Your Directors are pleased to present the Annual Report on the business and operationsof your Company and the audited Financial Statements of the Company for the year endedMarch 312017 in accordance with the Companies (Indian Accounting Standards) Rules 2015(Ind AS) prescribed under Section 133 of the Companies Act 2013 and other recognisedaccounting practices and policies to the extent applicable provisions of the Act from FY2016-17
| ||Year ended March 312017 ||Year ended March 312016 |
|Revenue from operations ||442108.89 ||45643768 |
|Profit before Depreciation || || |
|Amortisation and Tax ||107459.12 ||111339.07 |
|Less: Depreciation || || |
|Profit Before Tax || || |
|Less: Provision for Tax || || |
|- Current Tax ||37023.47 ||37685.34 |
|- Deferred Tax || || |
| || || |
|Profit After Tax || || |
|Other comprehensive || || |
|income (Net) || || |
|Total comprehensive || || |
|income for the year || || |
|Appropriations || || |
|Dividend Paid ||(29438.88) ||(23130.55) |
|Tax on Dividend ||(5993.06) ||(4708.83) |
|Transferred to General Reserves || || |
| || || |
|Earnings Per Share (Rs.) ||156.15 ||163.42 |
|(Basic & Diluted) || || |
|Dividend per Share (Rs.) ||70.00* ||70.00 |
*Dividend is recommended by the Directors and is subject to the approval of theShareholders.
Performance of the Company
Your Company continued its journey to become a truly Fast Moving Consumer HealthcareCompany and performed well against increased competitive intensity and volatile externalenvironment. Net Sales and Profit after Tax for the year ended March 312017 were Rs.420857 Lacs and Rs. 65668 Lacs respectively. Your Company retained its leadershipposition in HFD category with volume and value market share at 64.4% and 56.3%respectively.
Your Company continued its focus on innovation delivering products of value withsuperior science and has entered the advanced nutrition segment for consumers who wantvery high science products. Horlicks Growth+ launched in May 2016 is clinically provenformula for catch up growth for children between 3-9 years. It has been proven to showresults within 6 months of regular usage. The product is available in vanilla andchocolate variants to encourage consumption for children as they typically like theseflavours.
Science remains the core of our product portfolio that addresses the nutritional needsof consumers. The new & improved Horlicks re-launched in April 2016 has 2X ImmunoNutrients scientifically proven to support immunity to help the body's natural defencesystem. Research has shown that low immunity can obstruct the overall growth in childrenleading to hindrances in day-to-day activities including school attendance. Horlicks 2Ximmunity addresses the mental & physical growth of children thereby bringing aliveour product proposition of making child "Taller Stronger and Sharper".
Your Company launched in May 2016 Cardia+ which contains Nutriose which keeps theconsumer fuller for longer so that they eat less and do not eat in between meals. This isclinically proven to reduce RLP Cholesterol reduce insulin spikes reduce blood sugarspikes.
Women's Horlicks continued its differentiation through "Bone Health" platformwhich was re-staged in August with a unique combination of Calcium Vitamin D and VitaminK2 that helps to bind the bones. It was backed by a holistic campaign to remind consumersthat it was time to start consumption of nutrients for strong bones once you turn30'. The digital campaign "Strong to the Bone" launched on Women's Dayincluded an online Bone Mineral Density test. This campaign helped Women's Horlicks toemerge as the No.1 brand in online share of voice.
Mother's Horlicks was launched with great tasting Kesar flavor in June to address thetaste fatigue of expecting and new mothers. The "Early Start" campaign continuedto drive growth. Mother's Horlicks became the No.1 prescribed pregnancy HFD brand for the1st time ever.
Marie Biscuits were launched in September in East positioned as "The PerfectMarie" backed by Horlicks' equity aiming to entice consumers to switch to HorlicksMarie. This was backed with a holistic communication strong launch plan and execution.The brand has garnered 1% market share.
In line with the access strategy the Company reduced the price of Horlicks and Boostsachet to Rs. 5 & Rs. 10 to ensure that our products will be more attractive valueenabling to increase consumer base. This has resulted in increase of consumption offtake.This will also help migrate consumers to the regular packs.
Junior Horlicks launched a new communication series in August 2016 to drivedifferentiation around brain development emphasising the need for a specialized healthdrink in early years. Digital advocacy programs and social media interactions helpedincrease engagement consideration and strengthen benefit perception amongst toddlers'mothers.
Boost was re-introduced in March last year with a new communication platform of"Play a Bigger Game". This was supported by a new visual that highlighted itspackaging & looks across all consumer and shopper touch points. The brand had a growthof 7% and reached highest ever market shares in its core market in South.
In 2017-18 building on the same winning formula a new campaign was launched withIndian cricket team captain Virat Kohli. The 1st ever branded digital webseries for kids with Virat was launched and garnered 15 million views online.
Boost further strengthened its consumer connect through inspiring campaigns. BoostPlay the Pros' at the Chennai Open recorded a new Guinness Record at anAssociation of Tennis Professionals event for the "largest" Kids Tennis Session.
The Directors recommend a total dividend of Rs. 70 per equity share of Rs. 10 each forthe year ended March 31 2017. If approved by the Members at the ensuing Annual GeneralMeeting to be held on August 9 2017 it will be paid on or before September 8 2017 tothose Members whose names appear in the Company's Register of Members and to those personswhose names appear as beneficial owners (as per the details to be furnished by theDepositories in respect of the shares held in dematerialised form) as at the close ofbusiness hours on August 3 2017
With reference to point 11(g) (iii) in the Audit report the delay in deposit of demanddraft to Investor Education Protection Fund was procedural your Company did not benefitfrom the delay and the same has been submitted and accepted by the Registrar of Companies.
Management Discussion and Analysis Report
The changing global political landscape shifting attitudes to globalisation freetrade wage stagnation political uncertainty Brexit in UK caused significant volatilityand unpredictability.
