Your Directors have pleasure in presenting their Twenty-Eighth Annual Report togetherwith the Audited Financial Statements of your Company for the year ended March 31 2016.
FINANCIAL HIGHLIGHTS :
The financial performance of the Company for the year ended March 31 2016 issummarized below:
(Rs. in lakhs)
| ||STANDALONE ||CONSOLIDATED |
| ||March 31 2016 ||March 31 2015 ||March 31 2016 ||March 31 2015 |
|Revenue from Operations ||35830 ||41146 ||45104 ||44326 |
|Other Income ||3180 ||4298 ||4280 ||9465 |
|Total Income ||39010 ||45444 ||49384 ||53791 |
|Operating Expenditure ||7006 ||11148 ||7495 ||11266 |
|Profit before Depreciation / Interest / Tax ||32004 ||34296 ||41889 ||42525 |
|Depreciation ||301 ||403 ||507 ||980 |
|Finance costs ||30040 ||32259 ||45200 ||40341 |
|Profit / (Loss) before Tax ||1663 ||1634 ||(3818) ||1204 |
|Add : Extraordinary item || ||350 || ||350 |
|Add / (Less) : Provision for Tax ||(327) ||(504) ||(376) ||(743) |
|Excess / (Short) provision for taxation in respect of earlier years ||671 ||313 ||687 ||266 |
|Deferred Tax credit / (charge) ||155 ||(497) ||151 ||(501) |
|Prior Period Adjustments (net) ||(32) ||(221) ||(97) ||(445) |
|Minority Interest / Share of Profit / (Loss) from associates companies / pre-acquisition loss || || ||579 ||(74) |
|Capital reserve written back on dilution || || || ||17 |
|Net Profit / (Loss) for the Year ||2130 ||1075 ||(2874) ||74 |
|Balance Profit brought forward from Previous Year ||70158 ||68233 ||61690 ||60766 |
|Reversal of proposed equity dividend and tax thereon || ||850 || ||850 |
|Amount available for appropriation ||72288 ||70158 ||58816 ||61690 |
|APPROPRIATIONS : || || || || |
|Debenture Redemption Reserve || || || || |
|Proposed Dividend || || || || |
|Dividend Distribution Tax || || || || |
|General Reserves || || || || |
|Balance carried to Balance Sheet ||72288 ||70158 ||58816 ||61690 |
|Earnings per Share before Extraordinary Item (Rs. ) (EPS) ||2.93 ||1 ||(3.95) ||0.1 |
|Earnings per Share after Extraordinary Item (Rs.) (EPS) ||2.93 ||1.48 ||(3.95) ||0.1 |
As a prudent economic measure and in order to conserve the scarce liquid resources ofthe Company the Directors do not recommend any dividend on the equity shares for the yearunder review.
During the year under review on a consolidated basis your Companys :
Total Revenue stood at Rs. 49384 lakhs;
Operational Expenditure was Rs. 7495 lakhs;
Operating Profit (EBITDA) was Rs. 41889 lakhs;
Loss before Tax stood at Rs. (3818) lakhs; and
Loss after Tax for the year was Rs. (2874) lakhs
On a standalone basis your Companys :
Total revenue stood at Rs. 39010 lakhs;
Operational Expenditure was Rs. 7006 lakhs;
Operating Profit (EBITDA) was Rs. 32004 lakhs;
Profit before Tax stood at Rs. 1663 lakhs; and
Profit after Tax for the year was Rs. 2130 lakhs
TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND:
Pursuant to the provisions of Section 124 of the Companies Act 2013 the unclaimeddividend amount of Rs. 10157/- for the year ended March 31 2008 was transferred to theInvestor Education and Protection Fund (IEPF) after giving due notices to the members.
During the financial year 2016-2017 the dividend declared by the Company for theFinancial Year 2008-2009 remaining unclaimed in terms of Section 124 of the Companies Act2013 will be transferred to IEPF.
TRANSFER TO RESERVES :
No amount is proposed to be transferred to Reserves out of the profits earned duringthe Financial Year 2015-2016.
NATURE OF BUSINESS :
The Company is engaged in the business of execution and development of real estateprojects. There was no change in the nature of the business of the Company during the yearunder review.
CHANGES IN SHARE CAPITAL :
During the year under review there were no changes in the share capital of theCompany. The Company has not issued shares with differential voting rights or sweat equityshares or granted stock options during the year under review.
During the year under review the Company had not made any fresh issue of debentures orredeemed any of the existing debentures.
BUSINESS OVERVIEW :
Your Company is one of Indias leading real estate companies engaged in thebusiness of execution and development of real estate projects and currently operates both- on its own and through its subsidiaries / joint ventures / associate companiespartnerships firms and public private partnerships encompassing the construction anddevelopment of Residential and Commercial Premises and Build Operate Transfer (BOT)Projects. The Company has a Western India focus with presence in major cities such asMumbai Thane Pune Ahmedabad Surat Vadodara and Mehsana.
OVERVIEW OF THE COMPANYS PROJECTS
(includes projects being developed / to be developed through subsidiaries / associates/ joint ventures / public-private partnerships)
Project completed :
Hubtown Sunmist B Wing Andheri (East)
Hubtown Shikhar Andheri (East)
Hubtown Countrywoods Phase I Kondhwa Pune
|Hubtown Sunmist A Wing - Andheri (East) ||Hubtown Countrywoods Phase II Kondhwa Pune |
|Hubtown Seasons Chembur ||Hubtown Serene Bandra (East) |
|Hubtown Gardenia Mira Road ||Hubtown Celeste Worli |
|Hubtown Greenwoods Thane ||Hubtown Premiere Andheri (West) |
|Hubtown Heaven Matunga (East) ||Rising City Ghatkopar-Mankhurd Link Road |
|Hubtown Vedant Sion (East) ||Hillcrest Andheri (East) |
|Hubtown Sunstone Bandra (East) || |
Twenty Five South Prabhadevi ; Hubtown Divinity Thane ; Hubtown Square Thane; Hubtown Jewell Andheri (West)
Hubtown Solaris Phase I Andheri (East) ; Hubtown Viva Andheri(East)
Hubtown Solaris Phase II Andheri (East) ; Hubtown Central Surat
Hubtown Central Ahmedabad ; Hubtown Central Mehsana ; Hubtown Central Vadodara
IT SEZ and Township:
Sunstream City Phase I - Mulund-Thane
MANAGEMENT DISCUSSION AND ANALYSIS :
The Management Discussion and Analysis Report forming part of the Board Report for theyear under review as stipulated under Regulation 34 (2) (e) of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 is discussed herein below.
REAL ESTATE SECTOR OVERVIEW :
The last few years have seen Indian real estate sector witness a quiet revolutionowing to a growing economy and a positive government attitude which includes aliberalized foreign direct investment regime. The IT and ITES sector growth further had adomino effect since for every square foot of developed office area around 10 sq. feet ofresidential space needed to be developed for accommodation of the employees. Almost 80 %of real estate developed in India is residential space and the rest comprises of officesshopping malls hotels and hospitals. After agriculture real estate sector is the secondlargest employment generator in India and contributes heavily towards gross domesticproduct (GDP). The growth in the sector supported by a series of reforms has not onlyresulted in significant growth in residential and commercial real estate but alsocomplemented the development of physical and social infrastructure of the country. Fivepercent of the countrys GDP is contributed by the housing sector. In the next fiveyears this contribution to GDP is expected to rise further.
Real estate sector is also responsible for the development of over 250 other ancillaryindustries such as cement steel paints glass etc. The construction industry ranksthird among 14 major sectors in terms of direct indirect and induced effects in allsectors of the economy.
In the year 2015 Indian real estate sector witnessed regulatory changes that includedrelaxing of foreign direct investment laws and the Union Cabinet approving the muchawaited Real Estate Bill.
The Government of India has been supportive to the real estate sector. In August 2015the Union Cabinet approved 100 Smart City Projects in India. The Government has alsoraised FDI limits for townships and settlements development projects to 100 per cent. Realestate projects within the Special Economic Zone (SEZ) are also permitted 100 per centFDI. In Union Budget 2015-16 the government allocated US$ 3.72 billion for housing andurban development. The government has also released draft guidelines for investments byReal Estate Investment Trusts (REITs) in non-residential segment.
