Your Directors have pleasure in presenting the ninth annual report on the business andoperations of the Company and the audited accounts for the year ended 31 March 2015.
During the year under review Cairn India delivered revenue of INR 14646 crore. Thiswas driven by lower crude oil prices with gross operated average production at 211671barrels of oil equivalent for the fiscal. Together with its JV partners Cairn contributedabout 27% to Indias domestic crude oil production as per MoPNGs February 2015statistics thus helping strengthen the energy security of the country. During the yearthe Company executed multiple projects in Rajasthan block including one of theworlds largest polymer flood EOR programme at Mangala. Cairn continues to be one ofthe low cost producers in the world resulting in EBITDA margin of 59% and strong cash flowfrom operations of INR 8765 crore for the year.
Since resumption of exploration in March 2013 Cairn India has established 1.5 billionboe in-place resources by delivering a rapid exploration and appraisal drilling program.
CONSOLIDATED FINANCIAL STATEMENTS
Your Company is also presenting the audited consolidated financial statements preparedin accordance with the Accounting Standard 21 issued by the Institute of CharteredAccountants of India. Further pursuant to the provisions of Section 129(3) read with Rule5 of Companies (Accounts) Rules 2014 statement containing salient features of thefinancial statements of subsidiary companies is disclosed separately and forms part of theannual report.
Your Company has distributed an interim dividend of INR 5 per equity share of facevalue of INR 10 each to shareholders who were on the register of members of the Companyas on the closing hours of business on 23 September 2014 being the record date fixed bythe Board of Directors for this purpose. Interim dividend was paid on 26 September 2014.
In addition to interim dividend your Directors are pleased to recommend a finaldividend of INR 4 per equity share of face value of INR 10 each for the year ended 31March 2015 subject to approval of shareholders at the ensuing annual general meeting ofthe Company.
Final dividend if approved by the shareholders taken together with the interimdividend will amount to total dividend of INR 9 per equity share for the financial year2014-15.
TRANSFER TO RESERVES
During the year your Company has transferred INR 33.43 crore to capital redemptionreserve account on account of buy-back of equity shares which is equal to nominal amountof equity shares so bought back and extinguished till 31 March 2015.
BOARD OF DIRECTORS AND ITS MEETINGS
The Company has a professional Board with right mix of knowledge skills and expertisewith an optimum combination of executive non-executive and independent Directorsincluding one woman Director. The Board provides strategic guidance and direction to theCompany in achieving its business objectives and protecting the interest of thestakeholders.
One meeting of the Board of Directors is held in each quarter. Additional meetings ofthe Board/ Committees are convened as may be necessary for proper management of thebusiness operations of the Company. The annual calendar of
| ||Standalone ||Consolidated* |
| ||For the financial year ended ||For the financial year ended |
| ||31 March 2015 ||31 March 2014 ||31 March 2015 ||31 March 2014 |
|Total income ||8855 ||11829 ||16455 ||20264 |
|Total Expenditure ||5005 ||4054 ||8713 ||7414 |
|Profit before tax and ex- ceptional items ||3850 ||7775 ||7742 ||12850 |
|Exceptional item ||2256 ||- ||2633 ||- |
|Profit before tax ||1594 ||7775 ||5109 ||12850 |
|Taxes ||274 ||321 ||629 ||418 |
|Profit/ (loss) for the year ||1320 ||7454 ||4480 ||12432 |
* Cairn India Limited with its subsidiaries
meetings of the Board/Committees is usually finalized well before the beginning of theyear after seeking concurrence of all the Directors. In case of inability of any of theDirectors to attend the meeting in person the Directors endeavor to participate in themeeting through video conferencing or other audio visual means. In addition if requiredthe Board also approves resolutions by way of circulation between two successive Boardmeetings.
During the year ended 31 March 2015 the Board of Directors met six times viz. on 23April 2014 23 July 2014 17 September 2014 21 October 2014 22 January 2015 and 4March 2015. The maximum gap between any two meetings was not more than one hundred andtwenty days.
APPOINTMENT AND DECLARATION OF INDEPENDENT DIRECTORS
The Company at its annual general meeting held on 23 July 2014 had appointed Mr.Naresh Chandra Dr. Omkar Goswami Mr. Aman Mehta and Mr. Edward T. Story as independentDirectors of the Company. They hold office for a period upto 31 March 2017 and shall notbe liable to retire by rotation.
Further all the independent Directors have declared and a_rmed their compliance withthe independence criteria as mentioned in Section 149(6) of the Companies Act 2013 andclause 49 of the listing agreement in respect of their position as an "IndependentDirector" of the Company.
