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Cosmo Films Ltd.

BSE: 508814 Sector: Industrials
NSE: COSMOFILMS ISIN Code: INE757A01017
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OPEN 331.30
PREVIOUS CLOSE 328.95
VOLUME 14365
52-Week high 431.00
52-Week low 212.50
P/E 6.11
Mkt Cap.(Rs cr) 640.16
Buy Price 329.30
Buy Qty 69.00
Sell Price 0.00
Sell Qty 0.00
OPEN 331.30
CLOSE 328.95
VOLUME 14365
52-Week high 431.00
52-Week low 212.50
P/E 6.11
Mkt Cap.(Rs cr) 640.16
Buy Price 329.30
Buy Qty 69.00
Sell Price 0.00
Sell Qty 0.00

Cosmo Films Ltd. (COSMOFILMS) - Director Report

Company director report

DIRECTORS’ REPORT

Your Directors are pleased to present their 39th Annual Report together withthe Audited Statement of Accounts of the Company for the year ended March 31 2016.

1. Summary Financial Results

The Financial Results of the Company for the year ended March 31 2016 were asfollows:

( Rs. in Cr)

Particulars Standalone Consolidated
Year ended 31st March 2016 Year ended 31st March 2015 Year ended 31st March 2016 Year ended 31st March 2015
Net Sales 1434.44 1472.59 1615.58 1640.56
Other Income 10.22 9.86 10.58 11.17
Profit before Interest Depreciation and Tax 201.46 126.13 196.84 109.31
Finance Cost (including interest) 28.78 38.25 30.18 39.88
Depreciation 31.17 30.05 35.68 34.54
Exceptional Item (6.36) (9.20) (6.94) 3.33
Profit before Tax 135.15 48.63 124.04 38.22
Provision for Taxation
- Current Tax 4.84 (0.32) 4.85 3.90
- Deferred Tax 22.04 8.54 22.95 6.66
ProfitAfter Tax 108.27 40.41 96.24 27.66
Extraordinary Item - - - -
Profit afterTax Including Extraordinary Item 108.27 40.41 96.24 27.66
Minority Interest - - - -
Appropriations:
Dividend-Equity Shares 19.44 6.80 19.44 6.80
Dividend Tax 3.96 1.39 3.96 1.39
General Reserve - 4.04 - 4.04

Note: Previous year figures have been restated wherever

2. Overview of Performance

Total income from operations on a consolidated basis is Rs. 1615.58 Cr as against Rs.1640.56 Cr in F.Y. 2015. Even though sales volumes (particularly overall specialty sales)grew revenues declined as benefits from lower raw material prices were passed on toconsumers. EBITDA on a consolidated basis is Rs. 196.84 Cr as against Rs. 110.31 Cr inF.Y. 2015 an increase of 78.4%. This includes benefits from a reduction in variable coststhrough several engineering initiatives. In particular power cost and freight costs wereoptimised. Net Profit before Tax on a consolidated basis is Rs. 124.04 Cr as against Rs.38.22 Cr in F.Y. after Tax on a consolidated basis is Rs.2015.NetProfit 96.24 Cr asagainst Rs. 27.66 Cr in F.Y. 2015.

3. Exports

The Company continues to strengthen its exports through brand visibility initiativestaken during the year. Exports during the year were Rs. 612 Cr.

4. Share Capital

During the year under review there was no change in the Company’s issuedsubscribed and paid-up equity share capital. On March 31 2016 it stood at Rs. 19.44 Crdivided into 19440076 equity shares of Rs. 10/- each.

5. General Reserve

The Company has not transferred any amount to General Reserve during the year.

6. Dividend

During the year the Board of Directors declared an Interim Dividend of Rs. 10/- perEquity share of Rs. 10/- each (100%) on March 14 2016 which has been paid. No finalDividend was recommended by the Board and the Interim Dividend declared be the Dividend onthe Equity Shares of the Company for the Financial Year ended March 31 2016. Thereforethe Equity Dividend of Rs. 10/- per share

(Previous Year Rs. 3.50/- per share) has been paid as the Dividend for the Year.

7. Details of Subsidiaries

With effect from March 18 2016 CF (Mauritius) Holding Ltd Mauritius a step downwholly owned subsidiary of CF Global Holdings Ltd Mauritius (the wholly owned subsidiaryof Cosmo Films Limited) has been amalgamated with its immediate holding Company. Theamalgamation has no effect on shareholding pattern of Cosmo Films Limited.