In India the government remains keen on driving economic reforms. There are multipleinitiatives like Demonetisation GST Digitisation Make in India Infrastructure projectinvestments rural development and financial empowerment.
The economic environment during the year remained under pressure on account ofdemonetisation leading to subdued consumer sentiments. During the year Rs. 500 & Rs.1000 notes were demonetised. Thus having a significant impact on cash dominated Indianeconomy. There was major impact on cash dominated geographies and channels mainlywholesale and rural resulting in lower consumption. Your Company responded to thevolatile demand situation with agile Supply Chain and by supporting Trade with extendedcredit terms.
GST bill has been passed in the Parliament which is a positive for the economy as itwill not only smoothen the credit chain improve tax compliance but also bring moretransparency in the system. The multiple administration and technological challenges inits implementation are key to its success. Your Company is on track for GSTImplementation basis the GST laws available in public domain and are upgrading IT systemsto ensure GST readiness and compliance.
The fundamentals of the Indian economy continue to be good reinforcing its growthpotential. However the pace of execution of reforms remains key to translating thepositive sentiment to actual growth of the economy.
FMCG Industry continued to remain under pressure due to subdued demand and marketsentiments. Consumers continue to prioritise necessities as against discretionary spends.Earnings across the sector struggled on account of consumption.
Despite challenges we are well placed to deliver consistent performance given ourunderstanding of consumer behaviour. We also have robust price value propositionhigh-science based products Go to Market Strategy pipeline for innovative productsefficient cost and talent management processes. These we believe fortifies us againstheadwinds.
The rural business has been working with the vision of building a strong connect withthe communities it serves. Over the years your Company has built a strong rural businessthat continues to reach over 20000 villages directly. This has helped the Company buildcategories & brands and create positive social impact by building awareness onnutrition & promoting good health practices.
Two key growth drivers in our Rural Programme are Horlicks Swasthya Abhiyan (HSA) andVillage Level Entrepreneurs (VLE); HSA program aims to improve the standard of hygiene& health in the rural areas engaging with rural medical practitioners and communityworkers thus creating awareness education and relevance for our brands. HSA now reachesover 5600 villages 10000 Rural Medical practitioners and connects with over a millionconsumers. VLE has reached more than 1600 villages by which we are reaching out to bottomof the pyramid (Direct reach of 160000 Consumers) and in this process create livelihoodfor underprivileged rural women while enhancing access of our products in small villageseconomically empowering rural women. Mobile Sakhi a mobile based advisory service forpregnant mothers delivers vital information pertaining to pregnancy is used by over50000 rural women.
Further your Company has started to address the issue of malnutrition with strategicpartners as part of Corporate Social Initiatives during the year.
Your Company's growth in Modern Trade continues to show progress. The strongperformance has been on the back of visibility initiatives strategic placements andcompetitive growth during Big Day sales shopper education activations and bone healthchecks.
Your Company continues to invest in Brands and connect with the Consumers throughinnovative and diversified platforms of Advertising. The Company has made investments inE-commerce Channel. Encouragement to the Cashless transactions has given a lot of push tothe e-commerce companies.
Your Company has made significant efforts towards digital advocacy programs includingactivity targeting moms online. Other activities include social media amplification ofTVCs (Junior Horlicks) Bone Density Tests on Women's Day popularisation of "Horlicks Brand Store" digital launches for Cardia+ & Growth+ to name a few. Allthese have helped increase engagement consideration and strengthen benefit perceptionamongst customers.
Your Company's focus on cost management working capital optimisation andsimplification program continued to deliver positive results in mitigating inflation andsupporting profitable growth. Improvement in working capital better cash flow and costoptimization have supported sustained investments in Company's brands. Simplificationinitiatives like Electronic Collection and E-claims have been taken to empower improvespeed and strengthen the existing processes for better customer experience.
The total Reserves as on March 312017 stood at Rs. 308061.28 Lacs representing anincrease of 12% from March 31 2016.
Research and Development (R&D)
Your Company's R&D vision is to improve lives of more by creating and sustainingconsumer led Science based innovation. Last year we introduced 7 new launches with deepconsumer insight and high science which helped create strong portfolio of Nutritioncategory.
Horlicks with 2X Immuno-nutrients claim i.e. Selenium and vitamin D delivered at100% RDA which is scientifically proven to support immunity for consumers was launched inApril 2016.
Horlicks Growth Plus was launched in May 2016. A patent pending clinicallyproven formula evolved at Schneider Children's Medical Centre for children of age 3-9years who are lagging behind on their growth is proven to help catch up on lost growthwith key claims i) Horlicks Growth + : Start catching up on growth in just 3 months ii)Clinically Proven Horlicks Growth + : proven visible growth in 6 months. Two productvariants i.e. vanilla and chocolate variants have been developed with great tasteexperience. The new design has a reusable wide mouth PET tamper proof container withsilver tinted wrap around shrink sleeve to make it stand out on the shelf. Its flat capsurface makes it more stable on shelf and inbuilt plug seal inside cap surface offers inuse sealability. Its primary pack structure keeps the product safe from moisture and gasduring 12 months of product shelf life.
Boost pack restage delivered a sharper design in line with a new brand visuallanguage of 3X more stamina.
Horlicks Cardia+ has been designed to deliver clinically proven i) Reduction inglucose spike ii) Reduction in Insulin spike iii) Reduction in RLP cholesterol. Theproduct has been specially formulated with proprietary soluble fibres i.e. a) Fibersolwhich retards digestion and absorption of the associated dietary carbohydrate thusflattening the postprandial rise in plasma glucose and insulin concentrations and b)Nutriose which reduces daily calorie intake and has a great vanilla taste. The packagingdelivered through science based packaging technology stands out on the shelves.
Mother's Horlicks Kesar flavour was developed by NPD team basis a strongconsumer insight on ethnic Indian taste and association of Kesar with pregnancy. Theproduct has been received very well.