SEGMENT WISE PERFORMANCE : (KNIGHT FRANK RESEARCH)
Residential real estate growth in 2015 was not as good as expected. H1 2015 saw overallabsorption exceeding the new supply for the first time in three years across the majorcities. But the year 2015 ended with lowest number of new launches and sales volumesacross top eight cities of India since 2010. While the sales volume during the year wassimilar to that of 2014 new launches fell sharply by 22 percent. However H2 2015witnessed a marginal recovery in both launches and absorption as compared to H1 2015.
Absorption surpassed new completions for the second straight year across the top sixcities of India pushing vacancy levels to an eight year low. At around 35 million sq.ft. office space absorption was the second highest in the country after 2011. Vacancylevels reached 15.6 percent in H2 2015 significantly lower from the peak of 21 percent in2012. The IT/ITES sector continued to lead in terms of absorption across the top sixcities in H2 2015. The other services sector which constitutes e-commerce mediaconsulting and telecom among others accounted for 23 percent of the total office spaceabsorbed in H2 2015. Commercial/office space rental increased across most cities in 2015.
The year 2015 saw hardly any quality retail space come in. The year 2015 witnessed aconsolidation of retail real estate by brands and retailers who focused on theirprofit-making stores and closed down loss-making ones. Further with the relaxation of FDInorms it became easier for single-brand retail companies to explore the Indian market andset up e-commerce businesses independently.
Capital market transactions in real estate :
A number of big-ticket capital market deals in real estate were witnessed during 2015.Residential projects attracted significant investments but the majority of funds wererouted into income-yielding office projects in 2015. In 2016 capital market deals in realestate are expected to scale a new high.
OPPORTUNITIES : (source KPMG Indian real estate Opening doors)
Real estate in India is a big opportunity. The rapid urbanization nuclear familyconcept higher disposable incomes easier availability of credit younger populationgrowing Indian economy government focus on development of infrastructure etc. will leadto huge demand. This demand will spread across all segment of the real estate sector.
Residential segment opportunity
The residential segment which contributes about 80 percent to the real estate sector isexpected to grow significantly over the next few decades. It is estimated that Indiancities need to develop at-least two million houses annually for the growing population.Increased incomes easy availability of finance favourble interest rates and tax benefitshave ensured that there will be a huge demand for residential properties. The opportunityis limited not only to the metros but percolates to Tier II and Tier III cities as well.Further there was a housing shortage of about 18.7 million in 2012 (15th five year plan).Thus India needs to develop almost 45-50 million housing units by 2028 (KPMG analysis).
Commercial segment opportunity
The commercial real estate market comprises of office retail and industrial segments.It is primarily dependent on the growth in services (IT/ITES/BFSI) and industrial(logistic warehouse and manufacturing) sectors of the economy.
IT/ITES sector is the major occupier of office space in India absorbing 52 percent ofnew office space which came up since 2010. Banking Financial Services and Insurance(BFSI) are the second largest space occupiers in India occupying about 16 percent of thetotal office space. A major driver for commercial real estate could be the awarding of newbanking licences by Reserve Bank of India which would create demand for about 4.5-5million sq. feet of office space in short term.
Retailing in India is expected to increase at CAGR of 8 percent from US $ 518 billionin 2012 to US $ 957 billion by 2020. The organized retail is expected to increase from US$ 41 billion to US $ 191 billion during the same period. However 2016 is expected towitness a continued shortage of quality retail spaces.
The Indian Government is taking significant measures to promote growth in themanufacturing sector a key driver of industrial real estate. Among the most prominent isthe 1483 km long Delhi-Mumbai Industrial Corridor which is expected to significantly boostdemand from industrial real estate.
Warehouse realty :
E-commerce has emerged as one of the main drivers for warehouse realty demand acrossthe country after Third Party Logistics operators. An approximately 2 million sq. ft. ofwarehousing space was taken up by e-commerce firms in 2015 a significant jump as theshare of the sector rose from a meager 2 percent of the total warehousing demand in 2012to around 22 percent during 2015. The office space demand from e-commerce firms witnesseda 170 percent year-on-year growth from 0.7 million sq. ft. in 2014 to 2 million sq. ft. in2015.
Healthcare and Education :
Growing and emerging residential nodes will enable growth in the healthcare andeducation sectors. The education sector is poised to see major growth in the future asIndia will have the worlds largest population in the 18-24 age group and the secondlargest graduate talent pipeline globally by the end of 2020.
The healthcare sector is expected to nearly double in value from the current USD 144billion to USD 280 billion by 2020.
RISKS AND CONCERNS :
Real Estate Specific Risks :
Fluctuations in market conditions may affect the ability to sell units atexpected prices which could adversely impact revenues and earnings.
Competition from existing as well as new players both domestic as well asforeign.
Increase in interest rates may dampen the growth rate of demand for housingunits.
Real estate price cycles have the maximum impact on the margins of thedevelopers.
Unfavourable changes in government policies including change in tax structurewould affect the growth of the real estate sector.
Liquidity Risk liquidity crisis on account of stoppage of lending funds to realestate sector by banks financial institutions and other lending agencies leading tostoppage of development activity.
Operational Risks longer gestation period for acquisition of landnon-availability of critical raw materials such as cement and steel failure to complywith rules and regulations.
Shortage or sharp increase in prices of building materials could impact theproject schedule and impact thereby the revenues and margins.
Delays in obtaining approvals from regulatory authorities.
Perennial shortage of semi-skilled and skilled labour.
Economic uncertainty and political fluidity can adversely impact the economy.
Human Resource Risk high attrition of skilled/trained manpower.
Retrospective policy changes and regulatory bottlenecks could impact theperformance of real estate companies.
IT Risk loss/theft of important and confidential data and breakdown of IT systemmay adversely affect the Companys ability to monitor progress of the project etc.and provide timely information about the projects to the customers
Legal and Statutory Risk ownership and land title issues.
Lack of supporting infrastructure such as roads highways electricity watersewerage can hamper the growth of real estate.
Shift in consumer preference may adversely affect the Companys businessand operating results.
Absence of land title insurance.
The real estate sector offers ample opportunities for development across verticals butthere are certain intrinsic challenges that hinder growth of the sector. The challenges inthe Indian real estate can be broadly classified under five categories which are lack ofsuitable developable land delays in obtaining approvals issues in land title andinsurance inadequate funding challenges and shortage of manpower.
Lack of suitable developable land : Suitable developable land with basicinfrastructure has become scarce in Indian cities. This has resulted in significant surgein land prices in the urban areas.
Strict and prolonged regulatory process leading to delays : The process ofobtaining construction permit has become difficult over the last several years and isamong the major reasons contributing to the delays in real estate development. The delayin obtaining approvals and adhering to regulatory processes results in avoidable time andcost overruns.
Land related issues : Lack of clear land titles and title insurance often makesdifficult to acquire suitable land parcels. Absence of clear land titles sometimes resultsin long-drawn and expensive litigation for developers. Further there is no single landpolicy in India and each state has its own policy which adds to the complexities.
Inadequate funding channels : Reserve Bank of India has set threshold for thetotal maximum exposure to real estate including individual housing loans and lending todevelopers for construction finance. Absence of long term funding from banks results indevelopers tapping alternative sources of funds most of which do not offer aflordableinterest rates and hence the supply stified.
Shortage of manpower and technology : Despite being the second largest employerin the country the real estate sector as a whole faces manpower shortage. The sector isheavily dependent on manual labour faces longer time lines for construction completionswhich results in supply getting deferred.
High construction costs : As the raw material costs increase over a period itbecomes very difficult to provide housing at a reasonable cost.
Uneven development of urban infrastructure.
OUTLOOK : (source KPMG Indian real estate Opening doors)
The real state sector which is deeply linked to the economic performance is expected tobe a major beneficiary in the expected strong Indian economic growth. The major driverssupporting real estate sector include urbanization rising income level young populationand growing number of nuclear families and strong expected growth in the manufacturing andservice sector. The share of the real estate sector in GDP is expected to increase from6.3 percent in 2013 to 13 percent by 2028. In absolute terms the size of the sector isexpected to increase seven times to US $ 853 billion in 2028 from US $ 121 billion in2013.
