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Globus Spirits Ltd.

BSE: 533104 Sector: Consumer
NSE: GLOBUSSPR ISIN Code: INE615I01010
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OPEN 145.90
PREVIOUS CLOSE 141.10
VOLUME 17858
52-Week high 145.90
52-Week low 62.05
P/E 57.88
Mkt Cap.(Rs cr) 405
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 145.90
CLOSE 141.10
VOLUME 17858
52-Week high 145.90
52-Week low 62.05
P/E 57.88
Mkt Cap.(Rs cr) 405
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Globus Spirits Ltd. (GLOBUSSPR) - Director Report

Company director report

To the Members

Your Board of Directors to present the Twenty-forth Annual Report and Audited Accountsfor the year ended 31st March 2017.

FINANCIAL PERFORMENCE

(' In Lacs)

Particulars

Current Year (2016-17)

Previous Year (2015-16)

Standalone

Consolidated

Standalone Consolidated
Total Revenue 79356 79330 71053 71058
Total Expenses 78853 78994 69581 69836
Profit before Explanatory items & Tax 503 336 1472 1222
Profit before tax after extraordinary items 503 336 1472 1222
Less: Provision for taxation including Deferred tax (399) (399) 218 218
Profit/(Loss) after tax 902 735 1254 1004
Basic EPS 3.13 2.55 4.35 3.49
Diluted EPS 3.13 2.55 4.35 3.49

PERFORMANCE OVERVIEW

During the year under review the Total Revenue of the Company has increased by 11% from' 71053 lacs (Previous year) to ' 79356 lacs (Current year) and PBT has been decreasedby '969 lacs from the previous year and also PAT has been decreased by '352 lacs from theprevious year. The Basic EPS of the Company is '3.13/- as compared to '4.35/- and thediluted EPS of the Company is '3.13/- as compared to '4.35/- in the previous year.

THE YEAR IN PERSPECTIVE

FY2016-17 was a difficult year for the alcohol industry as it was marred by severaladverse policy decisions. The prohibition in Bihar became effective and several otherstate governments showed a similar intent followed by demonetization and a soon-to-arrive GST regime which too would be negative for alcohol industry - all-in-allsentiment in the industry was very muted.

In this backdrop your company commenced commercial production at its greenfield plantsin Bihar and West Bengal taking the total annual operating distillation capacity to 150million litres. However the mood around commissioning was subdued as the Bihar governmentsoon notified non-renewal of alcohol manufacturing licenses in the state from FY17-18.This was also a year when raw material prices witnessed an unusual increase. However likein the past your company showed resilience and posted a steady performance during theyear led by strong growth in IMIL in Haryana and Rajasthan and higher bulk alcohol salesdriven by additional capacities coming on-stream.

Revenues from operations increased by 12% to reach Rs 789.1 crore while EBITDA and PATmargins stood at 8% and 1% respectively a slight decline from last year. Profitabilitywas impacted by low capacity utilizations at the greenfield facilities which werecommissioned during latter part of the year and the impending Bihar closure alsodisincentivized scale-up. This resilient performance against a weak operating environmentis attributable to your company's strategy of straddling the spirits value chain andgeographic diversification.

The manufacturing business showed strong revenue growth led by commissioning ofgreenfield facilities and higher bulk alcohol realizations which was partly offset bylower realizations in DDGS. A bumper crop in soya affected protein prices and consequentlyimpacted DDGS revenues negatively.

Driven by strong performance of bulk alcohol the proportion of manufacturing businessin revenues grew from 49% in FY15-16 to 53% in the year under review.

Despite strong revenue growth in IMIL in Haryana and Rajasthan the IMIL businesswitnessed slow revenue growth at 5% driven by closure of Bihar market (due toprohibition) which in the previous year had contributed more than 10% of IMIL revenues. Weimproved our market shares in Haryana where we are the second largest private player andRajasthan where we are already the largest private player and also launched IMIL in WestBengal under the 'Goldee' brand. Though the launch was mostly a test launch the earlysigns are very encouraging.

Though uncertainty in Bihar remains a concern the opportunity in West Bengal is verypromising with a large import substitution market holding up prices and a rapidly growingIMIL market. With raw material and fuel prices being lower in West Bengal this shouldhelp to improve profitability.

MATERIAL CHANGES AFTER MARCH 31 2017 AFFECTING THE COMPANY

There have been no material changes and commitments affecting the financial position ofthe Company between the end of the financial year and date of this Report. There has beenno change in the nature of business of the Company.