Women's Horlicks was developed with CALSEAL idea i.e. Calcium Vitamin D andVitamin K2 combination to drive Women's Horlicks brand relevance through stronger scienceon bone health with addition of Vitamin K2 in formula. There is strong evidence of VitaminK2 science in absorption of calcium by bones.
Horlicks Marie was developed by R&D team as your Company entered a newsegment in food business in September 2016. R&D team delivered a consumer winningproduct within 3 months of development time and this was possible due to strong technicalcapabilities in R&D team.
Packaging has long proven to be a critical success factor for winning with theconsumers. Packaging excellence awards and recognitions have been received externally andinternally within GSK India Asia and at the global level. Recently high sciencepackaging lab has been established to enhance capability and drive packaging science basedinnovation program for more functional based packaging.
You will be pleased to know your Company's R&D function has the cutting edge bestpractices as mentioned below:
Adopted best practices in consumer insights and have strong network with GSK'sglobal capabilities on scientific exploration clinical science sensory and productunderstanding packaging expert networks to access best information to deliver product ofbest quality science and relevance.
Profitable growth ambitions are actively supported by R&D through astructured Value Engineering Program which also helps to mitigate the increasing cost ofraw materials. Design to value remains an integral part of R&D product developmentprocess to provide most efficient cost advantage to end consumer.
R&D partners with Supply Chain on a long term manufacturing process that iscost efficient more sustainable and high quality.
R&D is working also towards our environment sustainability initiatives. TheR&D function has also partnered with Supply Chain for capacity enhancement projectsand initiated work on long term manufacturing processes that are cost and capitalefficient and aims to lower carbon footprint.
The R&D function continues to focus on the regulatory compliance with localfood laws and also proactively engages with the regulatory authorities and industryassociations to shape the regulatory environment for science based innovation in food andnutrition.
You will be glad to know that your Company's R&D is significantly involved inbuilding and defining new science and benefits either through new technology that wouldgive cutting edge advantage for our offerings along with scientific research to drivedifferentiated claims to maintain category leadership. Some of the high sciencedifferentiated products are in advance stage of development for launches in short mediumand long term and thus making our innovation pipeline robust.
Your Company's manufacturing facilities at Nabha Rajahmundry and Sonepat continue tobe certified to the latest version of ISO 9001: 2008 ISO 22000: 2005 ISO 14001: 2004 andOHSAS 18001: 2007 by SGS a leading International certification Company. Thesecertifications indicate our commitment in meeting in a sustainable manner Global QualityEnvironment Health and Safety Standards.
Your Company strengthens its efforts in integration of Information Technology forbusiness efficiencies. The Information Technology function has been a key business enableracross all functions of the Company.
During the year the Company has kicked off simplification projects like outsourcingPayroll & Medical Claims reimbursement in order to streamline the processes. Plans areafoot to rollout First SFA (GSKCH Global reporting and detailing solution) for expertmarketing team in India. The rollout would help improve HCP's in-clinic experiencebesides supporting the business with cutting edge execution analytics. Further ITinfrastructure upgrade is on track to ensure GST readiness and compliance.
In view of the uncertainty of the GST Go Live date and to minimize business disruptionowing to its implementation the Company has taken a decision to defer the CERPS projectimplementation (SAP implementation project) till GST is rolled out.
Internal Control System and Adequacy
Your Company has established and maintained adequate internal control framework in linewith the Internal Financial Controls ("IFC") requirement within the meaning ofthe explanation to Section 134(5)(e) of the Companies Act 2013 including financialcontrols based on the internal control over financial reporting criteria established bythe Company considering the essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting issued bythe Institute of Chartered Accountants of India (ICAI). The Company has evaluated theoperating effectiveness of internal control systems which are supplemented by:
Well-documented standard operating procedures policies risk and controlmatrices for all material processes and fraud risk mitigation. Further these documentsare tested for operating effectiveness regularly reviewed and updated to align withglobal best practices.
Any material variances from the budget are reviewed on a monthly basis andrequire approval of the Management Team. All major policy changes are approved by theManaging Director.
The self-assessment by process/ control owner is also used as the basis ofCEO/CFO certification as required under SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 with the Stock Exchange. Further the self certificationis reviewed by the Audit Committee on a half yearly basis.
Your Company has a Risk Management and Compliance Board (RMCB) now called theRisk Management Committee' (RMC) comprising of the Managing Director FinanceDirector Operations Director Executive Vice President - Legal and Executive VicePresident -Human Resource. Risk maps stating the significant business risks potentialconsequences along with mitigation plans are prepared by each function and reviewed by RMCon a regular basis.
Your Company has a robust internal audit function that reports into the AuditCommittee and carries out review of operations systems and functions basis the planapproved by Audit Committee.
All significant Audit observations and follow-up actions thereon are reported to theAudit Committee. The Committee reviews the adequacy and effectiveness of your Company'sinternal control framework and monitors the implementation of audit recommendationsincluding those relating to strengthening your Company's risk management policies andsystems.
Human Resource Development
In 2016 your Company continued in its journey to become a truly Fast Moving ConsumerHealthcare Company where employees feel valued able
to develop contribute to our mission and be proud of what we achieve. Your Companyremains focussed in building a culture where both People and Performance are equallyimportant.
A large part of embedding this culture in the organization is linked to providingrewarding careers to our people. To this extent your Company has developed an integratedapproach to Career Framework titled My Winning Career'. Our focus towards thisinitiative ensured that employees were able to leverage a vast number of career &development initiatives throughout 2016 which is reflected in the improving EngagementSurvey scores.
Various initiatives around these enabled employees in the organization to cometogether take a step back and spend a day dedicated to conversations around careers &development.
Your Company continued to invest significantly in developing talent across levelsleveraging processes such as Integrated Talent Management to ensure sustainability oftalent role changes and robust succession pipelines for all our key roles. Our focus onDifferentiated Development ensures that employees are able to leverage a variety ofopportunities to develop and take on greater responsibilities in line with their careeraspirations. We also continued to build our early talent pipeline by hiring from the bestB-schools as well as sending our high potential talent on global talent accelerationprograms.