Drivers of the real estate sector :
Economic growth :
Indian economy is expected to be the fastest growing economy for the next fewdecades.
The growth could primarily be driven by infrastructure investment and the risingmanufacturing and service sector.
Within the service sector the growing IT and banking sectors are expected tosignificantly add to the demand for commercial real estate.
Rising income level :
The per-capita income in urban India is expected to triple from US $ 2800 in2012 to US $ 8300 in 2028.
The rising income supports the growth of retail and residential real estate.
About 10 million people are moving to Indian cities every year.
Urban areas are expected to contribute 70-75 percent to nations GDP by 2025.
About two million houses are required to be developed each year typically inthe affordable segment.
Young and smaller families :
The average household size is expected to decrease from 4.8 currently to justabove 4.4.
The fall in household size is expected to add about demand for 10 million newhousing units.
About 35 percent of Indias population is between 15-35 age bracket whichis expected to drive the demand for housing for over the next fifteen years.
In the mid-to-long term the real estate sector can derive indirect but significantbenefits of pro-growth initiatives launched by the Government of India viz. the SmartCities Mission Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and theHousing for All Mission all of which can help set off a new beginning in Indiasurban areas which are potentially key drivers of high rate economic growth. Therelaxation in FDI norms for construction and realty bodies well for the future of thesector as do initiatives such as Make in India the introduction of GST (asand when) and the development of dedicated freight corridors which can foster growth inkey industries that support demand for industrial real estate.
High demand for ready-to-move in projects and increased focus on project completionwill set the contours for the realty sector outlook in 2016.
Over the next five years the Indian real estate market is expected to grow at a CAGRof 20 percent driven by 18-19 percent growth in the residential segment 55-60 percent inthe retail real estate and 20-22 percent in the commercial real estate.
The investment activity in commercial real estate is also expected to heighten over thenext couple of years with the government streamlining taxation and other issues related toreal estate investment trusts (REITs).
FINANCIAL PERFORMANCE OVERVIEW :
During the year under review the overall markets remained sluggish and slow. YourCompanys performance was to a greater extent impacted due to continued inflationdampening investor sentiment increased cost of capital increased cost of constructionand restrained demand from end-users. The operational cashflows were adversely impactedfor major part of the year under review resulting in intense pressure on profit margins.
The salient features of the financial performance for 2015-2016 are as hereunder :
Consolidated basis :
Income from operations stood at Rs. 45104 lakhs as against Rs. 44326 lakhs inthe previous year;
Operational Expenditure was lower by 33.47 % at Rs. 7495 lakhs as against Rs.11266 lakhs in the previous year;
Operating Profit (EBITDA) was lower by 1.5 % at Rs. 41889 lakhs from Rs. 42525lakhs in the previous year;
Loss before Tax was Rs. (3818) lakhs as against profit of Rs. 1204 lakhs in theprevious year.
Loss after Tax Minority Interest and Other Items was Rs. (2874) lakhs asagainst profit of Rs. 74 lakhs in the previous year;
Earnings per Share before and after Extraordinary Item Rs. (3.95);
Networth of the Company stood at Rs. 170695 lakhs as against Rs. 169910 lakhsin the previous year.
Standalone basis :
Income from operations stood at Rs. 35830 lakhs as against Rs. 41230 lakhs inthe previous year;
Operational Expenditure was lower by 37.15 % at Rs. 7006 lakhs as against Rs.11148 lakhs in the previous year;
Operating Profit (EBITDA) was lower by 6.68 % percent to Rs. 32004 lakhs fromRs. 34296 lakhs in the previous year;
Profit before Tax and Extraordinary Item was marginally higher at Rs. 1663lakhs as against Rs. 1634 lakhs in the previous year;
Profit after Tax and Other Items was Rs. 2130 lakhs higher by 98.14 % asagainst Rs. 1075 lakhs in the previous year;
Earnings per Share before and after Extraordinary Item Rs. 2.93;
Networth of the Company stood at Rs.173273 lakhs as against Rs. 171143 lakhsin the previous year.
HUMAN RESOURCES :
The Company recognizes that its people are the key to the success of the organizationand in meeting its business objectives. The Human Resources function endeavours to createa congenial work environment and synchronizes the working of all the departments of theorganization to accomplish their respective objectives which in turn helps the Company tobuild and achieve its goals and strategies. Employee relations during the year remainedcordial.
The Company had 269 employees on its payroll as on March 31 2016.
INTERNAL FINANCIAL CONTROLS :
The Company has in place adequate internal financial controls with reference to thefinancial statements. These are routinely tested and certified by the Statutory as well asInternal Auditors. Significant audit observations and follow-up action thereon arereported to the Audit and Compliance Committee.
Your Companys control system and procedures are regularly reviewed for relevanceand effectiveness and changed as per the needs of business environment.
Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the Internal Statutory andSecretarial Auditors and the reviews performed by the Management the Board is of theopinion that the Companys internal financial controls were adequate and effectiveduring the Financial Year 2015-2016.
DIRECTORS AND KEY MANAGERIAL PERSONNEL:
Mr. Arvind Kumar Joshi an Independent Director resigned from the Board of Directors ofthe Company effective April 29 2016. Your Directors place on record its sincereappreciation of the invaluable contribution made by Mr. Arvind Kumar Joshi to thedeliberations of the Board and the Committees of the Board of which he was a member duringhis tenure.
In accordance with the provisions of Section 152 (6) (e) of the Companies Act 2013 andthe Articles of Association of the Company Mr. Vyomesh M. Shah (DIN : 00009596) Directorof the Company who retires by rotation and being eligible offers himself forreappointment.
Based on the recommendations of the Nomination and Remuneration Committee Mr. HemantM. Shah and Mr. Vyomesh M. Shah were reappointed as Executive Chairman and ManagingDirector respectively for a period of five years each effective January 01 2017 toDecember 31 2021 by the Board of Directors in its meeting held on June 22 2016 subjectto the approval of the shareholders in the ensuing Annual General Meeting.
The Notice convening the ensuing Annual General Meeting includes the proposals forappointment / reappointment of Director/Executive Chairman/ Managing Director.
DECLARATION BY INDEPENDENT DIRECTORS :
Pursuant to the provisions of Section 149 (7) of the Companies Act 2013 the Companyhas received individual declarations from all the Independent Directors confirming thatthey meet the criteria of independence under Section 149 (6) of the said Act andRegulation 16 (1) (b) of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.
NO. OF MEETINGS OF THE BOARD OF DIRECTORS :
The Board of Directors met 4 times during the financial year ended March 31 2016 inaccordance with the provisions of the Companies Act 2013 and the Rules made thereunderand Regulation 17 (2) of of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015. During the year ended March 31 2016 the Independent Directors held aseparate meeting in compliance with the requirements of Schedule VI to the Companies Act2013 and Regulation 25 (3) of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015. For details kindly refer to the section on Corporate Governanceforming part of this Annual Report.
COMMITTEES OF THE BOARD
There are currently five Committees of the Board as under:
Audit and Compliance Committee
Corporate Social Responsibility Committee
Nomination and Remuneration Committee
Stakeholders Relationship Committee
Risk Management Committee
Details of the aforesaid Committees including their composition terms of reference andmeetings held during the year under review are provided in the section on CorporateGovernance which forms part of this Annual Report.
ANNUAL EVALUATION OF PERFORMANCE :
During the year under review the Board has carried out an evaluation of its ownperformance the directors individually as well as the evaluation of the working of itsCommittees of the Board. The evaluation of the Board and its Committees was based onobjective and tangible criteria including the composition performance of the Companyaccomplishment of long term strategic objectives blending of ethics and business and thedevelopment of management etc. The evaluation of individual director was based on theeffective contribution by the director concerned the commitment to the role includingcommitment of time for Board and Committee meetings and any other duties.
