To the Members
Your Company's Directors are pleased to present the 39th Annual Report ofthe Company along with Audited Financial Statement for the year ended 31 December 2016.
|1. FINANCIAL RESULTS || || |
|Particulars ||For the year ended 31 December 2016 ||For the year ended 31 December 2015 |
| ||(Rupees in Crores) ||(Rupees in Crores) |
|Profit before Depreciation Exceptional Items & Tax ||1038.89 ||947.46 |
|Interest Income (Net of Finance Cost) ||51.77 ||42.46 |
|Profit before Depreciation & Tax ||1090.66 ||989.92 |
|Depreciation & Amortisation ||44.96 ||38.97 |
|Tax Expenses || || |
|Current Tax ||388.04 ||323.80 |
|Deferred Tax ||(17.25) ||11.89 |
|Profit after Tax ||674.91 ||615.26 |
|Adding thereto: || || |
|Balance as per last Balance Sheet brought forward ||166.33 ||87.50 |
|Profit available for Appropriation ||841.24 ||702.76 |
|The Appropriations are: || || |
|Dividend || || |
|Interim ||222.55 ||197.82 |
|Special ||98.91 || |
|Final ||222.55 ||247.28 |
|Tax on Dividend || || |
|Interim ||45.31 ||40.27 |
|Special ||20.14 || |
|Final ||45.31 ||50.34 |
|Tax on Final Dividend 2014 || ||0.72 |
|Net surplus in the Statement of Profit & Loss ||186.47 ||166.33 |
| ||841.24 ||702.76 |
Net revenues from operations of your Company have increased by about 2% over theprevious year to Rs. 3370 Crores mainly due to 4.4% rise in volumes driven by growth inPower Brands and personal mobility segment. Costs of materials were lower by about 4% overthe previous year at Rs. 1532 Crores mainly due to drop in input costs. Operatingand other expenses increased by Rs. 31.51 Crores as compared to the previous year.Profit Before Tax increased by about 10% over previous year to Rs. 1046 Crores. Tax ratefor the current year has remained at nearly the same level as that of the previous year.Profit After Tax increased by 10% over the previous year to Rs. 675 Crores.
Your Company's performance has been discussed in detail in Management Discussionand Analysis Report'.
Your Company does not have any subsidiary or associate or joint venture company.
Your Directors are pleased to recommend a final dividend of Rs. 4.50/- per equity share(2015: Rs. 5/- per share) for the Financial Year ended 31 December 2016. This is inaddition to the interim dividend of Rs. 4.50/- per share (2015: interim dividend Rs.4/- per share) paid on 18 August 2016 and a special dividend of Rs. 2/- per share (2015:Nil per share) to be paid on or before 23 March 2017.
The final dividend subject to approval of Members will be paid within statutoryperiod to those Members whose names appear in the Register of Members as on the date ofbook closure. The total dividend for the Financial Year ended 31 December 2016 includingthe proposed final dividend amounts to Rs. 11/- per equity share (220% on paid-up equityshare capital) (2015: Rs. 9/- per share) and will absorb Rs. 544.01 Crores (2015: Rs.445.10 Crores).
The dividend payout for the year under review is in accordance with your Company'spolicy to pay sustainable dividend linked to long-term growth objectives of your Companyto be met by internal cash accruals.
The dividend distribution policy is given as Annexure-I to this Report. The sameis also available on the website of the Company at http://www.castrol.com/en_in/india/financials/other-financial-documents-policies.html
4. TRANSFER TO RESERVE
Your Directors do not propose to transfer any amount to the General Reserves for theFinancial Year ended 31 December 2016.
5. INDIAN ACCOUNTING STANDARDS (IND AS) IFRS CONVERGED STANDARDS
Your Company will adopt Ind-AS with effect from 1 January 2017 pursuant to Ministry ofCorporate Affairs' notification dated 16 February 2015 notifying the Companies (IndianAccounting Standard) Rules 2015.
6. SUPPLY CHAIN
Your Company's Supply Chain function remained an important enabler for theorganization. The five strategic pillars of Supply Chain continued to be:
(1) Contemporary differentiated and competitive customer service;
(2) Premium quality a source of enhanced customer experience;
(3) Supply Chain capabilities assets and resources to support growth;
(4) Consistent processes;
(5) Generating value for business through efficiency initiatives.
