiative of the Government the Company willendeavour to construct toilets for the less privileged communities.

4. The Committee may also consider other deserving causes in the areas of healtheducation poverty alleviation and others.

5. The Committee will decide on undertaking specific projects in case of naturalcalamities based on available budgets.

6. The Company will continue to actively participate in the Affirmative Action Agendaof Cll.

7. The Committee proposes to involve Company’s employees in these CSR activitiesso as to give them a sense of purpose beyond the commercial as well as to build pride inthe Company.

Weblink to the CSR Policy: https://www.bluestarindia.com/about/images/CSR-Policy.pdf

Composition of the CSR Committee:

Mr Suneel M Advani - Chairman

Mr Satish Jamdar - Member (up to January 29 2016)

Mr BThiagarajan - Member

Ms Shobana Kamineni - Member

Average net profit of the Company for last 3 financial years for the purpose ofcomputation of CSR: Rs.67.17 crores

Prescribed CSR Expenditure (two percent of the amount as in item above): Rs.1.34crores

Details of CSR spent during the financial year:

a. Total amount to be spent for the financial year: Rs.1.34 crores

b. Amount unspent if any: Rs.0.15 crores

c. Manner in which the amount was spent during the financial year is detailed below:

CSR project or activity identified Sector in which the

Project

is

covered

Projects or Programmes: (1) Local area or other

(2) Specify the State and district where projects or programmes was undertaken

Amount outlay (budget) project or programme wise

(? in lakhs)

Amount spent on the projects or programmes Subheads: (1) Direct expenditure on projects or programmes (2) Overhead (7 in lakhs)

Cumulative expenditure up to to the reporting period (7 in lakhs)

Amount spent: Direct or through implementing agency (7 in lakhs)
1 Vocational Training- AC&R/MEP Education Chennai Visakhapatnam Mumbai Dadra 24 41.73 Direct 41.73 41.73Bala Mandir Kamaraj Trust Chennai; Indo-German Institute of Advanced Technology Visakhapatnam; National Employability Through Apprenticeship Program (NETAP)
2 School Toilets Health WadaDadra 30 19.80 Direct 19.80 19.80 Cll Foundation
3 Community Development around manufacturing facilities EducationHealth DadraHimachal 0 18.48  Direct 18.48 18.48 Direct: 13.48 Through Aastha Welfare Society: 5
4 Tamil Nadu Flood Relief DisasterRelief Tamil Nadu 0 16.23 Direct 16.23 16.23 Cll Foundation
5 Donation to NGOs Health Education Mumbai 0 1.50 Direct 1.50 1.50

St Jude India Childcare Centres Mumbai; Cherish Life India Foundation Mumbai

6 Donation of equipment to non-profit organisations Health Education Sirmour Himachal; Chittoor Andhra Pradesh; Vadodara; Mumbai 60 15.17 Direct 15.17 15.17 Direct
7 CSR Administrative Expenses Administration Mumbai 15 5.65 Overhead 5.65 5.65 Direct
8 Scholarships to needy engineering students Education 5

-

- Was implemented by Blue Star Foundation
Total 134 118.56 118.56

In case the Company has failed to spend the 2% of average net profits of the last threefinancial years or part thereof reasons for not spending to be mentioned:

The Company donated Rs.0.15 crores to Blue Star Foundation and Multiple SclerosisSociety of India for the Mumbai Delhi and Chennai marathons. Though these were directdonations to the above charity partners towards support for the cause of education of lessprivileged children the Company was subsequently advised that this donation would notqualify as CSR expenses.

A responsibility statement of the CSR Committee that the implementation and monitoringof CSR Policy is in compliance with CSR objectives and Policy of the Company:

We hereby declare that implementation and monitoring of the CSR Policy are incompliance with the CSR objectives and CSR Policy of the Company.