DIRECTORS/ KEY MANAGERIAL PERSONNEL (KMPs) APPOINTMENT OR RESIGNATION
During the year under review following changes occurred in the position of Directors/KMPs of the Company:
Mr. P. Elango (DIN 06475821) resigned as the interim Chief Executive Officer andWholetime Director w.e.f. 2 May 2014.
Mr. Mayank Ashar (DIN 07001153) was appointed as an additional Director of theCompany w.e.f. 17 November 2014 and was designated as Managing Director and ChiefExecutive Officer of the Company for a period of 5 (five) years upto 16 November 2019.The appointment of Mr. Ashar as Managing Director & Chief Executive Officer wasapproved by the shareholders of the Company (vide resolution passed through postal ballot)on 11 December 2014 and by Central Government on 16 January 2015.
Pursuant to the provisions of Section 161 of the Companies Act 2013 Mr. Ashar holdsoffice upto the ensuing annual general meeting. The Company has received a notice alongwith the requisite deposit from a member of the Company proposing the candidature of Mr.Mayank Ashar for the appointment as Director of the Company liable to retire by rotation.
In accordance with Section 152 of the Companies Act 2013 and Articles of Associationof the Company Mr. Tarun Jain (DIN 00006843) shall retire by rotation as Director at theensuing annual general meeting and being eligible offers himself for re- appointment.
A brief profile of the above-named Directors seeking appointment/reappointment at theensuing annual general meeting of the Company has been provided in the corporategovernance report and in the notice of the annual general meeting.
The Company has an adequately qualified Audit Committee constituted in accordance withthe provisions of Companies Act 2013 and clause 49 of the listing agreement. As on 31March 2015 the Committee comprised five non-executive Directors viz. Mr. Aman Mehta(Chairman) Mr. Naresh Chandra Mr. Tarun Jain Dr. Omkar Goswami and Mr. Edward T. Story.Apart from Mr. Tarun Jain all other Committee members are independent. All members of theCommittee are financially literate and have accounting or related financial managementexpertise.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Company is committed to conduct its business in a socially responsible ethical andenvironmental friendly manner and to continuously work towards improving quality of lifeof the communities in its operational areas.
The Company has a duly constituted CSR Committee which is responsible for fulfillingthe CSR objectives of the Company. As on 31 March 2015 the Committee comprised threeDirectors viz. Mr. Naresh Chandra Mr. Aman Mehta and Mr. Tarun Jain. Mr. Naresh ChandraChairman of the Committee is an independent Director.
During the year under review the Board of Directors on recommendation of the CSRCommittee has formulated the CSR policy of the Company. The CSR activities of the Companyare implemented in accordance with the core values viz. protecting stakeholder interestsproactive engagement with the local communities and striving towards inclusivedevelopment.
The CSR activities are focused on the following five broad themes with goals to improveoverall socio- economic indicators of Companys area of operation:
Promoting healthcare sanitation and making safe drinking water available;
Employment enhancement through training and vocational skill development;
Income enhancement through farm based and other livelihood opportunities;
Promoting education and sports; and n Ensuring sustainable environment.
The annual report on CSR containing particulars specified in Companies (CSR Policy)Rules 2014 including initiatives taken by the Company during the year is given inAnnexure I and also in the management discussion & analysis section of this report.
The CSR policy of the Company is enclosed as Annexure II to this report and is alsoplaced on the website of the Company viz. www.cairnindia.com
POLICY ON DIRECTORS APPOINTMENT & REMUNERATION
The Company strives to maintain an appropriate combination of executive non-executiveand independent Directors subject to a minimum of 3 (three) and maximum of 15 (fifteen)Directors including at least one woman Director.
The Nomination & Remuneration Committee of the Company leads the process for Boardappointments in accordance with the requirements of Companies Act 2013 listing agreementand other applicable regulations or guidelines. All the Board appointments are based onmeritocracy.
The potential candidates for appointment to the Board are inter-alia evaluated on thebasis of highest level of personal and professional ethics standing integrity valuesand character; appreciation of the Companys vision mission values; prominence inbusiness institutions or professions; professional skill knowledge and expertise;financial literacy and such other competencies and skills as may be considered necessary.
In addition to the above the candidature of an independent Director is also evaluatedin terms of the criteria for determining independence as stipulated under Companies Act2013 listing agreement and other applicable regulations or guidelines. In case ofre-appointment of independent Directors the Board shall take into consideration theresults of the performance evaluation of the Directors and their engagement level.
During the year under review the Board of Directors of the Company has adopted aRemuneration Policy for Directors KMPs and other employees. The policy represents theoverarching approach of the Company to the remuneration of Director KMPs and otheremployees. The copy of the policy is attached as Annexure- III to this report.