The performance evaluation of the Independent Directors was carried out by the entireBoard excluding the Director being evaluated. The performance of Non-Independent Directorsand the Chairman of the Company was carried out by the Independent Directors at their dulyconvened meeting.
POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION :
The Nomination and Remuneration Policy of the Company on Directors appointmentand remuneration including criteria for determining qualifications positive attributesindependence of a Director and other matters provided under Section 178 (3) of theCompanies Act 2013 and Regulation 19 (4) (Part D of Schedule II) of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 is appended as Annexure A to this Annual Report.
DIRECTORS RESPONSIBILITY STATEMENT :
Pursuant to sub-section (3) (c) of Section 134 (5) of the Companies Act 2013 inrelation to the audited financial statements of the Company for the year ended March 312016 the Directors of your Company to the best of their knowledge and belief and on thebasis of the information and explanations received by them hereby state and confirm that:
(i) in the preparation of the Annual Accounts for the year ended March 31 2016 theapplicable accounting standards read with the requirements under Schedule III to the saidAct have been followed alongwith proper explanation relating to material departures ifany;
(ii) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year on 31st March2016 and of the profit of the Company for the year ended on that date;
(iii) they have taken proper and suficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
(iv) the annual accounts have been prepared on a going concern basis;
(v) they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively; and
(vi) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and such systems were adequate and operating effectively.
SUBSIDIARIES JOINT VENTURE ENTITIES AND ASSOCIATE COMPANIES :
As on March 31 2016 the Company had 21 subsidiaries 7 joint venture entities and 5associate companies. There has been no change in the nature of business of the any of thesaid subsidiaries joint venture entities and associate companies.
During the year under review :
(i) Devkurpa Build Tech Limited ceased to be a wholly owned subsidiary and insteadbecame a subsidiary of the Company;
(ii) Citywood Builders Private Limited became a wholly owned subsidiary of the Company;
(iii) Sheshan Housing and Area Development Engineers Limited ceased to be a subsidiaryof the Company;
(iv) Yellowcity Builders Private Limited and Comral Realty Private Limited respectivelyceased to be associates of the Company.
A statement pursuant to Section 129 (3) of the Companies Act 2013 read with Rule 5 ofthe Companies (Accounts) Rules 2014 containing the salient features of the performanceand the financial statements of the subsidiaries joint venture entities and associatescompanies for the financial year ended March 31 2016 in the prescribed Form AOC 1 isappended to the consolidated financial statements as Schedule - I.
The Policy for determining material subsidiary under SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 as approved is posted on theCompanys website at the link:http://hubtown.co.in/admin/uploaddir/Policy%20on%20Subsidiaries%20.pdf .
In accordance with third proviso of Section 136(1) of the Companies Act 2013 theAnnual Report of the Company containing therein its standalone and the consolidatedfinancial statements has been placed on the website of the Company at the link:http://hubtown.co.in/admin/uploaddir/ Annual%20Report%20-%202015-2016.pdf .
Further as per fourth proviso of the said Section the audited annual accounts of eachof the subsidiary companies has also been placed on the website of the Company at thelink: http://hubtown.co.in/admin/uploaddir/All%20Subsidiaries-BS-2015(1).pdf.
The Company shall provide a copy of the annual accounts of its subsidiary companies tothe members of the Company and also to the members of subsidiary companies on theirrequest. The annual accounts of the subsidiary companies will also be available forinspection at the Registered Office of the Company between 11.00 a.m. and 1.00 p.m. on allworking days.
During the financial year ended March 31 2016 the Company was not required to appointan Independent Director of the Company on the Board of any of its non-listed Indiansubsidiary under Regulation 24 (1) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.
Additional information as required under Schedule III to the Companies Act 2013 inrespect of entities consolidated as subsidiaries/associates/joint ventures is furnished inNote 1 to the consolidated financial statements.
REPORT ON THE PERFORMANCE AND THE FINANCIAL POSITION OF SUBSIDIARIES ASSOCIATES ANDJOINT VENTURES :
As required under Section 129 of the Companies Act 2013 and SEBI Listing Regulationsthe consolidated financial statements have been prepared by the Company in accordance withthe applicable accounting standards and form part of this Annual Report. A statement onthe performance and the financial position of subsidiaries associates and joint venturescompanies included in the consolidated financial statements is appended in Form No. AOC 1 as Schedule I to the consolidated financial statements andhence not repeated here for the sake of brevity.
Statutory Auditors :
M/s. Dalal Doshi & Associates Chartered Accountants (Firm Registration No. :121773W) (DDA) were reappointed as Statutory Auditors of the Company to hold office fromthe conclusion of the 26th Annual General Meeting (AGM) held on September 25 2014 untilthe conclusion of the 29th AGM of the Company to be held in the year 2017 (subject toratification of their appointment by the members at every AGM held after the AGM held onSeptember 25 2014).
The Board in terms of Section 139 of the Companies Act 2013 on the recommendation ofthe Audit and Compliance Committee has recommended for the ratification of the membersthe appointment of DDA as Statutory Auditors from the conclusion of the ensuing AGM tillthe conclusion of the next AGM to be held in the year 2017.
The Company has received a certificate from the said Auditors to the effect that theirreappointment if made would be in accordance with the Companies Act 2013 and the Rulesframed thereunder and that they satisfy the criteria prescribed in Section 141 of theCompanies Act 2013.
As required under Regulation 33 (d) of the Listing Regulations the Statutory Auditorshave confirmed that they hold a valid certificate issued by the Peer Review Board of theInstitute of Chartered Accountants of India.
A resolution for ratification of the appointment of the said Auditors is included inthe Notice of Annual General Meeting for seeking approval of the members.
Further there have been no instances of fraud reported by the Auditors under Section143 (12) of the Companies Act 2013 and the Rules made thereunder either to the Company orto the Central Government.
Cost Auditors :
Based on the recommendation of the Audit and Compliance Committee the Board hasappointed M/s. D. C. Dave & Co. Cost Accountants (Firm No. : 000611) in place of M/s.N. I. Mehta & Co. Cost Accountants as Cost Auditors to conduct audit of the costrecords of the Company for the year ending March 31 2017 subject to the ratification ofthe remuneration payable to them by the members in the ensuing Annual General Meetingpursuant to Section 148 of the Companies Act 2013.
COST AUDIT REPORT :
The Cost Audit Report for the Financial Year 2015-2016 pursuant to the Companies (CostAccounting Records) Rules 2011 will be filed within the period stipulated under theCompanies Act 2013.
Secretarial Audit Report :
Pursuant to the provisions of Section 204 (3) of the Companies Act 2013 read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board ofDirectors has appointed M/s. Ashish Bhatt & Associates Practicing Company Secretaryto conduct the Secretarial Audit of the Company.
In terms of Section 204 (1) of the Companies Act 2013 the Report of the SecretarialAuditor on the Companys Secretarial Audit is appended to this Report as Annexure B. The said Report does not contain any qualifications orobservations or adverse remarks or disclaimers requiring explanation from the Board underSection 134 (3) of the Companies Act 2013.
AUDIT AND COMPLIANCE COMMITTEE :
As on March 31 2016 the Audit and Compliance Committee comprised of three IndependentDirectors namely Mr. Abhijit Datta as Chairman of the Committee Mr. Arvind Kumar Joshi(upto April 29 2016) and Mr. Sunil C. Shah and one Non-Independent Executive Director Mr. Vyomesh M. Shah.
Kindly refer to the section on Corporate Governance under the headingAudit and Compliance Committee for matters relating to constitution meetingsand functions of the said Committee.
AUDIT AND COMPLIANCE COMMITTEE RECOMMENDATIONS :
During the year under review all the recommendations put forth by the Audit andCompliance Committee were duly considered and accepted by the Board of Directors. Therewere no instances of non-acceptance of such recommendations.