DIVIDEND

Your Directors do not recommend any dividend for the financial year 2016-17 because thecompany wants to reserve funds for its ongoing projects

PUBLIC DEPOSITS

The Company has not accepted or invited deposits covered under the provisions ofSection 73 of the Companies Act 2013 read with the Companies (Acceptance of Deposit)Rules 2014 from any person during the year under Report.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year Mr. Richard Piliero and Mr. Vijay Kumar Rekhi have been appointed asAdditional Directors in the company on 10th April 2017 and 19th May2017 respectively and pursuant to section 161 (1) of the Companies Act 2013 the saiddirectors Mr. Richard Piliero and Mr. Vijay Kumar Rekhi will hold office only upto thedate of forthcoming AGM of the company and are eligible for appointment as Director. TheBoard recommends their appointment and accordingly resolution seeking approval of themembers for their appointment has been included in the Notice of forthcoming AnnualGeneral Meeting of the Company along with their brief profile.

Mr. Rajesh Sehgal Non Executive & Nominee Director of the company has beenresigned from the Board of the Company w.e.f. 10th April 2017. The Directorsplace on record their appreciation of the valuable contribution made by him.

Mr. Manik Lal Dutta Executive Director of the company and Sh. Shekhar Swarup JointManaging Director of the Company retire by rotation and being eligible offer themselvesfor re-appointment. The Board recommends their re-appointment.

SUBSIDIARY COMPANIES

Your Company has a wholly owned subsidiaries viz. M/s Unibev Limited (formerly knownas M/s Uber Blenders & Distillers Limited) (Indian subsidiary).

In terms of proviso to sub section (3) of Section 129 of the Act the salient featuresof the financial statement of the subsidiaries is set out in the prescribed form AOC-1which forms part of the annual report.

CORPORATE GOVERNANCE

As per requirement of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 a Compliance Report on Corporate Governance has been annexed as part ofthe Annual Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The CSR Policy of the Company and the details about the initiatives taken by theCompany on CSR during the year as per the Companies (Corporate Social ResponsibilityPolicy) Rules 2014 have been disclosed in Annexure-II to this Report. Further details ofcomposition of the Corporate Social Responsibility Committee and other details areprovided the Corporate Governance Report which forms part of this report.

AUDITORS

Pursuant to provisions of Section 139 of the Companies Act 2013 M/s Deloitte Haskins& Sells Firm Regn No.015125N Chartered Accountants having their office at 7thFloor Building 10 Tower B DLF Cyber City Complex DLF City Phase-II Gurgaon-122002Haryana who were appointed in the 21st AGM as statutory auditors of theCompany for a period of the first term of five consecutive years till the conclusion of 26thAGM subject to ratification at every annual general meeting in terms of the Companies Act2013.

AUDITORS' REPORT

The Auditors in their Report to Members have given a qualification as follows:-

In Standalone Accounts:

1) As on March 31 2017 Fixed Assets include Intangible Assets aggregating to '721.65Lacs (March 31 2016 - '1443.30 Lacs) under the head "Knowhow and New BrandDevelopment"representing intangibles internally generated by the Company throughexpenditure on advertisement and promotional expenses. Such recognition is not inaccordance with Accounting Standard - 26 "Intangible Assets". Had the Companycomplied with requirements of AS-26 Fixed Assets as at March 31 2017 would have beenlower by '721.65 Lacs (March 31 2016 - '1443.30 Lacs) Depreciation and amortisationexpense for the year would be lower by ' 721.65 Lacs Net profit after taxes and Reservesand Surplus would be lower by '471.90 Lacs.

2) As on March 31 2017 Plant & Machinery having Net book value of '2966.71 Lacs(March 31 2016 '3278.63 Lacs (Gross Book Value - '5580.40 Lacs (March 31 2016'5580.40 Lacs)) that are currently unutilized for over 4 years as on the balance sheetdate for which the management is evaluating alternative use and is of the view that noimpairment is considered necessary at this stage. In absence of impairment assessment weare unable to comment on recoverability of carrying value of such assets and consequentadjustment that may be required upon such assessment

3) In case of fixed assets the Company's internal financial controls around recordingof fixed assets and timely identification monitoring and reporting of non-usable fixedassets are operating in a manner that it may lead to delayed appropriate action /charge-off in the financial statements and consequently result in misstatement of thefixed assets.

In Consolidated Accounts:

1. As on March 31 2017 Fixed Assets include Intangible Assets aggregating to '721.65Lacs (March 31 2016 - '1443.30 Lacs) under the head "Knowhow and New BrandDevelopment" representing intangibles internally generated by the Holding Companythrough expenditure on advertisement and promotional expenses. Such recognition is not inaccordance with Accounting Standard - 26 "Intangible Assets". Had the Companycomplied with requirements of AS-26 Fixed Assets as at March 31 2017 would have beenlower by '721.65 Lacs (March 31 2016 - '1443.30 Lacs) Depreciation and amortisationexpense for the year would be lower by '721.65 Lacs Net profit after taxes and Reservesand Surplus would be lower by ' 471.90 Lacs.