PERFORMANCE EVALUATION OF BOARD COMMITTEES & INDIVIDUAL DIRECTORS
A formal evaluation of the performance of the Board its Committees the Chairman andthe individual Directors was carried out for the year 2014-15. Led by the Nomination &Remuneration Committee the evaluation was done using individual questionnaires coveringamongst others vision strategy & role clarity of the Board Board dynamics &processes contribution towards development of the strategy risk management budgetarycontrols receipt of regular inputs and information functioning performance &structure of Board Committees ethics & values skill set knowledge & expertiseof Directors leadership etc.
As part of the evaluation process the performance of non-independent Directors theChairman and the Board was done by the independent Directors. The performance evaluationof the respective
Committees and that of independent and non-independent Directors was done by the Boardexcluding the Director being evaluated. The Directors expressed satisfaction with theevaluation process.
BUY-BACK OF EQUITY SHARES OF THE COMPANY
During the last financial year the Company had approved a proposal for buy-back of itsequity shares at a price not exceeding INR 335 per equity share for an aggregate amountnot exceeding INR 5725 crore.
The buy-back which commenced on 23 January 2014 and concluded on 22 July 2014 wasdone from open market other than from promoters and persons in control.
The total number of shares bought back and extinguished as part of the buy back processwas 36703839 at a consideration of INR 1225.45 crore. Out of this during the periodfrom 1 April 2014 to 22 July 2014 33433290 equity shares were bought back at aconsideration of INR 1119.93 crore.
Pursuant to the Securities & Exchange Board of India (Buy-back of Securities)Regulations 1998 the Company has deposited a sum of INR 143.13 crore being 2.5% of themaximum buy-back size in an escrow account. Post closure of buy-back the Company hasapplied to the Securities & Exchange Board of India for release of the amountdeposited in the escrow account.
EMPLOYEE STOCK OPTION SCHEMES
Your Company has established share incentive schemes viz. Cairn India PerformanceOption Plan (CIPOP) and Cairn India Employee Stock Option Plan (CIESOP) pursuant to whichoptions to acquire shares could be granted to selected employees and executive Directorsof the Company and its subsidiaries. The Company also has cash awards option plan (phantomstock options) for expatriate employees of the Company and its subsidiaries.
During the financial year stock options have been granted to the employees of theCompany and its subsidiaries under CIPOP scheme. On exercise of the options so grantedthe paid-up equity share capital of the Company will increase in terms of the stock optionplans mentioned above. The details of stock options granted by the Company are set out inAnnexure IV to this Report in compliance with clause 12 of the Securities and ExchangeBoard of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)Guidelines 1999.
During the year under review 656171 equity shares of INR 10 each were allottedpursuant to the exercise of stock options.
CHANGES IN CAPITAL STRUCTURE
Pursuant to the buy-back process your Company has bought back and extinguished33433290 equity shares of INR 10 each during the period from 1 April 2014 to 22 July2014.
Further during the financial year under review 656171 equity shares of INR 10 eachwere allotted on exercise of employee stock options by the employees of the Company andits subsidiaries. The Company has not issued any sweat equity shares or any bonus shares.Consequently the issued and paid up capital of the Company as on 31 March 2015 was INR18748527520 divided into 1874852752 equity shares of INR 10 each. The Company hasonly one class of equity shares with face value of INR 10 each ranking pari-passu.
LOANS AND INVESTMENTS BY THE COMPANY
Details of loans and investments by the Company to other body corporates or persons aregiven in notes to the financial statements.
MANAGEMENT DISCUSSION AND ANALYSIS
The management discussion and analysis report on the operations of the Company asrequired under the listing agreement with stock exchanges has been given separately andforms part of this report.
The Board of Directors is overall responsible for identifying evaluating and managingall significant risks faced by the Company. The Board approved Risk Management policywhich acts as an overarching statement of intent and establishes the guiding principles bywhich key risks are managed across the organization.
The Board monitors and reviews the implementation of various aspects of the RiskManagement policy through a duly constituted Risk Management Committee (RMC). The RMCassists the Board in its oversight of the Companys management of key risksincluding strategic and operational risks as well as the guidelines policies andprocesses for monitoring and mitigating such risks under the aegis of the overall businessrisk management framework. Further the Company has a dedicated risk assurance team tofacilitate risk reporting and updates risk policy compliances and provide overallguidance and support to business risk owners.
The Company follows well-established and detailed risk assessment and minimizationprocedures which are periodically reviewed by the Board. The Company has in place abusiness risk management framework for identifying risks and opportunities that may have abearing on the organizations objectives assessing them in terms of likelihood andmagnitude of impact and determining a response strategy.
