Your Directors are pleased to present the 97th Annual Report and the Audited Accountsfor the year ended 31st March 2017.
1. Financial Highlights
| ||1st April 2016 to 31st March 2017 ||1st April 2015 to 31st March 2016 |
| ||Rs In Crores ||Rs In Crores |
|Gross Sales and Other Operating Income ||4936.05 ||4604.36 |
|Net Sales and Other Operating Income ||4531.05 ||4245.52 |
|Profit Before Interest Depreciation and Tax ||730.69 ||579.98 |
|Less: Depreciation ||69.49 ||67.72 |
|Profit Before Interest and Tax ||661.20 ||512.26 |
|Add: Other Income ||98.22 ||27.35 |
|Profit Before Tax ||759.42 ||539.61 |
|Exceptional Item- Profit on sale of land || ||535.34 |
|Profit Before Tax ||759.42 ||1074.95 |
|Less: Tax (including deferred tax) ||253.48 ||176.10 |
|Profit After Tax ||505.94 ||898.85 |
|Other Comprehensive Income (Net of tax) ||(4.73) ||(4.93) |
|Total Comprehensive Income for the year ||501.21 ||893.92 |
The Directors recommend for consideration of the Members a normal dividend of Rs 2.50per share (250%) and a special dividend of Rs 0.50 per share (50%) thus aggregating to atotal dividend of Rs 3.00 per share (300%) of the face value of Rs 1 each for the year.
This compares with a normal dividend of Rs 1.80 per share (180%) and a special dividendof Rs 1.25 per share (125%) thus aggregating to a total dividend of Rs 3.05 per share(305%) of the face value of Rs 1 each declared last year.
MANAGEMENT DISCUSSION AND ANALYSIS
Kansai Nerolac Paints Limited (KNPL) has come a long way since first being establishedas Gahagan Paint & Varnish Company Limited in 1920. Kansai Nerolac Paints Limited(KNPL) is a subsidiary of Kansai Paint Co. Ltd Japan.
The Company is in the business of paints and caters to customers in Businesses Segmentssuch as Decorative Automotive Auto Refinish Wood Coatings General IndustrialPerformance Coatings and Powder Coatings. The Company has international operations inNepal and Sri Lanka through Joint Ventures with Kansai Nepal and Capital Holdings MaharajaGroup respectively.
KNPL is the market leader in the Industrial Paints Market. It takes great pride inbeing the vendor of choice to the major automotive companies operating in India as well asmajor Industrial houses. KNPL has been able to achieve this due to its relentless focus oncustomer satisfaction built on superior coating systems and leveraging global technology.
In the Decorative Paints segment as well KNPL is well known for its many innovationsin products service and branding as it builds on its strong brand equity built over thedecades.
KNPL has four geographically spread manufacturing facilities working round the clock toproduce paint of the highest quality and need located at Lote in Maharashtra Bawal inHaryana Jainpur in UP and Hosur in Tamil Nadu. To boost the production capability KNPLis creating new production facilities at Saykha in Gujarat Amritsar in Punjab andVishakhapatnam in Andhra Pradesh. The new state of the art plants built using modernproduction technologies will strengthen the reach and capability of the Company thushelping KNPL to serve its customers in both the Industrial and Decorative divisions in theyear ahead.
KNPL prides itself to be at the forefront of New Product Innovations and has a stateof the art R&D centre in Mumbai. A new R&D centre is set to open at Vashi inNavi Mumbai which will help KNP maintain its edge in innovation.
KNPL has always considered IT as strategic. Since 2013 the Company has been makingrapid progress on driving the digitalization agenda across the Company bringing with itbenefits in customer responsiveness efficiency speed and productivity. This year theentire decorative sales force has been migrated to the mobility platform of SAP thusmaking them more agile in the market.
With a tagline of Healthy Home Paints KNPL demonstrates its commitment toenvironmental preservation and sustainable manufacturing. The Company commits resourcestowards ensuring high standards of Environment Health and Safety (EHS) across itsmanufacturing facilities. The Company publishes an Annual Sustainability Report everyyear.
Various customer awards as well as industry awards bestowed on KNPL serves to motivateus to strive even harder to ensure that our products solutions and operations offerunique value to our esteemed customers and our stakeholders.