AUDITORS REPORT AND AUDIT OBSERVATIONS :
The Statutory Auditors have : (i) stated an Emphasis of Matter and"Other Matters" and made certain observations in clauses (vii) (a) and (ix) ofthe Annexure referred to in their Report on the Standalone Financial Statements for theyear ended March 31 2016; (ii) stated an Emphasis of Matter and "OtherMatters" in their Report on the Consolidated Financial Statements for the year endedMarch 31 2016 and the response of your Directors thereto is as follows
Emphasis of Matter
In respect of clauses (a) (b) (c) (d) (e) (f) and (g) of the Auditors Reporton Standalone Financial Statements and in respect of clauses (a) (b) (c) (d) (e) (f)(g) and (j) of the Auditors Report on Consolidated Financial Statements therelevant Notes to the Standalone Financial Statements and the Consolidated FinancialStatements respectively are self explanatory and do not call for furtherclarification/elaboration.
Regarding Clause (h) of the Auditors Report on Standalone Financial Statementsand Consolidated Financial Statements respectively with respect to corporate socialresponsibility expense which is subject to cheque realization by the recipient trust theDirectors have to state that the recipient trust has informed the Company that it wasinadvertently and through oversight the cheque issued by the Company towards CSR expensewas not deposited in the bank account of the recipient trust.
Regarding clause (k) of the Auditors Report on the Consolidated FinancialStatements with respect to non-availability of consolidated financial statements of twosubsidiaries of the Company footnote (a) to Note 13 of the Consolidated FinancialStatements is self explanatory.
Regarding clause (l) of the Auditors Report on the Consolidated FinancialStatements with respect to non-availability of financial statements of one associate ofthe Company the Directors have to state that the investment by the Company in the saidassociate is purely temporary in nature and further the Company does not exert control onthe management of the said associate.
In respect of clauses (a) and (b) of the Auditors Report on the standalone financialstatements the Auditors observations thereon and Note 12 (footnote e) are selfexplanatory and do not call for further information/clarification.
As regards the Auditors observations in clauses (vii) (a) and (ix) of theAnnexure referred to in their Report on the Standalone Financial Statements for the yearended March 31 2016 the Directotrs have to state that :
"The delays caused by the Company in making timely payment of the statutory duesand payment of principal and interest on its borrowings have been due to prolongedrecession in the real estate industry owing to slowdown in demand inordinate delays inapproval process inflationary pressures liquidity crunch and costly debt. The Company isalso facing lack of adequate sources of finance to fund development of its real estateprojects resulting in delayed realisations from its customers and lower availability offunds to discharge its liabilities. The Company is exploring alternative sources offinance to generate adequate cash inflows for meeting these obligations and to overcomethis temporary liquidity shortage and is hopeful that these eflorts will yield fruitfulresults."
VIGIL MECHANISM :
Pursuant to Section 177 (9) and (10) of the Companies Act 2013 and Regulation 22 ofSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Company hasestablished a Whistle Blower Policy as a vigil mechanism for Directors and employees toreport their genuine concerns details of which have been given in the CorporateGovernance Report annexed to this Annual Report. The Whistle Blower Policy has beenuploaded on the Company website at the link:http://hubtown.co.in/admin/uploaddir/REVSIED%20WHISTLE%20BLOWER%20POLICY%2029.05.2014%20-%20Copy.pdf.
Risk evaluation and management is an ongoing process within the organization. The Boardof Directors of the Company has framed a Risk Management Policy to identifyassess monitor and mitigate various risks to key business objectives. Major risksidentified by the functions are systematically addressed through mitigating actions on acontinuing basis.
EXTRACT OF ANNUAL RETURN :
Pursuant to the provisions of Section 134 (3) (a) of the Companies Act 2013 theextract of the Annual Return for the Financial Year ended March 31 2016 made under theprovisions of Section 92 (3) of the said Act in Form No. MGT 9 is appendedas Annexure C to this Report.
MATERIAL CHANGES AND COMMITMENTS :
No material changes or commitments which could affect the financial position of theCompany have occurred between the end of the financial year of the Company to which thefinancial statements relate and the date of this Report other than those disclosed inthis Report.
During the year under review the Company has not accepted any public deposits and assuch no amount on account of principal or interest on public deposits was outstanding ason the date of the balance sheet.
PARTICULARS OF LOANS INVESTMENTS OR GUARANTEES UNDER SECTION 186 OF THE COMPANIES ACT2013
The details of the loans given investments made guarantees given and securitiesprovided under Section 186 of the Companies Act 2013 have been provided in the Notes tothe Financial Statements.
CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES :
All contracts / arrangements / transactions with related parties that were entered intoby the Company during the year under review were on an arms length basis and in theordinary course of business. There were no materially significant related partytransactions with the Companys Promoters Directors Key Managerial personnel ortheir relatives which could have had a potential confiict with the interest of the Companyat large. All related party transactions are placed before the Audit Committee and also tothe Board for approval.
Attention of the members is drawn to Note 33 to the standalone financial statements andNote 35 to the consolidated financial statements which sets out related party disclosures.
The particulars of a material contract with a related party entered into by the Companyduring the year under review are furnished in Form No. AOC-2 which is appended as AnnexureD.
The Policy on materiality of related party transactions and dealing with related partytransactions as approved by the Board is uploaded on the Companys website at thelink:http://hubtown.co.in/admin/uploaddir/Policy%20on%20Related%20Party%20Transactions.pdf.
CONSOLIDATED FINANCIAL STATEMENTS :
The Consolidated Financial Statements of the Company which have been prepared inaccordance with the relevant Accounting Standards (AS) viz. AS 21 Consolidated Financial Statements AS 23 Accounting forInvestments in Associates and AS 27 Financial Reporting of interests inJoint Ventures issued by the Institute of Chartered Accountants of India form partof this Annual Report.
CODE OF CONDUCT :
As prescribed under Part D of Schedule V read with Regulation 17 (5) of theListing Regulations a declaration signed by the Managing Director afirming compliancewith the Code of Conduct by the Directors and Senior Management Personnel of the Companyfor the Financial Year 2015-2016 is annexed to and forms part of the Corporate GovernanceReport.
DISCLOSURE OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY REGULATORS OR COURTS ORTRIBUNAL
During the year under review there were no significant or material orders passed byany regulatory / statutory authorities or courts / tribunals against the Company impactingits going concern status and operations in future.
CORPORATE GOVERNANCE :
The Report on Corporate Governance as stipulated under Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 forms part ofthe Annual Report. The Certificate from a practising company secretary confirmingcompliance with the conditions of Corporate Governance as stipulated under Schedule V tothe aforementioned Listing Regulations is annexed to and forms part of the CorporateGovernance Report.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013 :
The Company has in place an Anti-Sexual Harassment Policy in line with the requirementsof The Sexual Harassment of Women at Work Place (Prevention Prohibition andRedressal) Act 2013. An Internal Complaints Committee has been set up to redresscomplaints received regarding sexual harassment. The Company afirms that during the yearunder review no cases were filed /reported under the provisions of the said Act.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO :
The nature of operations of the Company does not require disclosure of particularsrelating to conservation of energy and technology absorption as prescribed under Section134 (3) (m) of the Companies Act 2013 read with Rule 8 (3) of the Companies (Accounts)Rules 2014. During the year under review the Company had Nil foreignexchange earnings and had incurred an expenditure of Rs. 134 lakhs in foreign exchange.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES:
The information required to be disclosed in the Directors Report pursuant toSection 197 (12) of the Companies Act 2013 read with Rule 5 (1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is provided in AnnexureE to this Report.
During the Financial Year 2015-2016 5 (five) persons employed throughout the financialyear were in receipt of remuneration of not less than Rs. 60 lakhs per annum and 1 (one)person employed for part of the financial year was in receipt of remuneration of not lessthan Rs. 5 lakhs per month. The information as per Rule 5 (2) & (3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of theemployees of the Company forms part of this Annual Report. However as per first provisoto Section 136 (1) of the Act and second proviso to Rule 5 (2) of the said Rules theAnnual Report and the Financial Statements are being sent to the members of the Companyexcluding the statement of particulars of employees under Rule 5 (2) & (3) of the saidRules. Any member interested in obtaining a copy of the said statement may write to theCompany Secretary at the Registered Office of the Company. The said statement would alsobe available for inspection by the members at the Registered Office of the Company duringbusiness hours on working days upto the date of the ensuing Annual General Meeting.