In the opinion of the Board none of the risks faced by the Company threaten itsexistence. However the following risks are considered to have a potential bearing on theperformance of the Company:
Unfavorable changes in Production Sharing Contract ("PSC") terms orfailure to extend the PSC for the Rajasthan block after the expiry of PSC in May 2020could have a material adverse impact on Companys operations and financial condition.
The performance of the Company has been and is expected to continue to besubstantially dependent on the reserves and production of the Rajasthan block and anyinterruption in the exploration development production operations at the existing oiland gas fields for any reason (including force majeure conditions) could have a materialeffect on the results of our operations and financial condition.
Inability/substantial delay in reserves replacement would lead to decline inproduction from existing fields which could materially and adversely affect results ofoperations and financial condition and therefore sustenance of Companys operationsin the longer term.
International prices for oil are volatile and have a significant effect onCompanys revenue and profits. In case there are substantial and/ or extendeddeclines in international crude oil prices it may have an adverse effect onCompanys business results of operations and financial condition.
The Company operates under regulatory uncertainties driven by politicaldevelopments by the central state local laws and regulations such as changes in taxesroyalties and other amounts payable to various governments or their agencies. Recently atax demand of approximately INR 20495 crore (comprising tax of approximately INR 10248crore and interest of approximately INR 10247 crore) has been made in relation toretrospective tax legislation for alleged failure to deduct withholding tax on allegedcapital gains in the hands of erstwhile parent Cairn UK Holdings Limited. TheCompanys parent Vedanta Resources Plc. has filed a notice of claims against GoIunder the UK-India bilateral investment treaty challenging the tax demand seekingresolution through international arbitration. The Company has filed a Writ Petition withthe Honble Delhi High Court praying for quashing/setting aside the order passed bythe Tax Authorities. Further the Company has also filed an appeal before CommissionerAppeals. Although considered unlikely if enforced such tax demand would have a materialadverse effect on the business results of operations and financial condition of theCompany.
INTERNAL FINANCIAL CONTROLS AND ITS ADEQUACY
Cairn India continuously invests in strengthening its internal control processes. TheCompany has put in place an adequate system of internal financial control commensuratewith its size and nature of business which helps in ensuring the orderly and efficientconduct of its business. These systems provide a reasonable assurance in respect ofproviding financial and operational information complying with applicable statutessafeguarding of assets of the Company prevention & detection of frauds accuracy& completeness of accounting records and ensuring compliance with corporate policies.As a means to further strengthen the control environment during the year the processeswere benchmarked with industry practices to identify the gaps if any and remedialmeasures were taken.
Financial policies standards and delegations of authority have been disseminated tosenior management to cascade within their departments. Procedures to ensure conformancewith the policies standards and delegations of authority have been put in place coveringall activities.
The Company has a Chief Internal Auditor with a dedicated internal audit team which iscommensurate with the size nature & complexity of operations of the Company. Internalaudit reports functionally to Audit Committee of Board which reviews and approves riskbased annual internal audit plan. Audit Committee periodically reviews the performance ofinternal audit function.
The Company has a rigorous business planning system to set targets and parameters foroperations which are reviewed with actual performance to ensure timely initiation ofcorrective action if required. The Audit Committee reviews adherence to internal controlsystems and internal audit reports. Further the Board annually reviews the effectivenessof the Companys internal control system.
The Company has in place a whistleblower policy to support the Code of BusinessEthics. This policy documents the Companys commitment to maintain an open workenvironment in which employees consultants and contractors are able to report instancesof unethical or undesirable conduct actual or suspected fraud or any violation ofCompanys Code of Business Ethics at a significantly senior level without fear ofintimidation or retaliation.
The Ethics committee comprises of four members including the Company Secretary ChiefInternal Auditor Chief Financial Officer and a senior functional head. The committee isauthorized by the Board of Directors of the Company for the purpose of receiving allcomplaints under the policy and in ensuring appropriate action. The concern can bereported by sending an e-mail message at the dedicated address viz.ethicscounsellors@cairnindia. com. Individuals can also raise their concerns directly tothe CEO or the chairman of the Audit Committee of the Company. Any allegations that fallwithin the scope of the concerns identified are investigated and dealt with appropriately.Further during the year no individual was denied access to the Audit Committee forreporting concerns if any.
The ethics counsellors periodically submit the report on complaints received if anyand the action taken to the Audit Committee.
The details of establishment of vigil mechanism for Directors & employees to reportgenuine concerns are available at the website of the Company viz. www.cairnindia.com
During the financial year under review in continuation of the efforts to realign thegroup structure and consolidate the multi layered structure five subsidiary companieswere dissolved details of which are given in Table 1.