Vir S Advani Suneel M Advani
Managing Director Chairman
Corporate Social Responsibility Committee
Mumbai: May 30 2016

Annexure 3 to Board’s Report

BLUE STAR EMPLOYEE STOCK OPTION PLAN 2013

March 2015

March 2016
Grant I (June 6 2014) Grant II (Feb 13 2015) Grant III (May 29 2015) Grant IV (Aug 7 2015) Grant V (Jan 29 2016) Grant VI (Mar 7 2016) Total
(a) Options granted 1365000* 42000 28000 56000 54000 6000 1551000
(b) Pricing formula Market Price Market Price Market Price Market Price Market Price Market Price
(c) Options vested during the year 270000 Nil Nil Nil Nil Nil 270000
(d) Options exercised during the year 15000 Nil Nil Nil Nil Nil 15000
(e) Total number of shares arising as a result of exercise of options 15000 Nil Nil Nil Nil Nil 15000
(f ) Options lapsed during the year 205500 Nil Nil Nil Nil Nil 205500
(g) Variation of terms of options during the year NA
(h) Money realised by exercise of options Rs.4350750 Nil Nil Nil Nil Nil Rs.4350750
(i) Total number of options in force as at March 31 2016 1144500 42000 28000 56000 54000 6000 1330500
(j) Employee-wise details of options granted to
1 Senior Management Personnel (Executive Committee)
Mr Satish Jamdar Managing Director (up to March 31 2016) 300000 - - - - - 300000
Mr B Thiagarajan Joint Managing Director (w.e.f. April 1 2016) 200000 - - - - - 200000
Mr C P Mukundan Menon Executive Vice President - Air Conditioning & Refrigeration Products Sales Group 90000 - - - - - 90000

*Outstanding and adjusted as of April 1 2015

March 2015

March 2016
Grant I (June 6 2014) Grant II (Feb 13 2015) Grant III (May 29 2015) Grant IV (Aug 7 2015) Grant V (Jan 29 2016) Grant VI (Mar 7 2016) Total
Mr Jitendra M Bhambure Executive Vice President - R & D and Technology 80000 - - - - - 80000
Mr Tojo Jose Executive Vice President - Human Resources (up to May 31 2016) 80000 - - - - - 80000
Mr R Aravindan Executive Vice President - Electro-Mechanical Projects Group 50000 - 14000 - - - 64000
Mr Ramesh Devnani Executive Vice President - Manufacturing 50000 - 14000 - - - 64000
Mr Neeraj Basur Chief Financial Officer - - - 56000 - - 56000
2 Employees to whom more than 5% options granted during the year

NA

(k) Diluted EPS pursuant to issue of shares on exercise of options

12.85

(l)
1 Method of calculationof employeecompensation cost

Calculation is based on intrinsic value method.

2 Difference between the above and employee compensation cost that shall have been recognised if it had used the fair value of the options

Employee compensation cost would have been higher by Rs.3.62 crores during the year had the Company used fair value method for accounting the options issued under ESOS.

3 Impact of this difference on Profits and on EPS of the Company

Profits would have been lower by Rs.3.62 crores and EPS would have been lower by Rs.0.40 during the year had the Company used fair value method of accounting the options issued under ESOS.

(m)
1 Weighted average exercise price

Rs.290.05

Rs.320.70 Rs.345.65 Rs.369.55 Rs.355.10 Rs.341.35
2 Weighted average fair value of options based on Black Scholes methodology

Rs.94.17

Rs.85.66 Rs.83.62 Rs.91.13 Rs.87.96 Rs.84.09
(n) Significant assumptions used to estimate fair value of options including weighted average
1 Risk free interest rate

8.51%

7.70% 7.81% 7.80% 7.78% 7.64%
2 Expected life (Average)

45 months

24 months 24 months 24 months 24 months 24 months
3 Expected volatility

38%

35% 30% 31% 32% 32%
4 Expected dividends

Not separately included; factored in volatility working.

5 Closing market price of share on a date prior to date of grant

Rs.290.05

Rs.320.70 Rs.345.65 Rs.369.55 Rs.355.10 Rs.341.35

 

For and on behalf of the Board of Directors
Ashok M Advani
Date: May 30 2016 Chairman

Annexure 4 to Board’s Report

To

The Members BLUE STAR LIMITED

Our report of even date is to be read along with this letter.

1) Maintenance of Secretarial Record is the responsibility of the Management of theCompany. Our responsibility is to express an opinion on these Secretarial Records based onour audit.

2) We have followed the audit practices and processes as were appropriate to obtainreasonable assurance about the correctness of the contents of the Secretarial Records. Theverification was done on test basis to ensure that correct facts are reflected in theSecretarial Records. We believe that the processes and practices we followed provided areasonable basis for our opinion.