PAYMENT OF REMUNERATION/COMMISSION TO EXECUTIVE DIRECTORS FROM SUBSIDIARY COMPANIES
During the year under review neither the Executive Chairman nor the Managing Directorwere in receipt of any remuneration/commission from any of the subsidiary companies of theCompany.
CORPORATE SOCIAL RESPONSIBILITY (CSR) :
The Company has constituted a Corporate Social Responsibility Committee in accordancewith the provisions of Section 135 of the Companies Act 2013 read with the Companies(Corporate Social Responsibility Policy) Rules 2014 (the Rules). The details requiredunder the Companies (Corporate Social Responsibility Policy) Rules 2014 are given in theCSR Report appended as Annexure F to this Report. Further the CSRPolicy has been uploaded on the Company website at the link :http://hubtown.co.in/admin/uploaddir/HUBTOWN%20CSR%20POLICY.pdf.
All the insurable interests of your Company including inventories buildings and otherassets are adequately insured.
CEO AND CFO CERTIFICATION :
A certificate from the Managing Director and the Chief Financial Officer pursuant toRegulation 17 (8) of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 for the year under review was placed before the Board of Directors of the Company atits meeting held on June 22 2016 which is annexed to and forms part of the CorporateGovernance Report.
APPRECIATION AND ACKNOWLEDGEMENTS :
Your Directors place on record their deep appreciation to employees at all levels fortheir hard work dedication and commitment. The Directors also take this opportunity tothank all Investors Suppliers Vendors Banks Financial Institutions BusinessAssociates Contractors Government and Regulatory Authorities and Stock Exchanges fortheir continued support during the year.
Your Directors would also like to thank the members for reposing their confidence andfaith in the Company and its management.
Certain statements made in the Directors Report and the Management Discussion andAnalysis may constitute forward looking statements within the meaning ofapplicable securities laws and regulations. Actual results could differ from thoseexpressed or implied. Several factors could make significant difference to theCompanys operations that include labour and material availability and pricescyclical demand and pricing in the Companys principal markets changes in interestrates changes in government regulations tax regimes economic development within Indiaand other incidental factors. The Company does not undertake any obligation to publiclyupdate any forward looking statements whether as a result of new information futureevents or otherwise.
| ||For and on behalf of the Board |
| ||Hemant M. Shah |
| ||Executive Chairman |
|Mumbai June 22 2016. ||DIN : 00009659 |
REVISED NOMINATION AND REMUNERATION POLICY
[Efiective from December 1 2015]
1. PREAMBLE :
i. Pursuant to Section 178 (2) and (3) of the Companies Act 2013 (the Act) and PartA of Part D of Schedule II to Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 (SEBI ListingRegulations 2015) provides inter-alia that :
The Nomination and Remuneration Committee shall formulate the criteria fordetermining qualifications positive attributes and independence of a director andrecommend to the Board of Directors a policy relating to the remuneration of thedirectors key managerial personnel and other employees.
The Nomination and Remuneration Committee shall identify persons who arequalified to become directors and who may be appointed in senior management in accordancewith the criteria laid down and recommend to the Board of Directors their appointment andremoval and shall carry out evaluation of every directors performance.
ii. Therefore in order to ensure compliance with the aforesaid provisions of the Actand SEBI Listing Regulations 2015 the Nomination and Remuneration Committee (N&RC)of the Board of Directors of Hubtown Limited has formulated this Nomination andRemuneration Policy.
iii. This Policy shall replace the existing Nomination and Remuneration Policyrecommended by Nomination and Remuneration Committee and approved by the Board ofDirectors in its meeting held on February 12 2015).
2. GUIDING PRINCIPLES :
The objectives of this Policy is to ensure that :
i. The level and composition of remuneration is reasonable and suficient to attractretain and motivate Directors of the quality required to run the Company successfully;
ii. Relationship of remuneration to performance is clear and meets appropriateperformance benchmark; and
iii. Remuneration to Directors Key Managerial Personnel and Senior management involvesa balance between fixed and incentive pay reflecting short and long term performanceobjectives appropriate to the working of the Company and its goal.
3. DEFINITIONS :
i. Board means the Board of Directors of the Company;
ii. Company means Hubtown Limited;
iii. 'Executive Directors shall mean the Wholetime Director and theManaging Director of the Company;
iv. Independent Director means a director referred to in Section 149(6) of the Companies Act 2013;
v. Key Managerial Personnel means
Officer Chief Executive or the Managing Director or the manager;
Chief Financial Officer ; and
Such other officer as may be prescribed
vi. Nomination and Remuneration Committee shall mean a Committee ofBoard of Directors of the Company constituted in accordance with the provisions ofSection 178 of the Companies Act 2013 and Regulation 19 (1) of SEBI Listing Regulations2015;
vii. Policy or This Policy means the Nomination andRemuneration Policy;
viii. SEBI Listing Regulations 2015 shall mean Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015;
ix. Senior Management means personnel of the Company who are membersof its core management team excluding the Board of Directors. This would include allmembers of management one level below the Executive Directors including all functionalheads. Words and Expressions used in this Policy but not defined shall have the samemeaning as given in the Companies Act 2013 read with the Rules made thereunder and SEBIListing Regulations 2015 as may be amended from time to time.
4. TERMS OF REFERENCE OF THE NOMINATION AND REMUNERATION COMMITTEE :
The terms of reference of the Nomination and Remuneration Committee (N&RC) are asunder :
i. to identify persons who are qualified to become directors and who may be appointedin senior management in accordance with the criteria laid down in this Policy. recommendto the Board their appointment and removal;
ii. to carry out evaluation of every directors performance;
iii. to formulate the criteria for determining the qualifications positive attributesand independence of a director and recommend to the Board a policy relating to theremuneration for the directors;
iv. to formulate the criteria for evaluation of Independent Directors and the Board;
v. to devise a policy on Board diversity;
vi. to recommend/review the remuneration of the Wholetime Director(s) and the ManagingDirector based on their performance and defined assessment criteria;
vii. to ensure that the level and composition of remuneration is reasonable andsuficient and the relationship of remuneration to performance is clear and meetsappropriate performance benchmark;
viii. to assist the Board in ensuring that plans are in place for orderly successionfor appointments to the Board and to senior management;
ix. to carry out any other functions as may be mandated by the Board from time to timeand/or enforced by any statutory notification amendment or modification as may beapplicable; and
x. to carry out such other functions as may be necessary or appropriate for theperformance of its duties.
5. MEMBERSHIP OF THE N&RC COMMITTEE :
i. The Committee shall consist of atleast 3 (three) Directors all of whom shall beNon-Executive Directors and atleast half of such Directors shall be Independent Directors;
ii. The Board shall reconstitute the Committee as and when required to comply with theprovisions of the Companies Act 2013 and applicable statutory requirement;
iii. Minimum 2 (two) members shall constitute a quorum for the Committee meeting;
iv. Membership of the Committee shall be disclosed in the Annual Report;
v. Terms of the Committee shall continue unless terminated by the Board.
vi. The Chairperson of the Company may be appointed as a member of the Company butshall not chair such Committee.
6. CHAIRMAN OF THE N&RC COMMITTEE :
i. The Chairman of the Committee shall be an Independent Director;
ii. In the absence of the Chairman the members of the Committee present at the meetingshall choose one amongst them to act as a Chairman;
iii. The Chairman of the Committee could be present at the Annual General Meeting ormay nominate some other member to answer the shareholders queries.
7. FREQUENCY OF MEETINGS :
The meeting of the Committee shall be held at such regular intervals as may berequired.
8. N&RC COMMITTEE MEMBERS INTEREST :
i. A member of the Committee is not entitled to be present when his or her ownremuneration is being discussed at a meeting or when his or her performance is beingevaluated; and
ii. The Committee may invite such Executives of the Company as it considersappropriate to be present at the meetings of the Committee.
9. SECRETARY OF N&RC COMMITTEE :
The Company Secretary of the Company shall act as Secretary of the Committee.
10. VOTING AT N&RC MEETINGS:
i. Matters arising for determination at Committee meetings shall be decided by amajority of votes of members present and voting and any such decision shall for allpurposes be deemed a decision of the Committee;
ii. In the case of equality of votes the Chairman of the meeting shall have a castingvote.