Post the development the Company has 8 wholly owned subsidiary companies. Pursuant toSection 129(3) of the Companies Act 2013 and Accounting Standard-21 issued by theInstitute of Chartered Accountants of India Consolidated Financial Statements presentedby the Company include the Financial Statements of its Subsidiaries.

Consolidated Financial Statements form part of this Annual Report. Statement containingthe salient feature of the financial statement of the Company’s subsidiaries isenclosed as Annexure - A to this Annual Report. In terms of provisions of Section136 of the Companies Act 2013 the Company shall place separate audited accounts of theSubsidiary Companies on its website at . wwwcosmofilms com The subsidiaries ofCosmo Films Limited as on March 31 2016 are listed hereunder:

• CF Global Holdings Limited

• Cosmo Films (Netherlands) Cooperatief U.A

• CF (Netherlands) Holdings Limited B.V.

• Cosmo Films Japan GK

• Cosmo Films Singapore Pte Limited

• Cosmo Films Korea Limited

• Cosmo Films Inc.

• CF Investment Holding Private (Thailand) Company Limited

8. Research and Development (R&D)

Your Company’s best investment for future growth has been and remains in researchand development. Over the years a relentless focus on R&D has enabled Cosmo to designand market newer products and in doing so to offer more value to customers.

Expenditure on Research & Development

Particulars 31st March 2016 31st March 2015
A. Capital 0.31 0.47
B. Recurring 3.73 2.47
Total 4.04 2.94

The Company is focussing on specialty labels and high barrier films. Other focus areainclude:

• The identification of technical (product/applications) growth areas throughcustomer activities exhibitions publications and technical interactions;

• Increasing the occupancy of value adds in the product baskets;

• Efforts towards down gauging in products;

• Reducing consumption of raw materials & fuel thereby reducing the carbonfootprint.

9. Capital Expenditure

During the year under review your Company incurred capital expenditure of Rs. 83.83 Cras compared to Rs. 19.64 Cr for F.Y. 2015.

10. Corporate Governance

Cosmo is committed to maintaining the best standards of Corporate Governance and hasalways tried to build the maximum trust with shareholders employees customers suppliersand other stakeholders. A separate section on Corporate Governance forming part of theDirectors’ Report and the certificate from the Practicing Company Secretaryconfirming compliance of the Corporate Governance norms as stipulated in the Securitiesand Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 ("Listing Regulations") is included in the Annual Report in Annexure - B.

11. Internal Controls Systems and their Adequacy

The Company has in place a strong system of internal controls commensurate with thenature of its business and the size and complexity of its operations. These systems ensurethat all assets are safeguarded and protected against loss from unauthorized use ordisposition and that transactions are authorized recorded and reported quickly. Thesystems are routinely tested and certified by Statutory as well as Internal Auditors andcover all offices plant facilities and key areas of business. Independence of theinternal audit and compliance is ensured by direct reporting to the Audit Committee of theBoard. This process is standardized and generate alerts for proper and timely compliance.A CEO and CFO Certificate forming part of the Corporate Governance Report furtherconfirms the existence and effectiveness of internal controls and reiterates theirresponsibilities to report deficiencies to the Audit Committee and rectify the same.During the year such controls were tested and no reportable material weaknesses in thedesign or operation were observed.

12. Risk Management

Cosmo has a robust process in place to identify key risks across the organisation andprioritise relevant action plans to mitigate these risks. The Risk Management Committeehas been entrusted with the responsibility to assist the Board members about the riskassessment and its minimization procedures which includes discussing the managementsubmissions on risks prioritising key risks and approving action plans to mitigate suchrisks.

The risk management procedure is reviewed by the Audit Committee and Board of Directorson regular basis at the time of review of quarterly financial results of the Company. Areport on the various risks that may pose challenge to your Company are set out as a partof Management Discussion and Analysis section of this report.

Cosmo’s Risk Policy has been uploaded on Company’s website atwww.cosmofilms.com

13. Vigil Mechanism / Whistle Blower Policy

The Company has adopted a Whistle Blower Policy establishing vigil mechanism toprovide a formal mechanism for the Directors and employees to report their concerns aboutunethical behaviour actual or suspected fraud or violation of the Company’s Code ofConduct or ethics policy without fear of reprisal. The policy is accessible on theCompany’s website.