3) We have not verified the correctness and appropriateness of financial records andBooks of Accounts of the Company.

4) Wherever required we have obtained the Management representation about thecompliance of Laws Rules and Regulations and happening of events etc.

5) The compliance of the provisions of Corporate and other applicable Laws RulesRegulations standards is the responsibility of the Management. Our examination waslimited to the verification of procedures on test basis.

6) The Secretarial Audit report is neither an assurance as to the future viability ofthe Company nor the efficacy or effectiveness with which the Management has conducted theaffairs of the Company.

For N L Bhatia & Associates
UIN: S1996MH016600
Bharat Upadhyay
(Partner)
FCS No. 5436
Date: May 20 2016 CP No. 4457

Annexure 4 to Board’s Report

SECRETARIAL AUDIT REPORT

FORM NO. MR-3

FOR THE FINANCIAL YEAR ENDED MARCH 31 2016

[Pursuant to Section 204(1) of the Companies Act 2013 and Rule No. 9 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014]

To

The Members

BLUE STAR LIMITED

We have conducted the secretarial audit of the compliance of applicable statutoryprovisions and the adherence to good corporate practices by Blue Star Limited (hereinaftercalled the Company). The Secretarial Audit was conducted in a manner that provided us witha reasonable basis for evaluating the corporate conducts/statutory compliances andexpressing our opinion thereon.

Based on our verification of the Company’s books papers minute books forms andreturns filed and other records maintained by the Company and also the informationprovided by the Company its officers agents and authorised representatives during theconduct of Secretarial Audit we hereby report that in our opinion the Company duringthe audit period covering the financial year ended on March 31 2016 has complied withthe statutory provisions listed hereunder and also that the Company has proper Boardprocesses and compliance mechanism in place to the extent in the manner and subject tothe reporting made hereinafter:

We have examined the books papers minute books forms and returns filed and otherrecords maintained by the Company for the financial year ended on March 31 2016according to the provisions of:

1. The Companies Act 2013 (the Act) and the Rules made thereunder;

2. The Securities Contracts (Regulation) Act 1956 (‘SCRA’) and the Rulesmade thereunder;

3. Foreign Exchange Management Act 1999 and the rules and regulations made thereunderto the extent of Foreign Direct Investment Overseas Direct Investment and ExternalCommercial Borrowings;

4. The Depositories Act 1996 and the Regulations and bye-laws framed thereunder;

5. The following Regulations and Guidelines prescribed under the Securities andExchange Board of India Act 1992 (‘SEBI Act’): a) The Securities and ExchangeBoard of India (Substantial Acquisition of Shares and Takeovers) Regulations 2011; b) TheSecurities and Exchange Board of India (Prohibition of Insider Trading) Regulations 2015;c) The Securities and Exchange Board of India (Issue of Capital and DisclosureRequirements) Regulations 2009-Not applicable to the Company during the year; d) TheSecurities and Exchange Board of India (Share Based Employee Benefits) Regulations 2014;e) The Securities and Exchange Board of India (Issue and Listing of Debt Securities)Regulations 2008-Not applicable to the Company during the year; f ) The Securities andExchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations1993 regarding the Companies Act and dealing with client; g) The Securities and ExchangeBoard of India (Delisting of Equity Shares) Regulations 2009-Not applicable to theCompany during the year; h) The Securities and Exchange Board of India (Buyback ofSecurities) Regulations 1998-Not applicable to the Company during the year.

Other Laws applicable to the Company;

List of other applicable Laws has been attached as Annexure A to this Report.

We have also examined compliance with the applicable clauses of the following:

i) Secretarial Standards issued by The Institute of Company Secretaries of India. ii)The Listing Agreements entered into by the Company under SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 with Bombay Stock Exchange Limited and NationalStock Exchange of India Limited.

During the period under review the Company has complied with the provisions of theAct Rules Regulations Guidelines Standards etc mentioned above subject to thefollowing observation:

CSR expenditure as per the calculation provided by section 135 is Rs.134.88 lakhs andRs.118.56 lakhs has been spent by the Company during the financial year.

We further report that the Board of Directors of the Company is duly constituted withproper balance of Executive Directors Non-Executive Directors and Independent Directorsas per the requirement of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015. There were no changes in the composition of theBoard of Directors during the financial year 2015-16.