Health Safety Security and Environment along with Ethics and Values formed the coreof operations.
The safety agenda continued to be driven strongly through plant safety and road safetyinitiatives. The Family Connect programme for heavy vehicle drivers continued to be animportant forum for engagement with the drivers across multiple locations. Within plantsas part of the safe control and monitoring mechanism Safety Observations continued to berecorded and proactively addressed. The Control of Work guidelines and OperatingManagement System processes across the plants and other Supply Chain functions continuedto be strengthened.
Customer service and product availability were key priorities for Supply Chain. Theywere driven by proactively anticipating demand changes and variability as well ascontinuous improvement in order fulfilment processes. The improvements in customer servicewere fully supported by plant production reliability as well as raw materials andpackaging suppliers.
The team continued to focus on quality by using stringent input measures and processes helping drive a premium image in the market. Strong inspection programmes atsupplier and process levels continued through the year. As a result of continuousimprovement in customer complaints the quality complaint closure rate for the period wasincreased to 92.6%.
In order to support growth operations your Company continued to invest in projects andinitiatives to make the operations robust for future. The total capital investmentacross multiple Supply Chain projects for 2016 was about Rs. 22.5 Crores.
Throughout the year there was strong focus on generating value through standardizationand simplification. Efficient sourcing and transportation initiatives focusing on costoptimization were led successfully helping deliver additional value for business.
7. DIRECTORS AND KEY MANAGERIAL PERSONNEL
At the 38th Annual General Meeting held on 5 May 2016 Members approvedappointment of Mr. Omer Dormen as the Managing Director of the Company.
Mr. Ralph Hewins ceased to be a Nominee Director of the Company with effect from 31August 2016 as your Company had received a letter from Castrol Limited UK intimating thewithdrawal of his nomination consequent to his resignation from Castrol Limited UK. YourBoard places on record its appreciation for outstanding contributions made by Mr. RalphHewins during his tenure as the Nominee Director of the Company.
Mr. Sandeep Deshmukh resigned as Company Secretary with effect from 14 March 2016. YourBoard places on record its appreciation for contributions made by Mr. Sandeep Deshmukhduring his tenure as the Company Secretary of your Company.
Your Board at its meeting held on 16 December 2016 appointed Ms. Chandana Dhar asCompany Secretary and Compliance Officer of the Company effective from 12 January 2017 onthe recommendation made by Nomination and Remuneration Committee.
In accordance with the provisions of the Companies Act 2013 (the "Act") andthe Articles of Association of the Company Mr. Omer Dormen and Ms. Rashmi JoshiDirectors of the Company retire by rotation at the ensuing Annual General Meeting andbeing eligible have offered themselves for re-appointment.
A brief resume of each of the Directors proposed to be re-appointed at theensuing Annual General Meeting and the details of the Directorships held by them in othercompanies are given in the Corporate Governance section of this Annual Report.Appropriate resolutions for the re-appointment of the aforesaid Directors are being movedat the ensuing Annual General Meeting which the Board recommends for your approval.
The Independent Directors of your Company have given the certificate of independence toyour Company stating that they meet the criteria of independence as mentioned underSection 149 (6) of the Act.
There is no change in the composition of the Board of Directors and KeyManagerial Personnel during the year under review except as stated above.
8. BOARD EVALUATION
The Nomination and Remuneration Committee of your Company approved Board PerformanceEvaluation Policy (the "Policy") during the year which was adopted by the Boardof Directors. The Policy provides for evaluation of the Board the Committees of the Boardand individual Directors including the Chairman of the Board. The Policy provides thatevaluation of the performance of the Board as a whole and the Board Committees andindividual Directors shall be carried out annually.
Your Company has appointed a reputed agency that engages with the Chairman of the Boardand Chairman of the Nomination and Remuneration Committee in respect of the evaluationprocess. The agency prepares an independent report which is used for giving appropriatefeedback to the Board/Committees/Directors for discussions in the meetings.
During the year the evaluation cycle was completed by the Company which included theevaluation of the Board as a whole Board Committees and individual Directors. Theevaluation process focused on various aspects of the Board and Committees' functioningsuch as composition of the Board and Committees experience and competencies performanceof specific duties obligations and governance issues. A separate exercise was carried outto evaluate the performance of individual Directors on parameters such as attendancecontribution and exercise of independent judgment.