Your Company also took positive steps towards Industrial relations. As a part of thisthe Nabha Long Term Wage Settlement was successfully signed within plan on 14thJune 2016 with the recognized union.
Your Company is strongly committed to principles of Inclusion and Diversity which is acritical element of the global HR strategy as well. In 2016 your organization refreshedthe leave policy for new parents much ahead of industry & government standardsfocusing on new parents; both men & women single parents to ensure that they aresupported and enabled by the organization. 2016 also saw our first ever "Inclusion& Diversity Week" to conduct a series of events and activations aimed atincreasing employee awareness and sensitization to build an inclusive and diverse culture.Your organization also saw the appointment of women in leadership roles double in 2016over 2015. Intake of women at entry level talent pipeline too has increased significantly.
Your Company has also put in place a Prevention of Sexual Harassment (POSH) atWorkplace policy aimed at ensuring safety & respectable nondiscriminatory environmentfor all employees. This policy defines what constitutes sexual harassment at workplacereporting an incident role of internal complaints committee and consequences in case ofboth genuine & false charges.
Building a healthy engaged workforce remains one of our key priorities and towardsthat we launched a program titled Partnership for Prevention (P4P) offering a host ofpreventive healthcare services for employees and their dependents. Under P4P employee andtheir covered dependents can avail a range of preventive healthcare services at zero cost.
Your Company continues to reinforce its Values through relevant and transparentinternal communication employee engagement and direct contact programmes to ensure wehave a highly engaged workforce that is truly aligned to your Company's mission of"do more feel better live longer"
Awards and Recognition
Your Company efforts to deliver the best quality products backed up by science basedinnovation strong talent base and brands have been recognised during the year. Some ofthe key recognitions are:
Rural campaigns won 6 awards at the 10th Annual Flame Asia Awards.
Horlicks won a Gold at the prestigious DBA Design Effectiveness Awards 2017 forthe product design in the beverage category.
Boost Race of Champions won New On Ground Property of the year.
Won the Golden Peacock Environment Management Award at the 18th WorldCongress on Environment Management 2016.
GSK ranked #1 on FORTUNE's Change the World list. The Change the World'list recognises companies that have made significant progress in sustainable scalableapproaches to addressing societal problems as part of their Company strategy.
Mr. Joaquin Mascaro was nominated as Director by Horlicks Limited under Article 97A ofthe Articles of Association of the Company w.e.f. May 18 2016 in place of Mr. JonathanBox. The change was noted and resolution for appointment was passed in the meeting held onMay 17 2016. The Board of Directors wishes to place on record its sincere appreciationfor the valuable advice and guidance rendered by Mr. Jonathan Box.
At the Annual General Meeting held on August 5 2016 the following Directors wereelected under the system of proportional representation Mr. Kunal Kashyap Mr. P.Dwarkanath Mr. Naresh Dayal Mr. Mukesh H. Butani Ms. Sangeeta Talwar Mr. Jaiboy JohnPhillips and Mr. Vivek Anand for a period of three years.
The Board of Directors at its meeting held on August 5 2016 appointed Ms. ShanuSaksena as Company Secretary of the Company w.e.f. August 5 2016 due to the resignationof Ms. Sonali Khanna. The Board of Directors wishes to place on record its sincereappreciation for the valuable advice and guidance rendered by Ms. Sonali Khanna.
The Board of Directors at its meeting held on August 5 2016 also appointed Mr. AnupDhingra as an Executive Director of the Company w.e.f. September 12016 till date ofAnnual General Meeting to be held in 2019 in the casual vacancy caused by the resignationof Mr. Jaiboy John Philips. The Board of Directors wishes to place on record its sincereappreciation for the valuable advice and guidance rendered by Mr. Jaiboy John Philips.
Performance Evaluation of Board
A regular process of evaluating the Board's performance can help the Board invalidating the relevance of its processes and provide insights for strengthening itsoverall efficiency and effectiveness. We evaluate the Board as whole the Directors theCommittees and the Chairman of the Board through a survey that takes place annually andthe mechanism followed is mentioned below:
1. I n February multiple surveys were sent to all Directors through a secured onlinesurvey portal.
2. The evaluation was based on Board Effectiveness Processes adopted by the BoardContribution by the Board Members Value addition by the Board Committee Effectivenessand contribution of the Committees .
3. Once the Directors completed filling the survey the third party appointed compiledthe results and shared the analysis with the NRC Chairman and Chairman of the Board.
4. The Chairman of the Board then individually discussed the results and sharedfeedback with all Directors.
5. On the basis of the report of performance evaluation it was determined whether toextend or continue the term of appointment of the Independent Directors.
On account of recent Guidance Note on Board Evaluation' shared by SEBI (datedJanuary 5 2017) we had revised few aspects of our Board Evaluation. While yourorganization was already compliant to most of the guidelines circulated by SEBI we madefew minor changes to the evaluation process. A notable change this year was to appoint athird party to manage the board evaluation process.
Criteria for Appointment of Directors
The success of the Board of Directors depends on the composition structure resourcesdiligence and authority of the entire board as well as their working relationships withother participants of corporate governance including management. Your Company iscommitted to corporate governance best practices and is vigilant at the time ofappointment of its Directors.
The Board of Directors is ultimately responsible for the Company's business affairs andgovernance. To that goal a director would be expected to:
Represent organization's shareholders' interests and create value for them.
Align the interests of management with those of shareholders while
protecting the interests of other stakeholders (customers creditors suppliers).
Oversee the Company's performance by setting objectives establishing short-termand long-term strategies to achieve these objectives.
Provide counsel to the Company's senior executives on material strategicdecisions and risk management. Establish or approve strategic plans and decisions toachieve these goals.
Oversee the sustainability of the Company in creating long-term shareholdervalue and protecting interests of other stakeholders.
Pre-requisites for consideration:
The candidate to acknowledge that s/he has sufficient time to effectivelydischarge her/his duties.