2. As on March 31 2017 Plant & Machinery having Net book value of'2966.71 Lacs(March 31 2016 '3278.63 Lacs (Gross Book Value - '5580.40 Lacs (March 31 2016'5580.40 Lacs)) that are currently unutilized for over 4 years as on the balance sheetdate for which the management is evaluating alternative use and is of the view that noimpairment is considered necessary at this stage. In absence of impairment assessment weare unable to comment on recoverability of carrying value of such assets and consequentadjustment that may be required upon such assessment

3. In case of fixed assets the Holding Company's internal financial controls aroundrecording of fixed assets and timely identification monitoring and reporting ofnon-usable fixed assets are operating in a manner that it may lead to delayed appropriateaction / charge-off in the financial statements and consequently result in misstatement ofthe fixed assets.

And the response of your Directors with respect to it as follows:-

Response on Audit Qualification 1:-

Up to 31/03/2013 the expenses incurred on brand promotion were capitalised asintangibles under the head "Knowhow and New Brand Development" since the brandswere under establishment during that period. Effective year ended 31/03/2014 the Companyadopted a policy of amortising these intangibles over a period of 5 years. During theyear '721.65 lacs has been recognised as depreciation and amortisation expense. Had theasset been fully expenses off as on 31/03/2017 Fixed Assets would have been lower by'721.65 lacs (31/03/2016 - '1443.30 lacs) the depreciation and amortisationexpense for

the year would have been lower by '721.65 lacs Net profit after tax for the year andthe Reserves and Surplus would have been lower by '471.90 lacs

Response on Audit Qualification 2:-

As on March 312017 fixed assets include Plant and machinery valued at '2966.71 lacs(Gross Book Value - '5580.40 lacs) situated at Hissar Haryana which are currentlyunutilised since 4 years for which the Company is in the process of evaluating alternativeuse and is confident that the value in use of these assets would be higher than thecarrying value and therefore no impairment provision / realisable value assessment isrequired at this stage.

Response on Audit Qualification 3:-

The Company has a process of physically verifying the fixed assets in a periodicalmanner. However there are certain amount of un-used fixed assets for which the company isin the process of evaluating options for making alternative use of the same.

COST AUDIT

The board subject to the approval of the Central Government if required has appointedM/s JSN & Co. Cost Accountants having Firm's registration no. 455 its office at462/1 1st Floor Old MB Road Lado Sarai New Delhi-110030 as Cost Auditorfor conducting the Cost Audit for the financial year 2016-17. The audit committeerecommended his appointment and remuneration. The Company has also received necessarycertificate under Section 141 of the Act 2013 conveying his eligibility forre-appointment. The remuneration fixed by the board based on the recommendation of theaudit committee is required to be ratified by the members at the AGM as per therequirement of Section 148(3) of the Act 2013.

SECRETARIAL AUDIT REPORT

Secretarial Audit Report has been annexed herewith & forms part of the AnnualReport.

PARTICULARS OF EMPLOYEES

Statement pursuant to u/s 197 (12) of the Companies Act 2013 read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the particulars of topten employees are as follows :-

Particulars of Top Ten Employees:

Name Designation Nature of Employment Age Date of Joining Qualifications & Experience Previous Employment %age of Equity shares held Remuneration Received
Ajay Kumar Swarup Managing Director Permanent 58 16-Jan- 1993 PGDBM (33 years of experience) M/s SVP Industries Ltd. 6.76% 10000000
Bhaskar Roy Executive Director & COO Permanent 54 04-Oct- 2005 Mcom FCA PHD(29 years of experience) M/s Saraya Industries Limited 0.00% 5248800
Ajay Goyal Chief Financial Officer Permanent 47 18-Mar- 2015 CA (20 years of experience) M/s Toyoda Gosei Minda India Pvt. Ltd. 0.00% 4218004
Manik Lal Dutta Executive Director Permanent 71 01 -Aug- 2006 M.Tech PGDBM (45 years of experience) M/s United Spirits Limited 0.007% 3525792
Shekhar Swarup Joint Managing Director Permanent 31 27-Oct- 2008 Degree in Business & Management (8 years of experience) N.A . 0.46% 7500000
Amitabh Singh Vice President Permanent 50 16-Apr- 2013 B.Sc. Engineering (27 years of experience) M/s Radico Khaitan Limited 0.00% 3236760
R.K. Malik Sr. Vice President Permanent 61 15-Aug- 2000 MBA (40 years of experience) M/s Golden Bottling 0.00% 3525792
Deepak Saroha Vice President Permanent 43 01-Jul- 2007 BSc. PGDAT(over 15 years of experience) M/s Radico Khaitan Ltd. 0.00% 2833991
Pankaj Tyagi Vice President Permanent 44 14-May- 2015 BSc. PGDAT (22 years of experience) M/s Brahamputra Biochem Pvt. Ltd. 0.00% 2943000
Jasbeer Singh Vice President Permanent 59 01 -Oct- 2014 BSc. MBA(over 15 years of experience) N.A. 0.00% 3270000