The results of the evaluation of the Board and Committees were shared with the Boardand respective Committees. The Chairman of the Board had individual discussions with eachmember of the Board to discuss the performance feedback based on self-appraisal and peerreview. The Nomination and Remuneration Committee Chairman discussed the performancereview with the Chairman of the Board.
The Independent Directors met on 14 November 2016 to review performance evaluation ofNon-Independent Directors and the Board of Directors and also of the Chairman taking intoaccount views of Executive Directors and Non-Executive Directors.
Based on the outcome of the evaluation the Board and Committees have agreed on variousaction points which would result in each Director its Committees and the Board playingmore meaningful roles to increase shareholder value.
9. POLICY ON DIRECTORS' APPOINTMENTS REMUNERATION ETC.
PolicyonRemunerationofDirectorsKeyManagerial Personnel (KMP) and Senior ManagementEmployees and Policy on Appointment of Directors Independence of Directors and BoardDiversity are given as Annexures II & III to this report.
10. BOARD AND COMMITTEES
A calendar of proposed dates for meetings is prepared and circulated in advance to theDirectors. The Board met five times during the year details of which are given in the CorporateGovernance Report that forms part of this Annual Report. The intervening gap between themeetings was within the period prescribed under the Act and the SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 ("SEBI Listing Regulations2015"). Details of all the Committee of the Board have been given in the CorporateGovernance Report.
11. CORPORATE GOVERNANCE
Your Company is part of BP Group which is known globally for best standards ofgovernance and business ethics. Your Company has put in place governance practices asprevalent globally. The Corporate Governance Report and the Auditor's Certificateregarding compliance of conditions of Corporate Governance are made part of the AnnualReport.
12. CORPORATE SOCIAL RESPONSIBILITY
Your Company recognizes the need and importance of a focused and inclusive social andeconomic development especially of the industries and communities within which itoperates. Your Company seeks to build open and constructive relationships with all itsstakeholders and wants them to benefit from your Company's presence and this is setout in the Code of Conduct and values of your Company. Over the last hundred years of theCompany's presence in India Castrol India's Corporate Social Responsibility (CSR)activities have evolved from charitable giving to a strategic CSR programmeworking in collaboration with key stakeholders. The CSR programme of your Company alignsbusiness risks and opportunities with the national agenda of development priorities tomeet the needs and aspirations of the populace.
Your Company aims to provide a safer and better quality of life for the communities itserves whilst ensuring the long-term sustainability of the
Company's operations in the relevant industries where it operates. In alignment withour core skills and vision of building a safer and better quality of life underpinned byour focus on progressive technology and in line with the aspirations of the country'syouth the Company focuses on the following programmes:
i. Eklavya: Strengthening skills in the automotive and industrial sectors with a focuson technology
ii. Ehtiyat: Collaborating for safer mobility
iii. Ekjut: Community Development in areas of operation and presence
iv. Ehsaas: Humanitarian aid
Corporate Social Responsibility Committee of the Board has recommended and the Boardhas approved a CSR Policy in line with the requirements of Section 135 of the Act.
The Corporate Social Responsibility Policy is available on the website of the Companyat http://www.castrol.com/en_in/india/about-us/csr. html.
The Annual Report on CSR activities is annexed to this report as Annexure-IV.
The Business Responsibility Report also contains information on work done on CSR.
13. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirement under Sections 134(3)(c) and 134(5) of the Act withrespect to the Directors' Responsibility Statement it is hereby confirmed:
(a) in the preparation of the annual accounts for the year ended 31 December 2016 theapplicable accounting standards read with requirements set out under Schedule III to theAct have been followed and there are no material departures from the same;
(b) the Directors have selected such accounting policies and applied them consistentlyand made judgements and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of your Company as at 31 December 2016 and of the profitof your Company for the year ended on that date;
(c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of your Company and for preventing and detecting fraud and other irregularities;
(d) the Directors have prepared the annual accounts on a going concern' basis;
(e) the Directors have laid down internal financial controls to be followed by yourCompany and that such internal financial controls are adequate and are operatingeffectively; and
(f) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
14. RISK MANAGEMENT AND ADEQUACY OF INTERNAL FINANCIAL CONTROLS
Your Company has set up a Risk Management Committee. Your Company has also adopted aRisk Management Policy the details of which are given in the Corporate Governance Reportthat forms part of this Annual Report.