With effect from March 31 2016 after office hours Mr Satish Jamdar ceased to beManaging Director and Director and Mr Vir Suneel Advani was appointed as ManagingDirector with effect from April 1 2016. Mr B Thiagarajan was also appointed as the JointManaging Director with effect from April 1 2016. Adequate notice is given to allDirectors to schedule the Board Meetings; agenda and detailed notes on agenda were sent atleast seven days in advance and a system exists for seeking and obtaining furtherinformation and clarifications on the agenda items before the meeting and for meaningfulparticipation at the meeting.

All the decisions at the Board Meetings were passed unanimously and with requisitemajority in General Meetings.

We further report that there are adequate systems and processes in the Companycommensurate with the size and operations of the Company to monitor and ensure compliancewith applicable laws rules regulations and guidelines.

We further report that during the period under review

i) The Company has entered into uniform Listing Agreement with Bombay Stock ExchangeLimited and National Stock Exchange of India Limited on January 20 2016. ii) Mr SatishJamdar has been allotted 15000 equity shares under ESOP Scheme of the Company on March16 2016. iii) A Separate meeting of the Independent Directors was held on March 23 2016.iv) No winding up petition has been filed against the Company impacting the going concernstatus of the Company. v) Two new complaints were received and subsequently disposed offunder the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013. vi) During the period under review a Court Convened Meeting was held onFebruary 27 2016 for approving Composite Scheme of Amalgamation of Blue Star InfotechLimited (BSIL) and Blue Star Infotech Business Intelligence & Analytics PrivateLimited with the Company and their respective shareholders and creditors. The Scheme wasapproved by requisite majority. The Scheme has been sanctioned by the Hon’ble HighCourt of Judicature at Bombay vide its Order dated April 16 2016. vii) During the periodunder review the Company had declared a final dividend at its Annual General Meeting heldon July 28 2015 for the financial year 2014-15 at Rs.5 per share to the shareholderswhose names appear on the Company’s Register of Members on July 13 2015.Rs.449680525 was transferred to Dividend account on July 31 2015 and this amount wasdistributed through warrants/cheques/NEFT to eligible shareholders within 30 days ofdeclaration thereof.

The Board has also declared an interim dividend of Rs.6.50 per share at its meetingheld on March 11 2016. March 23 2016 was fixed as the record date to determine theeligibility of the shareholders. Amount of Rs.584682183 was deposited in the DividendAccount on March 16 2016. This amount was distributed through warrants/cheques/NEFT toeligible shareholders of the Company within 30 days of declaration thereof.

As per the Composite Scheme of Amalgamation of BSIL and Blue Star Infotech BusinessIntelligence & Analytics Private Limited with the Company in case any dividend hadbeen recommended or declared by the Company provision should be made for such dividendpayable on 5391383 additional equity shares to be allotted to the shareholders of BSILas per the swap ratio under the Scheme. In accordance with the same Rs.35043989.50 hadbeen deposited in a separate bank account as Provisional Interim Dividend for therespective shareholders of BSIL subject to sanction of the Scheme of Amalgamation by theHon’ble High Court of Judicature at Bombay.

viii) During the period under review the Company has entered into a Shareholders’agreement with W J Towell & Co LLC by acquiring 51% of the paid up capital (255000number of equity shares of RO 1 each) in Blue Star Oman Electro-Mechanical Co LLC.

For N L Bhatia & Associates
UIN: S1996MH016600
Place: Mumbai
Date: May 20 2016 Bharat Upadhyay
(Partner)
FCS No. 5436
CP No. 4457

ANNEXURE A

LIST OF OTHER APPLICABLE LAWS FORMING PART OF THE SECRETARIAL AUDIT REPORT OF BLUE STARLIMITED FOR THE FINANCIAL YEAR 2015-16 i.e. 01/04/2015 to 31/03/2016:

1. Bombay Shop and Establishment Act 1948 rules thereunder and other State Acts andrules thereunder

2. Contract Labour (Regulation and Abolition) Act 1970 and Contract Labour (Regulationand Abolition) Central Rules 1971 and applicable State Rules

3. Industrial Employment (Standing Orders) Act 1946 and Industrial Employment(Standing Orders) Central Rules 1946 and applicable State Rules