14. Diversity of the Board

The Company believes that diversity is important to the work culture at anyorganisation. In particular a diverse Board among others will enhance the quality ofdecisions by utilizing different skills qualifications and professional experience forachieving sustainable and balanced development.

15. Directors

Chairman

Mr. Ashok Jaipuria is the Chairman & Managing Director of the Company.

Reappointment

Ms. Alpana Parida is Non-Independent and Non-Executive Director of the Company retiresby rotation and being eligible offer herself for reappointment at the ensuing AnnualGeneral Meeting.

Status of Directors

Mr. Anil Kumar Jain is the Whole Time Director of the Company. Mr. Rajeev Gupta Mr.H.K. Agrawal Mr. Ashish Guha Mr. Pratip Chaudhuri and Mr. H. N. Sinor are theIndependent Directors of the Company.

Independent Directors Declaration

The Company has received necessary declaration from each Independent Director undersection 149(7) of the Companies Act 2013 that they meet the criteria of independence laiddown in section 149(6) of the Companies Act 2013 and Regulation 16 of SEBI (ListingObligation and Disclosure Requirements) Regulations 2015.

16. Key Managerial Personnel

During the year under review there was no change in KMP of the Company. The followingpersonnel have been designated as KMPs as per the definition under Section 2(51) andSection 203 of the Companies Act 2013: 1. Mr. Ashok Jaipuria Chairman & ManagingDirector 2. Mr. A. K. Jain Director of Corporate Affairs 3. Mr. Pankaj PoddarChief Executive Officer 4. Mr. Neeraj Jain Chief Financial Officer 5. Ms. Jyoti DixitCompany Secretary

17. Familiarization Programme for the Independent

Directors

The Company follows a well-structured induction programme for orientation and trainingof Directors at the time of their joining so as to provide them with an opportunity tofamiliarise themselves with the Company its management its operations and the industryin which the Company operates.

At the time of appointing a Director a formal letter of appointment is given to himwhich inter alia explains the role function duties and responsibilities expected of himas a Director of the Company. The Director is also explained in detail the Compliancerequired from him under the Companies Act 2013 the Listing Regulations and otherrelevant regulations and affirmation taken with respect to the same.

The induction programme includes:

1) For each Director a one to one discussion with the Chairman and Managing Directorto familiarise the former with the Company’s operations

2) An opportunity to interact with the CEO CFO & Company Secretary business headsand other senior officials of the Company who also make presentations to the Boardmembers on a periodical basis briefing them on the operations of the Company strategyrisks new initiatives etc.

The details of the familiarisation programme may be accessed on the Company’scorporate website at www. cosmofilms.com.

18. Remuneration Policy

Your Company is driven by the need to foster a culture of leadership with mutual trust.Cosmo’s remuneration policy which is aligned to this philosophy is designed toattract motivate retain manpower and improve productivity by creating a congenial workenvironment encouraging initiative personal growth and teamwork besides offeringappropriate remuneration package. Pursuant to the applicable provisions of the CompaniesAct 2013 and the Listing Regulations the Board in consultation with its Nomination& Remuneration Committee has formulated a framework containing inter-alia thecriteria for performance evaluation of the entire Board of the Company its Committees andIndividual Directors including Independent Directors. Members can download the completeremuneration policy on the Company’s website at www.cosmofilms. com. Disclosure ofdetails of payment of remuneration to Managerial Personnel under Schedule V Part IISection II (A) of Companies Act 2013 forms part of this Corporate Governance Report

19. Performance Evaluation of the Board

In terms of the provisions of Companies Act 2013 read with the Rules issued thereunderand SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Board ofDirectors on recommendation of the HR Nomination and Remuneration Committee haveevaluated the effectiveness of the Board/Director(s) for the year.

20. Board Meetings

The Company prepares a calendar and circulates to all the directors in advance. DuringF.Y. 2016 Seven (7) meetings of the Board of Directors and four (4) Audit Committeemeetings were held. The intervening gap between the meetings was within the periodprescribed under the Companies Act 2013.

Details of the composition of the Board and its Committees and of the Meetings heldattendance of the Directors at such Meetings and other relevant details are provided inthe Corporate Governance Report.