Your Company maintains an adequate and effective Internal Control System commensuratewith its size and complexity. We believe that these internal control systems provideamong other things a reasonable assurance that transactions are executed with Managementauthorisation and that they are recorded in all material respects to permit preparation offinancial statements in conformity with established accounting principles and that theassets of your Company are adequately safe-guarded against significant misuse or loss. Anindependent Internal Audit function is an important element of your Company's internalcontrol system. The internal control system is supplemented through an extensive internalaudit programme and periodic review by Management and Audit Committee.
Your Company has in place adequate Internal Financial Controls with reference toFinancial Statements. During the year such controls were tested and no reportablematerial weaknesses in the design or operation were observed.
15. RELATED PARTY TRANSACTIONS
Your Company has adopted a Related Party Transactions Policy. The Audit Committee reviewsthe Policy from time to time and also approves and reviews all Related Party Transactionsto ensure that the same are in line with the provisions of applicable law and the Policy.The Committee approves the Related Party Transactions and wherever it is not possible toestimate the value approves limit for the Financial Year based on best estimates. AllRelated Party Transactions are reviewed by an independent accounting firm to establishcompliance with law and limits approved.
All Related Party Transactions entered during the year were in Ordinary Courseof the Business and on Arm's Length basis. No Material Related PartyTransactions were entered during the year by your Company. Accordingly thedisclosure of Related Party Transactions as required under Section 134(3)(h) of the Actin Form AOC-2 is not applicable to your Company.
In conformity with the requirements of the Act read with SEBI Listing Regulations2015 the policy to deal with Related Party Transactions is also available on Company'swebsite at http:// www.castrol.com/en_in/india/about-us/financials/other-financial-documents-policies.html
Your Company has not accepted any Fixed Deposits under Chapter V of The Act during thisFinancial Year and as such no amount on account of Principal or Interest on Deposits fromPublic was outstanding as on 31 December 2016.
17. PARTICULARS OF LOANS GIVEN INVESTMENTS MADE GUARANTEES GIVEN AND SECURITIESPROVIDED
Particulars of loans guarantees and investments made by your Company pursuant toSection 186 of the Act are given in the Notes to the Financial Statement whichforms part of the Annual Report.
18. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION RESEARCH & DEVELOPMENT (R&D)AND FOREIGN EXCHANGE EARNING AND OUTGO
The particulars relating to conservation of Energy Technology Absorption ForeignExchange Earnings and Outgo as required to be disclosed under the Act are provided as Annexure-V.
19. MATERIAL CHANGES OCCURRED AFTER END OF FINANCIAL YEAR
Except as disclosed elsewhere in this Annual Report no material changes andcommitments which could affect your Company's financial position have occurred between theend of the Financial Year of your Company and date of this Annual Report.
M/s. SRBC & Co. LLP Chartered Accountants retire as Statutory Auditors of theCompany from the conclusion of the ensuing Annual General Meeting. The Audit Report givenby the Auditors on the financial statements of your Company is part of the Annual Report.There has been no qualification reservation or adverse remark given by the Auditors intheir Report.
In accordance with Section 139 of the Act listed companies cannot appoint orre-appoint the auditor for more than two terms of five consecutive years if the auditoris an audit firm. Existing companies which are covered under auditor rotationrequirement should comply with these requirements within three years from the date ofcommencement of the Act.
SRBC & Co LLP Chartered Accountants (ICAI Firm Registration No. 324982 E) Mumbaihave been the Auditors of your Company since 2001 and have completed a term of sixteenyears (including three years of transitional period). It is now proposed to appoint M/s.Deloitte Haskins & Sells LLP Chartered Accountants (Firm Registration Number117366W-100018) as Statutory Auditors of your Company. Further M/s. Deloitte Haskins& Sells LLP have consented to be appointed as Statutory Auditors of the Company andhave confirmed that their appointment if made would be in compliance with the provisionsof Sections 139 and 141 of the Act and Rules framed thereunder.
The Audit Committee and the Board at their respective meetings held on 21 February2017 have recommended appointment of M/s. Deloitte Haskins & Sells LLP CharteredAccountants (Firm Registration Number 117366W-100018) as Statutory Auditors of theCompany from the conclusion of ensuing Annual General Meeting untilconclusion of 44th Annual General Meeting.