Notes:

1. The percentage of equity share holding mentioned as above is as on 31stMarch 2017.

2. None of the Directors or employees are inter related to each other except Sh. AjayK. Swarup Managing Director of the company is the father of Sh. Shekhar Swarup JointManaging Director of the company.

CONSERVATION OF ENERGY / TECHNOLOGY ABSORPTION/ RESEARCH & DEVELOPMENT ETC.

Particulars as required under Rule 8 (3) of the Companies (Accounts) Rules 2014 aregiven in Annexure I and form part of this report.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Management's Discussion and Analysis Report has been annexed & forms part of theAnnual Report.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134 (5) of the Companies Act 2013 withrespect to Directors Responsibility Statement it is hereby confirmed

1. That in preparation of the Annual Accounts for the financial year 2016-17 theapplicable Accounting Standards have been followed along with explanation relating tomaterial departures if any.

2. That the Directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the State of Affairs of the Company as at 31st March2017 and of the results of the Company for that period.

3. That the directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities.

4. That the directors had prepared the Annual Accounts for the financial year 2016-17on a going concern basis.

5. That they have laid down internal financial controls to be followed by the Companyand that such internal financial controls are adequate and operating properly ; and

6. That they have devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return as provided under Sub-Section (3) of Section 92 of theCompanies Act 2013 ( the "Act") is enclosed at Annexure-III in the prescribedform MGT-9 and forms part of this Report.

NUMBER OF MEETINGS OF THE BOARD

4 meetings of the Board of Directors of the Company were held during the year. Fordetail of the meetings please refer to the Corporate Governance Report which forms partof this Report.

AUDIT COMMITTEE

Composition and other details pertaining to Audit Committee has been disclosed in theCorporate Governance Report

INDEPENDENT DIRECTORS' DECLARATION

Mr. Santosh Kumar Bishwal Mr. Joginder Singh Dhamija Mr. Kunal Agarwal and Mr. VivekGupta who are Independent Directors have submitted a declaration that each of them meetsthe criteria of independence as provided in SubSection (6) of Section 149 of the Act andSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. Further therehas been no change in the circumstances which may affect their status as independentdirector during the year.

POLICY OF DIRECTORS' APPOINTMENT AND REMUNERATION

Company's policy on Directors' appointment and remuneration including criteria fordetermining qualifications positive attributes independence of a director and othermatters provided under section 178(3) of the Act are covered in Corporate GovernanceReport which forms part of this Report. Further information about elements ofremuneration package of individual directors is provided in the extract of Annual Returnas provided under Section 92(3) of the Act is enclosed at Annexure-III in the prescribedform MGT-9 and forms part of this Report.

CODE OF CONDUCT FOR DIRECTORS AND SENIOR MANAGEMENT

The Directors and members of Senior Management have affirmed compliance with the Codeof Conduct for Directors and Senior Management of the Company. A declaration to thiseffect has been signed by the Managing Director and forms part of the Annual Report.

RELATIONSHIP BETWEEN DIRECTORS INTER-SE

None of the Directors are related to each other within the meaning of the term"relative" as per Section 2(77) of the Act and SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015 except Sh. Shekhar Swarup (Joint ManagingDirector) is the son of Sh. Ajay Kumar Swarup (Managing Director) of the Company.

ANNUAL PERFORMANCE EVALUATION

The company has a mechanism for annual performance evaluation of every IndividualDirectors and the Board as a whole as well as its various committees

PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS

There have been no loans guarantees and investments under Section 186 of the Actduring the financial year 2015-16 except to its Wholly Owned Subsidiary M/s Unibev Limited(formerly known as M/s Uber Blenders & Distillers Limited).

TRANSACTIONS WITH RELATED PARTIES

The Company has entered into contract / arrangements with the related parties in theordinary course of business and on arm's length basis. The details are mentioned in thenotes to accounts of the financial statements. Policy on materiality of Related PartyTransactions can be accessed on the company's website www.globusspirits.com .