The candidate should have skill sets and expertise area which is complementaryto the current Board. The Board assesses the needs of the current Board to ensure thatthere is a range of skills experience and diversity represented including anunderstanding of:
- the industry and markets in which the Company operates
- Accounting finance and legal matters
- Other key areas of business operations
The candidate should have experience and depth of knowledge in her/ his area ofwork so as to contribute meaningfully to the operations of the Board
There should be no conflict of interest between the candidate and the Company.The individual should not be in relation to any current employee of the Company and shouldnot be holding more than 2% of the Company's shares at the time or during the appointment
The candidate should not be employed or related to another organization/bodywhich can directly/indirectly influence the operations of the Company or is in directcompetition with the Company.
The Candidate has not been convicted of any offence whether involving moral turpitudeor otherwise and sentenced to imprisonment for not less than six months and a period offive years has not elapsed from the date of expiry of sentence.
Remuneration Policy for Non-Executive Directors
Your Company believes that its Board Members bring immense value in their independentevaluation and oversight of the operations of the Company. It is therefore expected thatthey will devote significant time and provide unbiased point of view to their boardduties.
The remuneration paid to each Non-executive Director is as per the structure determinedby the Nomination & Remuneration Committee and the Board. This is reviewedperiodically and also compared to other peer organizations. It is ensured that theremuneration paid to them is in accordance with the provisions of the Companies Act andany other applicable law.
The remuneration structure for the Non-Executive Directors comprises of annualCommission and sitting fee per meeting attended.
Remuneration Policy for Employees Philosophy
Your Company recognizes that reward is important in engaging employees and motivatingthem to do their best work to deliver our strategic priorities and mission. We reward highperformance and recognize outstanding achievements of employees in a way that isconsistent with our values and behaviours.
Competitive - Your Company provides competitive rewards within a global rewardframework.
Differentiated - Your Company differentiates reward to attract and retainskilled employees; reward the greatest contributors and recognize employees who evolvetheir skills to enhance their individual contribution to GSK's success.
Alignment - Your Company's reward programs and practices are transparent andfocus on ensuring alignment at several levels.
Business alignment - Your Company's reward program take into account the commonand business-specific skill/ performance requirements across our various business units.
Country alignment - Reward aims at meeting the needs of our diverse workforceand enabling them to live our mission - to do more feel better and live longer.
Individual alignment - Individual objectives are set and reviewed annually toensure employees have a clear understanding of the link between the business value theydeliver and their own performance based reward.
Your Company believes its employees are its biggest assets and aligns its compensationand benefits towards rewarding employees in line with its Rewards policy. Your Companyfocuses on being market aligned as well as differentiate basis performance to drive a highperformance culture.
Your Company has 3807 permanent workers including workmen. The remuneration for theworkmen at two of the factories is governed by Long Term Wage Settlement (LTWS) which isdone in consultation with the unions. For the remaining employees the targeted salaryincrease was 10% for all employees including KMP.
If we compare the remuneration of these to that of median employee we observe thefollowing ratio:
|Name ||Designation ||Remuneration for year ended March 31 2017 (Rs.)* ||Remuneration for year ended March 31 2016 (Rs.)* ||Salary Change ||Ratio of Salary to Median Employee |
|Manoj Kumar1 ||Managing Director ||58436168 ||57661832 ||NC** ||80 |
|Vivek Anand2 ||Director-Finance ||31123815 ||28206218 ||NC** ||43 |
|Jaiboy Phillips3 ||Director-Operations ||20035493 ||28692921 ||NC** ||27 |
|Anup Dhingra4 ||Director-Operations ||29471892 ||NA*** ||NC** ||43 |
|Sonali Khanna5 ||General Manager Legal & Company Secretary ||835566 ||6740191 ||NC** ||1 |
|Shanu Saksena6 ||Company Secretary & Area Ethics and Compliance Officer ||5768232 ||NA*** ||NC** ||8 |
'Remuneration is calculated on accrual basis.
1 Appointed in the role with effect from 1 June 2015 salary increase & ratio tomedian salary not comparable
2 Appointed in the role with effect from 1 June 2015 salary increase & ratio tomedian salary not comparable
3 Ceased to be in role with effect from 31 August 2016 salaiy increase & ratio tomedian salary not comparable
4 Appointed in the role with effect from 1 September 2016 salary increase & ratioto median salary not comparable
5 Ceased to be in role with effect from 17 May 2016 salary increase & ratio tomedian salary not comparable
6 Appointed in the role with effect from 5 August 2016 salary increase & ratio tomedian salary not comparable
Your Company believes that by means of the variable pay plan the Company is able tolink a portion of compensation to the individual and business performance which creates astrong positive reinforcement. It also ensures that the employees of the Company arerewarded only when the shareholders' goals are met. Your Company's variable pay plantherefore links the variable pay to both - individual performance and business resultssuch as sales growth and operating profits.
The ratio of the remuneration of the highest paid director to that of the employees whoare not directors but receive remuneration in excess of the highest paid director duringthe financial year is not applicable. It is also affirmed that the remuneration is as perthe Remuneration Policy of your Company.
|Name ||Designation ||Remuneration of KMP as percentage of Revenue ||Remuneration of KMP as percentage of PBT |
|Manoj Kumar ||Managing Director ||0.13% ||0.58% |
|Vivek Anand ||Director-Finance ||0.07% ||0.31% |
|Jaiboy Phillips1 ||Director-Operations ||0.04% ||0.20% |
|Anup Dhingra2 ||Director-Operations ||0.06% ||0.29% |
|Sonali Khanna3 ||General Manager Legal & Company Secretary ||0.00% ||0.01% |
|Shanu Saksena4 ||Company Secretary & Area Ethics and ||0.01% ||0.06% |
| ||Compliance Officer || || |
1 Ceased to be in role with effect from 31 August 2016
2 Appointed in the role with effect from 1 September 2016
3 Ceased to be in role with effect from 17 May 2016
4 Appointed in the role with effect from 5 August 2016
Total KMP Remuneration as a percentage of Revenue: 0.3%
Total KMP Remuneration as a percentage of PBT: 1.5%
Your Company believes in balancing the competitiveness of pay as well as sustainabilityof the associated costs for the organization. The salary increases for this year wereaimed at maintaining the pay competitiveness with market as well as performance of theCompany.