4. Factories Act 1948 and applicable State Rules

5. Foreign Exchange Management Act 1999 read with Notifications and DirectionsNotifications and Circulars issued by RBI

6. Foreign Trade (Development and Regulation) Act 1992

7. Securities and Exchange Board of India Act 1992 and rules and regulationsthereunder

8. Companies Act 2013 and rules thereunder

9. The Building and Other Construction Workers’ (Regulation of Employment andConditions of Service) Act 1996 The Building and Other Construction Workers’(Regulation of Employment and Conditions of Service) Central Rules 1998 The Building andOther Construction Workers’ Welfare Cess Act 1996 and Cess Rules 1998 andapplicable State Rules

10. Industrial Disputes Act 1947 and Industrial Disputes (Central) Rules 1957 andapplicable State Rules 11. Apprentices Act 1961 and Apprentices Rules 1992 12. EmployeeCompensation Act 1923 and Workmen Compensation Rules 1924 and applicable State Rules

13. Employees’ State Insurance Act 1948 and Employees’ State Insurance(Central) Rules 1950 and Employees’ State Insurance (General) Regulations 1950

14. Employees’ Provident Funds and Miscellaneous Provisions Act 1952 andEmployees’ Provident Fund Scheme 1952 and Employees’ Pension Scheme 1995 andEmployees’ Deposit Linked Insurance Scheme 1976

15. Equal Remuneration Act 1976 and Equal Remuneration Rules 1976 16. MaternityBenefit Act 1961 and applicable State Rules 17. Payment of Bonus Act 1965 and Payment ofBonus Rules 1975

18. Payment of Wages Act 1936 and Payment of Wages (Nomination) Rules 2009 andapplicable State Rules 19. Minimum Wages Act 1948 and Minimum Wages Rules 1950 andapplicable State Rules 20. Payment of Gratuity Act 1972 and applicable State Rules 21.Bombay Labour Welfare Fund Act 1953 rules thereunder and other State Acts and rulesthereunder

22. Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013 and Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Rules 2013

23. Information Technology Act 2000 and Information Technology (Reasonable securitypractices and procedures and sensitive personal data or information) Rules 2011

24. Indian Standard Code of Practice for Selection Installation and Maintenance ofPortable First Aid Fire Extinguishers

25. Bureau of Indian Standards Act 1986 and Indian Standard Code of Practice forSelection Installation and Maintenance of Portable First Aid Fire Extinguishers

26. Fire Prevention and Life Safety Measures Act Rules and applicable States Acts andRules as applicable

27. Legal Metrology Act 2009 and Legal Metrology (Enforcement) Rules 2011 andapplicable State Rules

28. Explosives Act 1884 and Gas Cylinder Rule 2004

29. Petroleum Act 1934 and Petroleum Rules 2002

30. Electricity Act 2003 and Central Electricity Authority (Measures Relating toSafety and Electric Supply) Regulations 2010

31. Energy Conservation Act 2001

32. Income Tax Act 1961; Wealth Tax Act 1957; Finance Act 1994 (as amended from timeto time) and Service Tax Rules 1994; Central Sales Tax Act1956; Central Excise Act 1944and rules thereunder; Maharashtra Value Added Tax Act 2002; Chattisgarh Vritti KarAdhiniyam 1995; and other State Acts governing VAT Profession Tax Entry Tax Tax onTrades Callings and Employments Act and rules thereunder

33. Environment (Protection) Act 1986 and Hazardous Waste (Management Handling andTransboundary Movement) Rules 2008; Noise Pollution (Regulation and Control) Rules 2000;Environment (Protection) Rules 1986; E-waste (Management & Handling) Rules 2011;Ozone Depletion Substances (Regulation) Rules 2000; Bio Medical Waste (Management &Handling) Rule 1998; Batteries (Management and Handling) Rules 2001

34. Air (Prevention and Control of Pollution) Act 1981; Air (Prevention and Control ofPollution) (Union Territories) Rules 1983 and applicable State Rules

35. Water (Prevention and Control of Pollution) Act 1974; Water (Prevention andControl of Pollution) Rules 1975 and applicable State Rules

36. Water (Prevention and Control of Pollution) Cess Act 1977; Water (Prevention andControl of Pollution) Cess Rules 1983 and applicable State Rules

37. Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulationof Trade and Commerce Production Supply and Distribution) Act 2003

38. Any other Central State and Municipal Acts and rules made thereunder as may beapplicable

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