21. Auditors

Statutory Auditors

M/s. Walker Chandiok & Co. LLP Chartered Accountants were appointed as StatutoryAuditors of the Company in the 38th AGM (held on 6th August 2015) to hold office for aperiod of 5 years until the conclusion of the 43rd Annual General Meeting subject toratification by members at every AGM.

The Statutory Auditors seek ratification of their appointment for the Financial Year2016-17 at the ensuing Annual General Meeting.

The Company has received a letter from Walker Chandiok & Co. LLP CharteredAccountants expressing their willingness for their appointment to be ratified asstatutory auditors of the Company and further confirmed that their ratification if madewill be in compliance with provisions of Section 141(3)(g) of the Companies Act 2013. TheAudit Committee of at its Meeting has recommended their ratification for the F.Y. 2016-17.

Cost Auditors

Messrs Jayant B. Galande Cost Accountants were appointed as Cost Auditors of theCompany for the Financial Year F.Y. 2016. In accordance with the provisions of Section 148of the Companies Act 2013 read with the Companies (Audit and Auditors) Rules 2014 sincethe remuneration payable to the Cost Auditors is required to be ratified by theshareholders the Board recommends the same for approval by shareholders at the ensuingAGM.

Secretarial Auditor

The Company has appointed M/s. DMK Associates Company Secretaries New Delhi toconduct its Secretarial Audit for the financial year ended March 31 2016. The SecretarialAuditors have submitted their report confirming compliance by the Company of all theprovisions of the applicable corporate laws. The Secretarial Audit Report annexed as Annexure- C to this report does not contain any qualifications reservation or adverseremarks.

22. Related Party transaction

With reference to Section 134(3)(h) of the Companies Act 2013 all contracts andarrangements with related parties under Section 188(1) of the Act entered into by theCompany during the financial year were in the ordinary course of business and on anarm’s length basis. The details of the related party transactions as required underAccounting Standard-18 are set out in Note 29 to the standalone financial statementsforming part of this Annual Report.

No Material Related Party Transactions i.e. transactions exceeding ten percent of theannual consolidated turnover as per the last audited financial statements were enteredduring the year by your Company. Accordingly the disclosure of Related Party Transactionsto be provided under section 134(3)(h) of the Companies Act 2013 in Form AOC 2 is notapplicable.

As per the Listing Regulations all related party transactions are placed before theAudit Committee for approval. Prior omnibus approval of the Audit Committee has beenobtained for the transactions which are of foreseen and repetitive nature. Thetransactions entered into pursuant to the omnibus approval are presented to the AuditCommittee by way of a statement giving details of all related party transactions. TheCompany has developed a Related Party Transactions Policy for the purpose ofidentification and monitoring of such transactions and can be accessed on theCompany’s website (www.cosmofilms.com).

23. Management’s Discussion and Analysis Report

Pursuant to regulations 34 of the Listing Regulations Management’s Discussion andAnalysis Report for the year is presented in a separate section forming part of the AnnualReport.

24. Deposits

The Company has not accepted deposit from the public within the ambit of Section 73 ofthe Companies Act 2013 and The Companies (Acceptance of Deposits) Rules 2014.

25. Energy Conservation Technology Absorption and Foreign Exchange Earnings &Outgo

The details of energy conservation technology absorption and foreign exchange earningsand outgo as required under Section 134(3) of the Companies Act 2013 read with the Rule8 of Companies (Accounts of Companies) Rules 2014 is annexed herewith as Annexure -Dto this report.

26. Particulars of Loans Guarantees or Investments

The Company have duly complied with the provision of Section 186 of the Companies Act2013 during the year under review. The details of loans guarantees and investments arecovered in the notes to the financial statements.

27. Significant and Material Orders Passed by The

Regulators or Courts

During the year under review no significant / material orders were passed by theregulators or the Courts or the Tribunals impacting the going concern status and theCompany’s operations in future.

28. Change in Nature of Business if any

There was no change in the nature of business during the year under review.

29. Material Changes and Commitments if any Affecting Financial Position of theCompany

There were no material changes / commitments affecting the financial position of theCompany or that may require disclosure between March 31 2016 and the date ofBoard’s Report.