Policy on Board Diversity
As stated in the policy for appointment of Directors your Company recognizes that thesuccess of the Board of Directors depends on the composition structure resourcesdiligence and authority of the entire board as well as their working relationships withother participants of corporate governance including management. GSK is committed tobuild a truly diverse board which brings with it diversity of expertise skills regionaland industry experience gender and demographics. GSK believes that such a Board willenhance the quality of decisions by utilizing the diversity of its members.
The Nomination and Remuneration Committee (NRC) is responsible for reviewing andassessing the composition and performance of the Board as well as identifyingappropriately qualified persons to occupy board positions. At the time of appointment thecandidate must bring with him/ her skill sets and expertise area which is complementary tothe current Board composition. The Board will have an optimum combination of ExecutiveNon-executive and Independent Directors with at least one women director in compliancewith all statutory provisions. The Board of Directors shall maintain an appropriate mix ofdiversity skill experience and expertise on the Board.
The NRC and the Board of Directors shall refer to this Policy on Board Diversity at thetime of appointment of persons as a Board Member.
Particulars of Employees
The information required pursuant to Section 197 of the Companies Act 2013 read withRules 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 in respect of employees of the Company will be provided to membersupon request in writing made before the Annual General Meeting wherein FinancialStatements for the relevant financial year are proposed to be adopted. In terms of Section136 of the Act the copy of the Annual Report is being sent to the Members and othersentitled thereto and is also available for inspection by the Members at the RegisteredOffice of the Company during business hours on working days of the Company up to the dateof the ensuing Annual General Meeting. If any Member is interested in obtaining a copythereof such Member may write to the Company Secretary in this regard.
The Annual Report of the Company is also available on the Company's website- www.gsk-ch.in .
Particulars of Loans Guarantee Investment U/S 186
There are no Loans guarantees Investments to be reported u/s 186 of Companies Act2013.
Details of Board Meetings
A calendar of Meetings is prepared and circulated in advance to the Directors.
During the year five Board Meetings and five Audit Committee Meetings were convened andheld the details of which are given in the Corporate Governance Report. The interveninggap between the Meetings was within the period prescribed under the Companies Act 2013.
Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo
Information required as per the Companies Accounts Rules 2014 is given in the AnnexureI to this Report.
As per Section 139 of the Companies Act 2013 read with the Companies (Audit andAuditors) Rules 2014 the term of Messrs. Price Waterhouse Chartered Accountants as theStatutory Auditors of the Company expires at the conclusion of the ensuing Annual GeneralMeeting of the Company.
The Board of Directors of the Company have made its recommendation for appointment ofMessrs Deloitte Haskins & Sells LLP Chartered Accountants as the Statutory Auditorsof the Company by the Members at the Annual General Meeting of the Company.
Pursuant to provisions of Section 204 of the Companies Act 2013 the Secretarial AuditReport is annexed herewith as Annexure II to this Report duly certified by S.N.Ananthasubramanian & Co. a firm of Company Secretaries in practice to undertake theSecretarial Audit of the Company.
Composition of Audit Committee
Please refer corporate governance report for composition of audit committee.
Risk Management Policy
The Company has a Risk Management policy and an internal control framework which isused to manage risks.
Vigil Mechanism for Directors and Employees of Company
The detailed policy for Vigil Mechanism and Whistle blower is available atwww.gsk-ch.in - Vigil Mechanism Whistle Blower.
Extract of Annual Report
Information required under this clause is given in the Annexure III to this report.
Related Party Transaction
Disclosures as required under Form AOC 2 are contained in Note 28 (FinancialStatements).There are no transactions which are not at arm's length and all the RelatedParty transactions are at arm's length basis.
The detailed policy for Related Party Transactions is available at http:// www.gsk-ch.in/Policies.aspx
The Company has not accepted any deposits within the meaning of Section 73 of theCompanies Act 2013 and the Companies (Acceptance of Deposits) Rules 2014.
Information on Company's Share Performance
The market capitalisation of the Company decreased by 15% (Rs. 2168404 lacs) VsMarch 312016 (Rs. 2538113 lacs). The EPS as on March 312017 stands at Rs.156.15 vsRs.163.42 as on closing date of last financial year. The PE ratio as on March 31 2017stands at 33 vs 37 as on closing date of last financial year.
Environment and Social Commitment
Your Company is dedicated towards improving the quality of human life by enablingpeople to do more feel better and live longer. As a Global Healthcare Company yourCompany believes that it can play an important role in meeting societal challenges throughright engagement towards environmental and societal commitments. Your Company's philosophyis to target support to selected programmes that are innovative sustainable and whichproduce tangible results.
Your Company's stated mission statement is "To lend a helping hand to the underserved in our society through the support of women children and the aged in the areas ofhealth and education". Towards implementing this philosophy in spirit your Companycontinued its positive contributions during the current period to the communities andinvested in health and education programmes and partnerships that aimed to bringsustainable improvements to under-served people.
Your Company has revamped its CSR focus to align its efforts and create lasting impactin the realm of Nutrition and Healthcare. The initiatives undertaken by your Company areprimarily focused towards children and the community at large.
Your Company has spent 2% of our average net profit of last three financial years aspart of your CSR in the reporting period.
Your Company undertakes these activities in the following different ways:
a. Nutrition: Your Company has started three key programs to address the nation's issueof malnutrition with strategic partners. Following are the programs initiated during thereporting period:
Holistic nutrition program for 50000 kids with The Akshaya Patra Foundation inKarnataka.
Mass Outreach Through Schools with SHARP for 150000 in Karnataka; MadhyaPradesh; Uttar Pradesh; and Bihar.