11. APPOINTMENT AND REMOVAL OF EXECUTIVE AND NONfiEXECUTIVE / INDEPENDENT DIRECTORSKEY MANAGERIAL PERSONNEL (KMP) AND SENIOR MANAGEMENT PERSONNEL :
Appointment criteria and qualifications :
i. The Committee shall identify and ascertain the integrity qualification expertiseand experience of the person for appointment as Director KMP or at Senior Managementlevel and recommend to the Board his/her appointment as per the Companys Policy;
ii. A person should possess adequate qualification expertise and experience for theposition he/she is being considered for appointment The Committee shall have thediscretion to decide whether qualification expertise and experience possessed by a personis/are suficient / satisfactory for the concerned position; and
iii. The Company shall not appoint or continue the employment of any person as ManagingDirector/Wholetime Director who has attained the age of seventy years. Provided that theterm of the person holding this position may be extended beyond the age of seventy yearswith the approval of the shareholders by a special resolution based on the explanatorystatement annexed to the notice for such motion indicating justification for extension ofappointment beyond seventy years.
Tenure of Office :
The Company shall appoint or reappoint any person as its Managing Director or WholetimeDirector for a term not exceeding 5 (five) years at a time. No reappointment shall be madeearlier than one year before the expiry of the term.
i. An Independent Director shall hold office for a term upto five consecutive years onthe Board of the Company and will be eligible for reappointment on passing of a specialresolution by the Company and disclosure of such appointment in the Boards Report;
ii. An Independent Directors shall not be liable to retire by rotation.
iii. No Independent Director shall hold office for more than two consecutive terms butsuch independent Director shall be eligible for appointment after the expiry of threeyears of ceasing to be an Independent Director; Provided that the Independent Directorshall not during the said period of three years be appointed in or be associated withthe Company in any capacity either directly or indirectly; and
iv. At the time of appointment of an Independent Director the Committee shall ensurethat the no. of Boards on which such Independent Director serves is restricted to 7(seven) listed companies as an Independent Director and three listed companies as anIndependent Director in case such person is serving as a Wholetime Director of a listedcompany.
i. The Committee shall carry out evaluation of performance of each Director on a yearlybasis;
ii. The Committee shall monitor and review Board evaluation framework conduct anassessment of the performance of the Board each Board Committee the IndependentDirectors and the Chairperson of the Board against criteria determined and approved by theCommittee;
iii. The performance evaluation of Independent Directors shall be done by the entireBoard of Directors on the basis of recommendations of the Committee (excluding theDirector being evaluated);
iv. The Independent Directors shall review the performance of Non-Independent Directorsand the Board as a whole;
v. The Independent Directors shall review the performance of the Chairperson of theCompany taking into account the view of the Committee and the Non-Executive Directors;and
vi. The criteria for performance evaluation is given in Annexure I. Howeverthese criteria are only suggestive and the Board /Directors may consider such othercriteria as it/they may deem necessary for effective evaluation of performance.
Due to any reason for any disqualification mentioned in the Companies Act 2013theRules made thereunder or under any other applicable Act Rules and Regulations theCommittee may recommend to the Board with reasons recorded in writing the removal of aDirector KMP or Senior Management subject to the provisions and compliance of the saidAct Rules and Regulations and the Policy of the Company.
The Director KMP and Senior Management shall retire as per the applicable provisionsof the Companies Act 2013 and the prevailing policy of the Company. The Board will havethe discretion to retain the Director KMP and the Senior Management Personnel in the sameposition / remuneration or otherwise even after attaining the retirement age for thebenefit of the Company.
12. POLICY RELATING TO THE REMUNERATION OF EXECUTIVE AND NONfiEXECUTIVE / INDEPENDENTDIRECTORS KMP AND SENIOR MANAGEMENT PERSONNEL :
Remuneration Policy for Executive Directors :
i. The remuneration and commission to be paid to the Executive Directors shall be asper the statutory provisions of the Companies Act 2013 and the Rules made thereunder forthe time being in force;
ii. Payment of remuneration to the Executive Directors is governed by the respectiveagreements executed between each of such Executive Directors and the Company;
iii. The remuneration / commission to be paid to the Executive Directors will bedetermined by the Committee and recommended to the Board for approval.
iv. The break-up of the pay scale and the quantum of perquisites and allowances shallbe decided by the Committee;
v. The remuneration / commission etc. shall be subject to prior/post approval of theshareholders of the Company and the Central Government wherever required;
vi. Increments to the existing remuneration/compensation structure may be recommendedby the Committee to the Board which should be within the time scale approved by theshareholders. The effective dates of increments shall be at the discretion of the Board;
vii. If in any financial year the Company has no profits or its profits areinadequate the Company shall pay remuneration to its Managerial Person in accordance withthe provisions of Schedule V to the said Act and if it is not able to comply with suchprovision with the prior approval of the Central Government;
viii. If any Executive Director draws or receives directly or indirectly by way ofremuneration any such sums in excess of the limits prescribed under the Companies Act2013 or without the prior sanction of the Central Government where required he/she shallrefund such sums to the Company and until such sum is refunded hold it in trust for theCompany. The Company shall not waive the recovery of such sum refundable to it unlesspermitted by the Central Government.
Remuneration Policy for Non-Executive / Independent Directors :
i. The remuneration and commission to be paid to the Non-Executive / IndependentDirectors shall be in accordance with the statutory provisions of the Companies Act 2013and the Rules made thereunder for the time being in force;
ii. The Non-Executive/Independent Directors are paid remuneration by way of fees forattending the meeting of the Board/Committee thereof. Provided that the amount of suchfees shall not exceed the maximum amount as provided in the Companies Act 2013 permeeting of the Board/Committee or such amount as may be prescribed by the CentralGovernment from time to time;
iii. The commission may be paid within the monetary limits approved by theshareholders subject to the limits not exceeding 1 % of the net profit of the Companycomputed as per the applicable provisions of the Companies Act 2013 and
iv. An Independent Director shall not be entitled to any stock option of the Company.
The overall managerial remuneration shall not exceed 11 % (eleven) percent of the netprofit of the Company computed in the manner laid down in Section 198 of the Act.
Remuneration for KMP Senior Managerial Personnel and Other Employees:
i. This Policy aims at attracting retaining and motivating high caliber talent andensures equity fairness and consistency in rewarding the employees.
ii. The performance of the individual as well as that of the Company forms the basisof this Policy.
iii. The KMP Senior Management Personnel and other employees of the Company shall bepaid monthly remuneration as per the Companys HR Policies and/or as may be approvedby the Committee;
iv. The salary structure of the employees including KMP and Senior Management comprisesof basic salary perquisites allowances and performance incentive. The salary involves abalance between fixed and variable pay which reflects the performance objective of theindividual as against the earmarked Key Performance Indicator and the strategic objectiveand the performance of the Company.
v. The components of total remuneration vary for different grades of employees and arebased on the qualifications and experience of the employee responsibilities handled andthe individual performance.
vi. In case any of the relevant Statute/Rules/Regulations require that the remunerationof KMPs Senior Management or other employees of the Company is to be specificallyapproved by the Committee and/or the Board of Directors then such approval(s) shallaccordingly be obtained.
13. FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS :
The Company shall familiarize the Independent Directors with the Company its businessmodel their roles rights duties and responsibilities in the Company the nature of theindustry in which the Company operates through various programmes.
The details of such programmes shall be disclosed on the Companys website and aweb link thereto shall also be given in the Annual Report.
14. INSURANCE POLICY :
Where any insurance policy is taken by the Company on behalf of the ExecutiveDirectors Non-Executive and Independent Directors KMP Senior Management Personnel andany other employees of the Company the premium paid on such insurance shall not betreated as part of the remuneration payable to any such personnel. Provided that if suchperson is proved to be guilty the premium paid on such insurance shall be treated as partof the remuneration.
15. IMPLEMENTATION OF THE POLICY :
The N&RC Committee may issue guidelines procedures formats reporting mechanismand manuals as supplement(s) to this Policy and for better implementation thereof.