As on 31 March 2015 the Company had 14 subsidiaries including indirect subsidiaries.All these companies are 100% beneficially owned by Cairn India Limited. The Companyregularly monitors the performance of such companies.
The Company shall make available the annual accounts of the subsidiary companies to anymember of the Company who may be interested in obtaining the same. The annual accounts ofthe subsidiary companies will also be kept open for inspection at the registered office ofthe Company and respective subsidiary companies. Further the annual accounts of thesubsidiaries are also available on the website of the Company viz. www.cairnindia.com.
The consolidated financial statements presented by the Company include the financialresults of its subsidiary companies.
REPORT ON PERFORMANCE & FINANCIAL POSITION OF SUBSIDIARIES
Following are the highlights on performance and financial position of yourCompanys subsidiaries:
Cairn India Holdings Limited: The company is incorporated in Jersey and itsprincipal business is holding investments. The company did not have any operations duringthe year apart from its investments in various subsidiary companies. During the yearended 31 March 2015 the company made a profit of INR 2684.86 crore.
Cairn Energy Hydrocarbons Limited: The company is incorporated in Scotlandand its principal business is exploration and production of oil and gas. The company holdsinterest in the producing block RJ-ON-90/1 in India. During the year ended 31 March 2015the company made a profit of INR 1912.78 crore. Average gross production from theRajasthan block for the year ended 31 March 2015 was 175143 boepd and working interestproduction was 61300 boepd.
Cairn Energy Holdings Limited: The company is incorporated in Scotland andits principal business is holding investments. The company did not have any operationsduring the year apart from its investment in subsidiary company. During the year ended 31March 2015 the company made a profit of INR 7.13 crore.
Cairn Exploration No. (2) Limited: The company is incorporated in Scotlandand its principal business is exploration and production of oil and gas. The company didnot have any operations during the year 2014-15. During the year ended 31 March 2015 thecompany made a profit of INR 0.0004 crore.
Cairn Exploration No. (6) Limited: The company is incorporated in Scotlandand its principal business is exploration and production of oil and gas. The company didnot have any operations during the year 2014-15. During the year ended 31 March 2015 thecompany incurred a loss of INR 0.04 crore.
1. SUBSIDIARY COMPANIES DISSOLVED DURING THE FINANCIAL YEAR ENDED 31 MARCH 2015
|S. No. ||Name of the Company ||Country of incorporation ||Effective date of dissolution |
|1. ||Cairn Energy Cambay B.V. ||Netherlands ||30 December 2014 |
|2. ||Cairn Energy Gujarat B.V. ||Netherlands ||30 December 2014 |
|3. ||Cairn Energy India West B.V. ||Netherlands ||30 December 2014 |
|4. ||Cairn Energy Netherlands Holdings B.V. ||Netherlands ||30 December 2014 |
|5. ||CEH Australia Limited ||British Virgin Islands ||29 October 2014 |
Cairn Exploration No. (7) Limited: The company is incorporated in Scotlandand its principal business is exploration and production of oil and gas. The company didnot have any operations during the year 2014-15. During the year ended 31 March 2015 thecompany incurred a loss of INR 0.04 crore.
Cairn Energy Gujarat Block 1 Limited: The company is incorporated inScotland and principal business is exploration and production of oil and gas. The companydid not have any operations during the year 2014-15. During the year ended 31 March 2015the company incurred a loss of INR 7.26 crore.
Cairn Energy Discovery Limited:
The company is incorporated in Scotland and its principal business is exploration andproduction of oil and gas. The company did not have any operations during the year2014-15. During the year ended 31 March 2015 the company incurred a loss of INR 0.07crore.
Cairn Energy Australia Pty Limited: The company is incorporated in Australiaand its principal business is holding investments. The company did not have any operationsduring the year apart from its investment in subsidiary company. During the year ended31 March 2015 the company incurred a loss of INR 0.23 crore.
Cairn Energy India Pty Limited:
The company is incorporated in Australia and its principal business is exploration andproduction of oil and gas. The company did not have any operations during the year 2014.During the year ended 31 March 2015 the company incurred a loss of INR 0.01 crore.
Cairn South Africa Proprietary Limited: The Company holds a 60%participating interest in the exploration right in Block-1 Orange Basin offshore SouthAfrica. During the year as part of the work program processing and interpretation of 2Dand 3D seismic data were carried out. The work programme commitments for the current phasethat expired in February 2015 have been completed. During the year ended 31 March 2015the company incurred a loss of INR 27.02 crore.
CIG Mauritius Holding Private Limited: The company is incorporated inMauritius and its principal business is holding investments. During the year ended 31March 2015 the company incurred a loss of INR 948.33 crore which was mainly on accountof impairment of its investment in its subsidiary company CIG Mauritius Private Limitedamounting to INR 948.09 crore.