Improve awareness about malnutrition with NGO Sakshi for 200 kids in Haryana.
b. Skill development: We have started a program with Confederation of Indian Industryfocussing on Capacity building of FBOs including Midday Meal Organisers Self Help GroupsMass and Railways Catering Food Storage Locations on how to prepare produce and serveSafe Food.
c. Community Development: All community and rural development focussed projects runningunder supervision of BCF and CAF continued. The projects were focused on healthcare andnutrition education vocational training income generation support to the elderlyacross the country. Under these projects your Company is supporting 16 grass rootsprojects in 9 states of India addressing some important issues of poverty malnutritioneducation health disability support to widows differently-abled infant & maternalmortality and community disease like Kalazar among others.
d. Healthcare: We supported our Global program for eradicating Lymphatic Filariasis(elephantiasis) through Albendazole contribution to World Health Organization (WHO).
For other details regarding CSR please refer Annexure IV to Directors' Report.
Significant Material Orders Passed by the Court/ Regulator/ Tribunal Impacting GoingConcern Status and Company's Operations in Future
Your Company has not received any material Show cause under the Companies Act / SEBIRegulations. Notices received from other regulatory/ statutory authorities are beingsuitably dealt with.
There are no significant legal /arbitral proceedings against the Company. All suchmatters are being brought to the notice of the Audit Committee / Board as the case may be.
Director's Responsibility Statement
To the best of their knowledge and belief and according to the information andexplanation obtained your Directors make the following statement in terms of Section 134(3) (c) and 134(5) of the Companies Act 2013 for the year ended March 31 2017:
a. The Financial Statements of the Company for the period ended March 312017 have beenprepared in accordance with Indian Accounting Standards (Ind AS) notified under Section133 of the Companies Act 2013 (the Act) [Companies (Indian Accounting Standard) Rules
2015 as amended] and other relevant provisions of the Act. There have been no materialdepartures in the adoption and application of accounting standards.
b. All Financial Statements have been prepared on historical cost convention as agoing concern and on the accrual basis.
c. The estimates and judgments relating to Financial Statements have been made on aprudent and reasonable basis in order to ensure that Financial Statements reflect in atrue and fair manner the form and substance of the transactions and reasonably presentthe Company's state of affair and profit for the year.
d. The Directors of the Company have taken adequate care for the maintenance ofadequate accounting records in accordance with the provisions of Companies Act 2013 forsafeguarding of assets of the Company and for preventing and detecting fraud and otherirregularities.
e. The Company has established and maintained adequate internal control framework inline with the Internal Financial Controls ("IFC") requirement within the meaningof the explanation to Section 134(5) (e) of the Companies Act 2013 including financialcontrols based on the internal control over financial reporting criteria established bythe Company considering the essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting issued bythe Institute of Chartered Accountants of India (ICAI). The internal financial controlsare adequate and operating effectively and our internal auditors have conducted periodicaudits to provide reasonable assurances on the same.
f. The systems to ensure compliance with the provisions of all applicable laws are inplace and were adequate and operating effectively.
Declaration of Independent Directors
Pursuant to Sections 149(6) & 149(7) of Companies Act 2013 the IndependentDirectors of your Company have given a declaration that they have complied with thecriteria of independence as set out under sub section (6) of Section 149 of the CompaniesAct 2013.
Statements in this report particularly that pertains to Management Discussion andAnalysis may contain certain statements that might be considered forward looking. Thesestatements are subject to certain risks and uncertainties. Actual results may differmaterially from those expressed in the statement as important factors could influence theCompany's operations such as Government policies local political and economicdevelopment risks inherent to the Company's growth and such other factors.
The Directors wish to extend their thanks and appreciation to all the employees of theCompany at all levels agents and other business associates for their commitmentdedication and respective contributions to the Company's operations during the year underreview.
The Directors would also like to acknowledge the valuable guidance technicalassistance and advice being received from the Associate Company in the U.K. Your Directorslook forward to the future with confidence.
For and on behalf of the Board
|Subodh Bhargava ||Manoj Kumar |
|(DIN: 00035672) ||(DIN: 07177262) |
|Chairman ||Managing Director |
|Vivek Anand ||Mukesh H. Butani |
|(DIN: 06891864) ||(DIN: 01452839) |
|Director ||Director |
Dated: May 11 2017
Annexure I to the Directors' Report for the year ended March 312017
Particulars regarding Conservation of Energy Technology Absorption Foreign ExchangeEarnings and Outgo.
(A) CONSERVATION OF ENERGY-
(i) the steps taken or impact on conservation of energy;
As in the past the Company continued to stress upon measures for the conservation andoptimal utilization of energy in all the areas of operations and effective usage ofsources/equipment.
All the sites have increased the agri-waste bio-mass (briquettes/ pellets) blendingwith coal for steam generation resulting in reduction of about 50441 Tons of CO2thus significantly reducing carbon foot print in generating steam and endeavouring towardsa clean & sustainable environment.
More than 12 energy conservation initiatives have been carried out during the year2016-17 Significant measures which have contributed to energy conservation were:
441KW roof top solar plant for renewable energy.
High Speed Doors to avoid air conditioning losses.
1800KVA backup power supply replacement with energy efficient system.
Energy efficient fans in air conditioning systems.
I ncrease in agri-waste biomass to replace coal for steam generation therebysaving on Carbon.
Sunpipe in FG warehouse for daylight use.
Replaced water based vacuum pumps with dry vacuum pumps(oil lubricated) tominimize the ground water usage.
Installation of LED lighting in place of the conventional lighting system at allthe sites.
Boiler efficiency improvements.
(ii) the steps taken by the Company for utilising alternate sources of energy;
441KW roof top solar PV plant for renewable energy.
Increase in agrarian waste biomass to replace coal for steam generation therebyreducing the fossil fuel consumption.
(iii) the capital investment on energy conservation equipments;
Company has spent close to 13 crores on various energy conservation equipmentsand initiatives last year.