16. DELEGATION OF AUTHORITY :
The Committee may delegate any of its powers to one or more of its members as may bedeemed necessary for proper and expeditious implementation.
17. DEVIATIONS FROM THE POLICY :
Deviations from elements of this Policy in extraordinary circumstances when deemednecessary in the interests of the Company shall be made if there are specific reason to doso in an individual case.
18. EXTERNAL ASSISTANCE :
The Committee may in its sole discretion seek the advice of externalexperts/consultants at the Companys expense for enabling it to discharge its dutiesand responsibilities.
19. DISCLOSURE OF THE POLICY:
This Policy and the evaluation criteria shall be uploaded on the Companys websiteand be also disclosed in the Annual Report as part of the Boards Report therein.
20. AMENDMENTS TO THE POLICY :
This Policy is based on the requirements of the Companies Act 2013 read with the Rulesmade thereunder and SEBI Listing Regulations 2015. In case of any amendment(s)clarification(s) circular(s) etc. issued by the relevant authorities not beingconsistent with the provisions of this Policy then such amendment(s) clarification(s)circular(s) etc. shall prevail upon the provisions hereunder and this Policy shall standamended accordingly from the effective date stated under such amendment(s) The provisionsin this Policy would then be modified in due course to make it/them consistent with law.
SUCCESSION PLAN FOR APPOINTMENT TO THE BOARD AND SENIOR MANAGEMENT
1. INTRODUCTION :
Regulation 17 (4) of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 (the Listing Regulations) provides that the Board of every listedcompany shall satisfy itself that plans are in place for orderly succession forappointment to the Board of Director and Senior Management. Regulation 16 (1) (d) of theListing Regulations defines Senior Management to mean officers /personnel ofthe listed entity who are members of its core management and normally this shall compriseall members of the management one level below the executive directors including allfunctional heads.
2. OBJECTIVE :
The objective of this Policy is to make a plan for orderly succession for appointmentto the Board and the Senior Management.
3. PROCESS :
I. Board Level Appointment(s) :
The Nomination and Remuneration Committee of the Board of Directors of the Companyshall identify suitable persons from among the existing top management or from theexternal sources to fill up the vacancy at the Board level. The appointment of such personat the Board level shall be in accordance with the applicable provisions of the CompaniesAct 2013 and the Rules made thereunder and the terms of Corporate Governance under theListing Regulations.
II. Senior Management Level Appointment :
The vacancy at Senior Management Level shall be filled up by the Chairman or theManaging Director as the case may be in line with the HR Policy adopted by the managementkeeping in view the Companys mission vision values goals and objectives.
4. REVIEW OF THE POLICY :
The Board shall review the Succession Policy periodically and if required will makesuitable changes keeping in view the regulatory changes or changes in thebusiness/industry norms.
ANNEXURE - I
PERFORMANCE EVALUATION CRITERIA
1. Section 178 (2) of the Companies Act 2013 stipulates that the Nomination andRemuneration Committee of Directors shall carry out evaluation of every Directorsperformance.
2. Para A of Part D of Schedule II to SEBI Listing Regulations2015 provides that the Nomination and Remuneration Committee shall formulate criteria forevaluation of Independent Directors and the Board.
3. Pursuant to Regulation 25 (3) and (4) of SEBI Listing Regulations 2015 theIndependent Directors shall hold atleast one meeting in a year without the presence ofnon-independent directors and members of the management to inter-alia : i. Review theperformance of the non-independent directors and the Board as a whole; ii. Review theperformance of the Chairperson of the Company taking into account the view of theExecutive Directors and Non-Executive Directors; and iii. Assess the quality quantity andtimeliness of the flow of information between the Company management and the Board that isnecessary for the Board to effectively and reasonable perform their duties.
4. Pursuant to Regulation 17 (10) of SEBI Listing Regulations 2015 the performanceevaluation of the Independent Directors shall be done by the entire Board excluding theDirector being evaluated.
5. Section 134 (3) (p) of the Companies Act 2013 provides that there shall be attachedto the Boards Report a statement indicating the manner in which formal annualevaluation has been made by the Board of its own performance and that of its Committeesand individual Directors.
6. The assessment criteria for determining the effectiveness of Board / Directorsperformance is given below. However these criteria are only suggestive / illustrative andthe Board/ Directors may consider such other criteria as they may deem necessary foreffective evaluation of performance.
BOARD OF DIRECTORS :
3. Contribution to achievement of corporate objectives.
4. Contribution to robust and effective risk management.
5. Communication of expectations and concerns clearly.
6. Assuring appropriate Board size composition independence structure.
7. Timely resolution of issues at meetings.
8. Identify monitor and mitigate significant corporate risks.
9. Efiective meetings.
10. Companys approach to Corporate Governance.
11. Clearly defining roles and monitoring activities of Committees.
12. Review of Companys ethical conduct.
13. Assess policies structures and procedures.
14. Communication of the Board with the management team key managerial personnel andother employees.
15. Regular monitoring of corporate results against projections.
17. Review and approval of strategic operational plans objectives and budgets.
18. Boards relationships inside and outside the boardroom.
19. Boards handling of crisis or problems.
20. Adequacy and quality of feedback to the management on its requirements.
COMMITTEE OF BOARD OF DIRECTORS :
1. Suitability of matters reserved for the Committee(s).
2. Diversity of experiences backgrounds and appropriate composition.
3. Committee monitors compliance with corporate governance norms law regulations andguidelines.
4. Communication of the Committee(s) with the management team key management personneland other employees.
5. Committee demonstrates integrity credibility trustworthiness willingness toactively participate ability to constructively handle confiict inter- personal skillsand proactiveness.
6. Committee dedicates appropriate time and resources to execute its responsibilities.
7. Committee meetings are conducted in an effective manner with time being spentprimarily on significant issues.
8. The quality and timeliness of the flow of information to the Committee.
9. Adequacy and quality of feedback by the Committee(s) to the management on itsrequirements.
NON-EXECUTIVE DIRECTORS :
1. Contribution to corporate leadership and stewardship.
2. Commercial and business acumen.
3. Familiarity with the Companys operations and the industry in which the Companyoperates.
4. Contribution to achievement of corporate objectives.
5. Constructive contribution to resolution of issues at meetings.
6. Promotion of the Companys interest externally.
7. Interpersonal relationship with other Directors and management.
8. Level of ethical awareness
9. Willingness to devote necessary time including attendance at meetings extent ofpreparedness for meetings willingness to participate in Committee work.
10. Efiective and proactive follow-up on any areas of concern.
11. Updated on the latest developments in areas such as corporate governance frameworkand financial reporting the industry and market conditions.
INDEPENDENT DIRECTORS (ID) :
1. Level of preparedness for the meetings of the Board / Committee.
2. Willingness to devote time and eflort to understand the Company and its businessmodel.
3. Quality and value of their contribution to the Board / Committee deliberations.
4. Attendance at the meetings of the Board / Committee(s) of which he/she is a member.
5. Helps in bringing an independent judgment to bear on the Boards deliberations.
6. Relationship with fellow Board members. the management team key managementpersonnel and other employees.
7. Knowledge and understanding of current industry and market conditions.
8. Efiective and proactive follow-up on any areas of concern.
9. Refrains from any action that would lead to loss of his / her independence.
10. Participates constructively and actively in the Committees of the Board of whichhe/she is a Chairperson or member.
11. Exercises his / her responsibilities in a bonafide manner in the interest of theCompany.
12. Devotes suficient time and attention to his / her professional obligations forinformed and balanced decision making.
EXECUTIVE DIRECTORS :
1. Actively manages shareholder board management and employee relationships andinterests.
2. Meets with the potential investors equity and debt capital.
3. Manages shareholder meetings effectively and promotes a sense of participation inall shareholders and shareholder confidence in the Board.
4. Promotes effective participation of all board members in the decision makingprocess.
5. Demonstrates effective leadership of the Board .
6. Takes action correct deficiencies / short comings noted.
7. Provides opportunities to the Board members to raise issues and express concerns onsignificant matters.
8. Relationship and communication within the Board is constructive.