CIG Mauritius Private Limited: The company is incorporated in Mauritius andits principal business is holding investments. The company did not have any operationsduring the year 2014-15 apart from its investment in subsidiary company. During the yearended 31 March 2015 the company incurred a loss of INR 958.38 crore which was mainly onaccount of impairment of its investment and loan in its subsidiary company Cairn LankaPrivate Limited amounting to INR 829.73 crore and INR 132.48 crore respectively.
Cairn Lanka Private Limited: The company is incorporated in Sri Lanka andits principal business is exploration and production of oil and gas. The company holds a100% participating interest in the exploration area of block SL-2007-01-001 in Sri Lanka.During the year ended 31 March 2015 the company incurred a loss of INR 553.61 crore. Theloss was mainly on account of impairment of carrying value of exploration assets of blockin Sri Lanka. Given the current level of gas prices and fiscal terms the development ofhydrocarbons in the said block is not commercially viable. Hence the management hasimpaired the carrying value of the related assets amounting to INR 505.19 crore.
Your Company strives to ensure that best corporate governance practices are identifiedadopted and consistently followed. Your Company believes that good governance is the basisfor sustainable growth of the business and for enhancement of stakeholder value.
The report on corporate governance forms an integral part of this report and is set outas separate section to this annual report. The certificate of S. R. Batliboi & Co.LLP chartered accountants the statutory auditors of the Company certifying compliancewith the conditions of corporate governance as stipulated in clause 49 of the listingagreement is annexed with the report on corporate governance.
RELATED PARTY TRANSACTIONS
During the year under review the Board has adopted a policy to regulate thetransactions of the Company with its related parties.
As per policy all related party transactions require prior approval of the AuditCommittee and Board of Directors of the Company. Prior approval of the shareholders of theCompany is also required for certain related party transactions as prescribed underCompanies Act 2013 and listing agreement. The said policy is available on theCompanys website viz. www.cairnindia.com
All related party transactions that were entered into during the financial year were onan arms length basis. There were no materially significant related partytransactions made by the Company with promoters Directors key managerial personnel orother designated persons which may have a potential conflict with the interest of theCompany at large. Details of such transactions are given in the Annexure V to this report.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company appointedM/s Sanjay Grover & Associates a firm of company secretaries in practice toundertake the Secretarial Audit of the Company. The report of the Secretarial Audit isannexed to this report as Annexure VI.
Secretarial Auditors report is self-explanatory and therefore does not requirefurther comments and explanation.
AUDITORS & AUDITORS REPORT
S. R. Batliboi & Co. LLP chartered accountants statutory auditors of the Companyhold office till the conclusion of the ensuing annual general meeting. Further they haveconfirmed that they are not disqualified for re-appointment as auditors of the Companyunder the Companies Act 2013 the Chartered Accountants Act 1949 and the rules orregulations made thereunder.
The Audit Committee at its meeting held on 23 April 2015 has recommended there-appointment of S. R. Batliboi & Co. LLP as statutory auditors of the Company. YourDirectors also recommend their reappointment from the conclusion of this annual generalmeeting till the conclusion of the next annual general meeting of the Company.
Auditors report is self-explanatory and therefore does not require furthercomments and explanation.
In terms of the Section 148 of the Companies Act 2013 read with Companies (CostRecords and Audit) Rules 2014 the Company is required to maintain cost accountingrecords and get them audited every year.
The Board appointed M/s. Shome & Banerjee cost accountants as cost auditors ofthe Company for the financial year 2015-16 at a fee of INR 885000 (Rupees eight lacseighty five thousand only) plus applicable taxes and out of pocket expenses subject to theratification of the said fees by the shareholders at the ensuing annual general meeting.
The cost audit report would be filed with the Central Government within prescribedtimelines.
The Company has not invited any deposits from the public under Section 73 of theCompanies Act 2013.
Companys industrial relations continued to be harmonious during the period underreview.
PARTICULARS OF EMPLOYEES
In accordance with the provisions of Section 197(12) of the Companies Act 2013 andRule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014the names and other particulars of employees are set out in the annexure to this report.In terms of the provisions of Section 136(1) of the Companies Act 2013 the BoardsReport is being sent to the shareholders without this annexure. Shareholders interested inobtaining a copy of the annexure may write to the Company Secretary.
MATERIAL AND SIGNIFICANT ORDERS PASSED BY REGULATORS & COURTS
No significant and material orders have been passed by any regulators or courts ortribunals against the Company impacting the going concern status and Companysoperations in future.