(iv) Total energy consumption and energy consumption per unit of production as per Form"A" of the Annexure in respect of industries specified in the Schedule there to:
| ||Year ended March 31 2017 ||Year ended March 31 2016 |
|A. Power and Fuel Consumption || || |
|1. Electricity || || |
|a) Purchased Units (in Lacs) ||437.93 ||458.08 |
|Total amount (Rs. Lacs) ||3491.63 ||3710.64 |
|Rate/Unit (Rs.) ||7.97 ||8.10 |
|b) Own Generation || || |
|1. DG Sets Units (in Lacs) ||31.94 ||25.29 |
|Units per litre of Diesel oil ||3.57 ||3.44 |
|Cost/Unit (Rs.) ||12.88 ||12.92 |
| ||Year ended March 31 2017 ||Year ended March 31 2016 |
|2. Turbine Units (in Lacs) ||23.72 ||18.12 |
|2. Coal Used in Boilers || || |
|Quantity (Tonnes)* ||15390 ||18054 |
|Total Cost (Rs. Lacs) ||907.36 ||1099.57 |
|Average Rate (Rs.) ||5895.77 ||6090.55 |
|3. Bio-mass used in Boilers || || |
|Quantity (Tonnes) ||39167 ||38815 |
|Total Cost (Rs. Lacs) ||2161.85 ||2218.89 |
|Average Rate (Rs.) ||5519.57 ||5716.60 |
includes Coal consumed to produce steam to generate electricity from Turbine.
B. Consumption per unit of Production:
| || |
Year ended March 31 2017
Year ended March 31 2016
| ||Coal/ Bio-mass ||Power ||Coal/ Bio-mass ||Power |
| ||MT ||Units ||MT ||Units |
|1. Malt based Food / Energy and Protein Health Food / Cereal based Food/ Powdered Milk (Per Ton) ||0.61 ||538 ||0.62 ||545 |
|2. Ghee & Butter (Per Ton) ||0.18 ||123 ||0.18 ||122 |
(B) TECHNOLOGY ABSORPTION-
(i) the efforts made towards technology absorption;
New technology introduced and stabilized for Horlicks manufacturing (vacuum banddryers) at one of the sites.
New technology introduction for energy conservation through electronicallycommuted (direct drive) fans.
(ii) t he benefits derived like product improvement cost reduction productdevelopment or import substitution;
18 Kilo Tonnes Horlicks manufacturing capacity enhanced through vacuum banddrying technology.
Direct Drive technology of electronically commutated (EC) fan system afterevaluation of different energy saving options.
(iii) i n case of imported technology (imported during the last three years reckonedfrom the beginning of the financial year);
(a) the details of technology imported;
Vacuum band dryers.
Energy efficient electronically commutated (EC) fan
(b) the year of import;
(c) whether the technology been fully absorbed;
(d) i f not fully absorbed areas where absorption has not taken place and the reasonsthereof;
Energy efficient electronically commutated (EC) fan - Pilot installationcompleted & full scale installation is in progress. Same is replicated at all sites.
(C) RESEARCH & DEVELOPMENT (R&D)
(i) Specific Areas in which R&D was carried out by the Company
As part of delivering our vision to improve more people's lives by creating andsustaining consumer led Science based innovation key focus areas continue to beexploration of new scientific areas product Innovation new claims development newproduct research clinical research packaging development continuous cost optimization quality compliance speed to market regulatory compliance and regulatory strategy.Further various new initiatives have been taken to build a strong pipeline of new claimsnew communications new products and enhance consumption of existing products throughproduct creativity and tapping new consumer needs.
(ii) Benefits derived as a result of the above R&D
New and differentiated claims new communication new product launches re-launches andnew packaging together enabled business to keep the relevance of our products and alsodelivered solutions to meet consumer needs. R&D constantly explores the opportunitiesfor a good Innovation pipeline setting the platform for new launches in the future. ValueEngineering efforts have helped the business deliver profitable growth and reinvest inbrands. All the efforts have been carried out to ensure all our products comply tofrequent changing regulations.
(iii) Further Plan of Action
Your Company's R&D has a key role to play in achieving our vision of becoming theworld's best and fast-Moving Consumer Healthcare Company driven by Science and values.Cutting edge innovations based on consumer preferences without shifting focus onprofitability would help R&D contribute and achieving this vision In the R&Dorganization the focus will be to continue drive excellences across Research &Development areas by bringing best practices across the world while adopting local ®ional consumer insights meeting local regulatory and statutory guidelines There issignificant focus on driving quality improvement through Quality by design cost controland Design to Value simplification and technical governance which will further make yourorganization strong and robust to deliver profitable consumer driven and Science ledinnovation
(iv) Expenditure on R&D
| ||Year ended March 31 2017 ||Year ended March 31 2016 |
|a) Capital ||271.86 ||21.52 |
|b) Recurring ||4702.68 ||4191.32 |
|Total ||4974 .54 ||4212.84 |
|R&D Expenditure as a percentage of turnover ||1.2% ||1% |
(D) FOREIGN EXCHANGE EARNINGS AND OUTGO
(i) Activities relating to exports : Initiatives taken to grow exports: Development ofnew export methods for products and services and export plans
The Foreign exchange earnings in the current year include exports to Bangladesh SriLanka Middle East Myanmar Kenya Mauritius and Pakistan. The efforts to broaden theexport base to new and existing countries are continuing.
(ii) Total Foreign Exchange used and earned:
| ||Year ended March 31 2017 ||Year ended March 31 2016 |
|Foreign Exchange Earnings ||25913.17 ||28158.93 |
|Foreign Exchange Outgo ||2815.03 ||2605.47 |
For and on behalf of the Board
|Subodh Bhargava ||Manoj Kumar |
|(DIN: 00035672) ||(DIN: 07177262) |
|Chairman ||Managing Director |
|Vivek Anand ||Mukesh H. Butani |
|(DIN: 06891864) ||(DIN: 01452839) |
|Director ||Director |
Dated: May 11 2017