M/s. Kishore Bhatia & Associates Cost Accountants carried out the Cost Audit forapplicable business segment. It is proposed to re-appoint them as Cost Auditors for theFinancial Year ending 31 December 2017.
The Board had appointed M/s. S. N. Ananthasubramanian & Co. Company Secretaries inWhole-time Practice to carry out Secretarial Audit under the provisions of Section 204 ofthe Act for the Financial Year 2016. The Secretarial Audit report is annexed to thisreport marked as
The qualification made by the Secretarial Auditor in the Secretarial Audit Report ispertaining to non-appointment of Company Secretary within the statutorily permittedperiod of six months from the vacancy of office of the whole-time Key Managerial Personnelpursuant to Section 203(4) of the Companies Act 2013 for which your Company has filed asuo-moto application for compounding of the contravention of said provision of the Actbefore the Hon'ble National Company Law Tribunal Mumbai Bench.
Your Board has appointed Ms. Chandana Dhar as Company Secretary with effect from 12January 2017.
21. EXTRACT OF THE ANNUAL RETURN
Details forming part of the extract of the Annual Return in Form MGT 9 as perprovisions of the Act and rules thereto are annexed to this report as Annexure VII.
22. PARTICULARS OF EMPLOYEES
Disclosures with respect to the remuneration of Directors and employees as requiredunder Section 197 of the Act and Rule 5(1) of Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 have been annexed to this report as Annexure-VIII.
Details of employee remuneration as required under provisions of Section 197 of theAct and Rule 5(2) & 5(3) of Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 form part of this Report. As per the provisions of Section 136 ofthe Act the Report and Financial Statement are being sent to the shareholders of yourCompany and others entitled thereto excluding the statement on particulars of employees.Copies of said statement are available at the Registered Office of the Company during thedesignated working hours up to 21 days before the Annual General Meeting. Any Memberinterested in obtaining such details may also write to the Secretarial Department at theRegistered Office of the Company.
23. PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
Your Company firmly believes in providing a safe supportive and friendly workplaceenvironment a workplace where our values come to life through the supportingbehaviours. Positive workplace environment and a great employee experience areintegral part of our culture. Your Company believes in providing and ensuring a workplacefree from discrimination and harassment based on gender.
Your Company educates its employees as to what may constitute sexual harassment and inthe event of any occurrence of an incident constituting sexual harassment your Companyprovides the mechanism to seek recourse and redressal to the concerned individualsubjected to sexual harassment.
Your Company has a Sexual Harassment Prevention and Grievance Handling Policy inplace to provide clarity around the process to raise such a grievance and how thegrievance will be investigated and resolved. An Internal Complaints Committee has beenconstituted in line with the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.
During the year there was one complaint of sexual harassment that was reported whichwas reviewed by the Internal Complaints Committee. Pursuant to the review disciplinaryaction was taken against the employee accused of sexual harassment.
24. VIGIL MECHANISM
Your Company has a very strong whistle blower policy viz. Open Talk'. Allemployees of your Company also have access to the Chairman of the Audit Committee in casethey wish to report any concern. Your Company has provided a dedicated e-mailaddress for reporting such concerns. All cases registered under Whistle Blower Policy ofyour Company are reported to and are subject to the review of the Audit Committee.
25. GENERAL DISCLOSURES
Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:
1. Issue of Equity Shares with differential rights as to dividend voting or otherwise.
2. Issue of Shares (including Sweat Equity Shares) to employees of your Company underany scheme. Your Company has not resorted to any buy back of its shares during the yearunder review.
3. Neither the Managing Director nor the Whole-time Directors of your Company receiveany remuneration or commission from any of its subsidiaries.
4. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company's operations in future.
The Board wishes to place on record its sincere appreciation of the efforts put in byyour Company's employees for achieving encouraging results under difficult conditions. TheBoard also wishes to thank its members distributors vendors customers bankersgovernment and all other business associates for their support during the year.
On behalf of the Board of Directors
|Omer Dormen ||Rashmi Joshi |
|Managing Director ||Director Finance & |
|DIN: 07282001 ||Chief Financial Officer |
| ||DIN: 06641898 |