30. Listing with Stock Exchanges

The Company confirms that it has paid the Annual Listing Fees for the year F.Y. 2017 tothe NSE and the BSE where the Company’s equity shares are listed.

31. Extract of the Annual Return

Pursuant to the provisions of section 92(3) of the Companies Act 2013 and rule 12(1)of the Companies (Management and Administration) Rules 2014 an extract of annual returnin form MGT 9 is enclosed as Annexure -E to this Annual Report.

32. Corporate Social Responsibility

As a socially responsible Company Cosmo is committed to increasing its CorporateSocial Responsibility (CSR) impact with an aim of playing a bigger role in sustainabledevelopment of our society. In pursuit of this objective a Corporate SocialResponsibility (CSR) Committee had been formed by the Company which oversees andfacilitates deliberation on the social and environmental consequences of each of thedecisions made by the Board. The Company has in place a Corporate Social ResponsibilityPolicy pursuant to the provisions of Section 135 of the Companies Act 2013 read with theCompanies (Corporate Social Responsibility Policy) Rules 2014.

The initiatives undertaken by your Company during the year have been detailed in CSRSection of this Annual Report. The Annual Report on CSR activities in accordance with theCompanies (Corporate Social Responsibility Policy) Rules 2014 is set out herewith as Annexure- F to this Report.

33. Promotion of Women’s Well Being at Work Place

Cosmo Films 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. There have been no complaints of sexualharassment received during the year.

34. Particulars Of Employees And Related Disclosures

The information required pursuant to Section 197(12) of the Companies Act 2013 readwith Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel)Ammendment Rules 2016 is also enclosed as Annexure - G (i) to this Report.

Particulars of the Employees pursuant to section 197(12) of the Companies Act 2013read with Rule 5(2) and 5(3) of Companies (Appointment and Remuneration of ManagerialPersonnel) Ammendment Rules 2016 is enclosed as Annexure - G (ii) to this Report.

35. employee Stock options

The Shareholders approved the issuance of Employee Stock Options to the Employees ofthe Company and its Subsidiaries under the "Cosmo Films Employee Stock Option Plan2015" in the previously concluded Postal Ballot on 11th January 2016. The 2015 Planis in compliance with the SEBI (Share Based Employee Benefits) Regulations 2014 and shallbe administered by the HR Nomination and Remuneration Committee of the Board constitutedby the Company pursuant to the provision of Section 178 of the Companies Act 2013.

The purpose of 2015 Plan is:

(a) To factor in employee’s performance’s annual performance; and (b) Toencourage employee’s retention for longer period.

The details of the Employee Stock Options Plan form part of the Notes to accounts ofthe Financial Statements in this Annual Report and also available on our website i.e. www.cosmofilms.com36. Director’s Responsibility Statement

Pursuant to the section 134 (5) of the Companies Act 2013 the Board of Directors tothe best of knowledge and belief and according to the information and explanationsobtained by them hereby confirm that: I. In preparation of the annual accountsapplicable accounting standards have been followed along with proper explanation relatingto material departures. II. Accounting policies selected were applied consistently.Reasonable and prudent judgments and estimates are made so as to give a true and fair viewof the state of affairs of the Company as of 31st March 2016 and of theprofits of the Company for the year ended on that date.

III. Proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.

IV. The annual accounts of the Company have been prepared on a going concern basis.

V. Proper Internal Financial Controls were in place and that the Financial Controlswere adequate and were operating effectively.

VI. Systems to ensure compliance with the provisions of all applicable laws were inplace and were adequate and operating effectively.

37. Awards & Recognition

During the year the Company received Indiastar Award 2015 awarded by Indian Instituteof Packaging for Direct Thermal Printable Film.

38. Acknowledgement

Your Directors would also like to extend their gratitude for the co-operation receivedfrom financial institutions the Government of India and regulatory authorities and thegovernments of the countries we have operations in. The board places on record itsappreciation for the continued support received from customers vendors retailers andbusiness partners which is indispensable in the smooth functioning of Cosmo. YourDirectors also take this opportunity to thank all investors and shareholders and thestock exchanges for their continued support. Your Directors place on record their deepappreciation to employees at all levels for their hard work dedication and commitment.Their contribution to the success of this organization is immensely valuable.

For and on behalf of the Board of Directors

Ashok Jaipuria

Chairman

Date : July 13 2016

Place: New Delhi

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