INTERNAL CONTROL

The information about internal controls is set out in the Management Discussion &Analysis report which is attached and forms part of this Report.

RISK MANAGEMENT

The Company has a Risk Management Committee & also it has in place a RiskManagement Policy to deal with various risks arising in the course of business. The keyresponsibilities of Risk Management Committee are namely Identification of risksImplementing and monitoring the risk management plan for the Company and reframe the riskmanagement plan and policy as it may deem fit lay down procedures to inform Board membersabout the risk assessment and minimization procedures Monitoring and reviewing of therisk management plan from time to time and activities as may be required to be done underthe Companies Act 2013 or listing Agreements with Stock Exchanges.

VIGIL MECHANISM

The Company has established a vigil mechanism for Directors and employees to reporttheir genuine concerns.

PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARIES

The Wholly Owned Subsidiary of the Company M/s Unibev Limited (Formerly known as M/sUber Blenders & Distillers Ltd.) has not yet commenced any Business operation andhence is yet to generate revenue. Financial position of each of the subsidiaries isprovided in a separate statement AOC-1 attached to the Financial Statement pursuant tofirst proviso to Section 129(3) of the Act.

PARTICULARS OF REMUNERATION

The information required under section 197 of the Companies Act 2013 and the rulesmade there under in respect of employees of the Company is follows :-

(a) The ratio of the remuneration of each director to the median remuneration of theemployees of the Company

Executive Directors Ratio to the Median Remuneration*
Mr. Ajay Kumar Swarup 55.69
Mr. Shekhar Swarup 41.76
Mr. Manik Lal Dutta 19.63
Dr. Bhaskar Roy 29.23
Non-Executive Directors (Sitting Fees only)
Sh. Santosh Kumar Bishwal 0.72
Sh. Joginder Singh Dhamija 0.89
Sh. Kunal Agarwal 0.50
Sh. Vivek Gupta 0.45
Ms. Ruchika Bansal 0.22

* for the purpose of comparison 12 months salary has been considered for all theemployees even though any employee has worked for less than 12 months

(b) The percentage increase in remuneration of each Director Chief Executive OfficerChief Financial Officer Company Secretary or Manager if any in the financial year

Name of the Person % increase in Remuneration
Mr. Ajay Kumar Swarup (Managing Director) 23%
Mr. Shekhar Swarup (Executive Director) 79%
Mr. Manik Lal Dutta (Executive Director) NIL
Dr. Bhaskar Roy (Executive Director) NIL
Sh. Ajay Kumar Goyal (CFO) 3%
Sh. Santosh Kumar Pattanayak (Company Secretary) 7%

(c) The percentage increase in the median remuneration of employees in the financialyear

8% (Since there is lot of variation in the no. of employees during the current year ascompare to previous year comparison of the exact median remuneration may not beaccurate.)

(d) The number of permanent employees on the rolls of Company as on 31/03/2017: 412

(e) The average percentile increase already made in the salaries of employees otherthan the managerial personnel in the last financial year and its comparison with thepercentile increase in the managerial remuneration and justification thereof and point outif there are any exceptional circumstances for increase in the managerial remuneration

The average increase in salaries of employees other than managerial personnel in2016-17 was 8% approximately. Percentage increase in the managerial remuneration for theyear was also approximately 8%.

(f) The affirmation that the remuneration is as per the remuneration policy of theCompany

The Company's remuneration policy is driven by the success and performance of theindividual employees and the Company. Through its compensation package the Companyendeavors to attract retain develop and motivate a high performance staff. The Companyfollows a compensation mix of fixed pay benefits and performance based variable pay.Individual performance pay is determined by business performance and the performance ofthe individuals measured through the annual appraisal process. The Company affirmsremuneration is as per the remuneration policy of the Company.

PECUNIARY RELATIONSHIP OR TRANSACTIONS OF NON-EXECUTIVE DIRECTORS

During the year the Non-Executive Directors of the Company had no pecuniaryrelationship or transactions with the Company.

ACKNOWLEDGEMENT

The Board wishes to place on record its appreciation for the wholehearted support andvaluable co-operation extended to the Company by the Central & the State GovernmentsBankers Suppliers Associates Contractors employees and shareholders.

For and on behalf of the Board of Directors
Dr. Bhaskar Roy Ajay K. Swarup
Executive Director & COO Managing Director
DIN-02805627 DIN-00035194
Santosh Kumar Pattanayak Ajay Goyal
Company Secretary Chief Financial Officer
ACS-18721

Place: New Delhi

Date: 11/08/2017