However members are informed that the Company has received an order from the IncomeTax Department for an alleged failure to deduct withholding tax on alleged capital gainsarising during the year 2006-07 in the hands of Cairn UK Holdings Limited (CUHL)Companys erstwhile parent company a subsidiary of Cairn Energy Plc. This was inrespect of the transaction of CUHL transferring the shares of Cairn India Holdings Limitedto Cairn India Limited as part of internal group reorganization in 2006-07 to facilitatethe IPO of Cairn India Limited. A demand of approximately INR 20495 crore (comprising taxof approximately INR 10248 crore and interest of approximately INR 10247 crore) isalleged to be payable. The Company has filed a Writ Petition with the Honble DelhiHigh Court praying for quashing/setting aside the aforesaid order and is pursuing allpossible options to protect its interest.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Information on conservation of energy technology absorption and foreign exchangeearnings and outgo is given in Annexure VII to this report.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to Section 134 of the Companies Act 2013 the Directors confirm that:
a. in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;
b. appropriate accounting policies have been selected and applied consistently and havemade judgments 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 31 March 2015 and of the profit of theCompany for the year ended 31 March 2015;
c. proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
d. the annual accounts have been prepared on a going concern basis;
e. internal financial controls have been laid down to be followed by the Company andsuch internal financial controls are adequate and were operating effectively;
f. proper systems have been devised to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
Disclosure pursuant to Section 197(12) of Companies Act 2013 and Rule 5 of Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is provided below:
i) the ratio of the remuneration of each Director to the median remuneration of theemployees of the Company for the year 2014-15:
|Directors ||Nature of Directorship ||Ratio |
|Mr. Navin Agarwal ||Chairman & Non-executive Director ||0.3:1 |
|Mr. Tarun Jain ||Non-executive Director ||0.5:1 |
|Ms. Priya Agarwal ||Non-executive Director ||0.1:1 |
|Mr. Aman Mehta ||Non-executive independent Director ||4:1 |
|Mr. Naresh Chandra ||Non-executive independent Director ||4:1 |
|Dr. Omkar Goswami ||Non-executive independent Director ||4:1 |
|Mr. Edward T. Story ||Non-executive independent Director ||4:1 |
|Mr. Mayank Ashar ||Managing Director & Chief Executive Officer ||76:1* |
*computed based on annualized remuneration.
(ii) the percentage increase in remuneration of each Director Chief Financial OfficerChief Executive Officer Company Secretary in the financial year:
The remuneration of non-executive Directors by way of sitting fee for attending Board/Committee meetings was increased by 150% viz. INR 20000 per meeting to INR 50000 permeeting from financial year 2014-15. There is no increase in profit linked commissionpaid/payable to non-executive independent Directors of the Company.
Mr. Mayank Ashar was appointed as Managing Director & CEO of the Company on 17November 2014 and Mr. P. Elango ceased to be the interim CEO & Wholetime Director ofthe Company on 2 May 2014. Accordingly there is no comparative information in thisregard.
The percentage increase in the remuneration of Mr. Sudhir Mathur CFO and Ms. NeerjaSharma Director Assurance & Communication and Company Secretary is 24.7% and 12.5%respectively.
(iii) the percentage increase in the median remuneration of employees in the financialyear: 18.7%
(iv) the number of permanent employees on the rolls of Company: 1619 (One thousand sixhundred and nineteen) as on 31 March 2015.
(v) the explanation on the relationship between average increase in remuneration andCompany performance:
The average increase in remuneration of the employees was 19.1%. The average increasein remuneration is closely linked to and driven by achievement of annual corporate goalsand overall business financial and operational performance of the Company.
(vi) comparison of the remuneration of the key managerial personnel against theperformance of the Company:
During the year the gross operated average production was at 211671 barrels of oilequivalent. Together with its JV partners Cairn contributed about 27% to Indiasdomestic crude oil production and thus helping strengthen the energy security of thecountry. Cairn continues to be one of the low cost producers in the world resulting inEBITDA margin of 59% and strong cash flow from operations of INR 8765 crore for the year.The remuneration of key managerial personnel amongst others is closely linked to anddriven by achievement of annual corporate goals and overall business financial andoperational performance of the Company. The average increase in the remuneration ofKMPs was 20.6% over the previous year.
(vii) variations in the market capitalisation of the Company price earnings ratio asat the closing date of the current financial year and previous financial year andpercentage increase over decrease in the market quotations of the shares of the Company incomparison to the rate at which the Company came out with the last public offer:
The Company had allotted shares under its IPO in December 2006 at the price of INR 160per equity share. The market quotations/price of the shares of the Company as at 31 March2015 on NSE compared to the IPO price increased by 33.66%
|Particulars ||As at 31 March 2015 ||As at 31 March 2014 ||Variation (%) |
|Closing Share Price on NSE (INR) ||213.85 ||333.0 ||(35.78) |
|Market Capitalisation (INR crore) ||40094* ||63524* ||(36.88) |
|P/E Ratio** ||30.42 ||8.53 ||256.62 |
*Total number of shares as on 31 March 2015 and 31 March 2014 are 1874852752 and1907629871 respectively. ** P/E ratio is calculated using basic earnings per shareincluding exceptional items.
(viii) average percentile increase already made in the salaries of employees other thanthe managerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration:
The average increase in the remuneration of employees was 19.1%. Mr. Mayank Ashar wasappointed as Managing Director & CEO of the Company on 17 November 2014 and Mr. P.Elango ceased to be the interim CEO & Wholetime Director of the Company on 2 May2014. Accordingly there is no comparative information in this regard.
(ix) comparison of the each remuneration of the Key Managerial Personnel against theperformance of the Company:
The increase in the remuneration of Mr. Sudhir Mathur CFO and Ms. Neerja SharmaDirector - Assurance & Communication and Company Secretary is 24.7% and 12.5%respectively. Mr. Mayank Ashar was appointed as Managing Director & CEO of the Companyon 17 November 2014 and Mr. P. Elango ceased to be the interim CEO & WholetimeDirector of the Company on 2 May 2014. Accordingly there is no comparative informationin this regard. The comparison of the remuneration against the performance of the Companyis detailed in clause (vi) above.
(x) the key parameters for any variable component of remuneration availed by theDirectors:
The variable component of remuneration of the executive Director comprises of annualperformance bonus which is linked to achievement of corporate KPIs & individual goalsand the long term incentives in the form of stock/cash options. The non-executiveDirectors of the Company are entitled to annual commission linked to the performance andprofit of the Company.
(xi) the ratio of the remuneration of the highest paid Director to that of theemployees who are not Directors but receive remuneration in excess of the highest paidDirector during the year: Not applicable.
(xii) Affirmation that the remuneration is as per the Remuneration Policy of theCompany:
The remuneration is as per the Remuneration Policy of the Company.
BUSINESS RESPONSIBILITY REPORT
The Business Responsibility Report for the financial year 2014-15 forms part of theannual report.
KEY AWARDS AND RECOGNITIONS
During the year your Company received awards and honours from different bodies andtrade organisations the summary of which is as under:
Seventeen mines safety awards from Directorate General of Mines Safety for siteinstallations and drilling & work over/ completion rigs in Rajasthan;
Golden Peacock award for Business Excellence 2014 under oil & gas category;
Golden Peacock HR excellence award 2014;
Business World award for Indias Fastest Growing Company in middleweightfor the financial year 2014-15;
CII Southern Region "Excellence Award in EHS 2013" awards for bestpractices in environment health and safety management at Ravva;
Awards from Public Relations Council of India (PRCI) in the categories of InHouse Magazine Creative Logo of the year Corporate Publication Corporate Advertisement;and
National Safety awards (Mines) conferred by honble President of India for2011 & 2012 in the category of lowest injury frequency rate and longest accident-freeperiod for Companys facilities at CB-OS/2 & Ravva respectively.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013
Your Company has always believed in providing a safe and harassment free workplace forevery individual working in Cairn Indias premises through various interventions andpractices. The Company always endeavors to create and provide an environment that is freefrom discrimination and harassment including sexual harassment.
The Company has in place a robust policy on prevention of sexual harassment atworkplace. The policy aims at prevention of harassment of employees as well as contractorsand lays down the guidelines for identification reporting and prevention of sexualharassment. There is an Internal Complaints Committee (ICC) which is responsible forredressal of complaints related to sexual harassment and follows the guidelines providedin the policy. ICC has its presence at corporate office as well as at site locations.
During the year ended 31 March 2015 the ICC received two complaints pertaining tosexual harassment. Detailed investigations were carried out and appropriate action wastaken by the ICC.
RELEVANT EXTRACT OF THE ANNUAL RETURN
Relevant extract of annual return for the financial year 2014-15 under the CompaniesAct 2013 is given in Annexure VIII to this report.
MATERIAL CHANGES & COMMITMENTS
No material changes and commitments affecting the financial position of the Companyhave occurred after the end of the financial year 2014-15 and till the date of thisreport.
Your Directors wish to place on record their sincere appreciation of the efforts anddedicated service of all employees which contributed to the continuous growth andconsequent performance of the Company. Your Directors wish to place on record theirgratitude for the valuable assistance and cooperation extended to the Company by theCentral Government State Governments joint venture partners banks institutionsinvestors and customers.
For and on behalf of the Board of Directors
Navin Agarwal (DIN No.-00006303)
Date: 23 April 2015