[B] INDUSTRY PROGRESS
2016-17 was a year with moderate growth for the paint industry. Growth picked up paceduring the second quarter of this fiscal owing to a good monsoon and a positiveinvestment climate in the country. However due to the Demonetization activity undertakenby the government pace of growth was impacted in both the Decorative and IndustrialMarkets in the third and fourth quarter.
Post demonetization the Automotive Industry is gradually seeing a revival. Consumerdemand has also picked up signalling a stabilization of the economy.
The first half of the year saw a deflationary trend which lead to a reduction in rawmaterial prices. From the second half of the year the industry has been witnessing aninflationary trend. This trend is expected to accelerate in the new financial year furtherputting pressure on costs.
The rupee remained volatile oscillating between frequent highs and lows due to anuncertain global landscape and changing conditions in the domestic economy. Thisvolatility is expected to continue to create challenges for the industry.
Going forward GST is expected to impact the industry. GDP is growing at a steady paceand will outpace major economies of the world. Policy decisions taken by the government inrecent times to boost consumer and infrastructure demand are expected to impact theindustry positively.
[C] MARKETING OUTLOOK
Marketing is an integral part of the Decorative paints business which aims to make theconsumer aware of products available as well as attracting them to the value propositionthat KNPL offers Healthy Home Paints.
This year saw many media campaigns across marketing channels to strengthen the NerolacBrand. Television campaigns across channels and products were run periodically throughoutthe year. Regional advertisements were run during important events in West Bengal. Focuswas put on products that are important to a particular region.
Excel Mica Marble India's first acrylic emulsion with particles and marble boosters anew premium offering which is targeted at consumers who want their exterior paint to lastlong and provide additional protective and aesthetic properties was well received in themarket. Pan India as well as regional marketing campaigns was conducted to effectivelycommunicate the Product Value proposition.
KNPL showcased its innovation capabilities by launching a first of its kind productReadyMix (Primer+Putty). product eliminates the need to apply primer and putty on the wallseparately resulting in significant Mica cost savings for the customer and increased easeof application.
KNPL launched Alkali Prime and Construction Chemicals during the year and increaseddistribution of the newly launched range of Soldier Paints.
KNPL associated with the IPL Team Gujarat Lions in the 2016 IPL edition a first forany Paint Company in India. To tie all the promotional activities surrounding IPL 2016together KNPL coined a new hash tag #aShadeBetter. This Hash Tag was promoted heavily onSocial media through contests like "Predict and Win" "Colour meOrange" and a Nerolac & Gujarat Lions Dubsmash activity #GameKiRaunak.
In soccer KNPL associated with the ISL team North East United FC in the Soccer LeagueISL 2016 edition.
Nerolac Premium Painter program has been a very successful initiative for the Companyover the years and this year the Company was able to build on the success of theprevious years as well.
KNPL is the market leader in industrial coatings and has endeavoured to strengthen itsleadership position over the years owing to innovative product and service offerings toindustrial customers.
Despite numerous challenges in the business environment during the year KNPL has notonly maintained its leadership position but also increased its market share. KNPL hasadded value to its customers and shareholders by its cutting edge technology and uniquemarket offerings.
Technology has always been the cornerstone of KNPL solution to customers and KNPL hascontinued to focus on technology providing High Quality Cost Effective and SustainableSolutions to its automotive customers. Quality standards have been consistently enhancedby the Auto OEMs in their crusade to provide better value to their consumers. Clientinteraction and business acquisition remained high this year with the Company baggingrepeat business from its esteemed clients as well as winning new business from clients.
KNPL has worked closely with the Auto Industry and this year has introduced enhancedproducts like a superior Mar and Scratch Resistant Clear Coat and Medium Solid Base Coats.KNPL also enhanced its range of colours for Car Interior Coatings which are eco-friendlyfree of Hazardous Air Pollutants (HAPs) and meet international coating standards.
KNPL has introduced Monocoat Metallic System for Two Wheeler industry replacingexisting two coat system. In addition KNPL worked closely with raw material suppliers forinnovative product development and this year we have developed SuperWeatherabilityMonocoat Product with enhanced properties as per customer requirements. Wehave also introduced Water Based Top Coat for Two wheelers frame which has helped inelimination of one baking cycle.
The Company has introduced a next generation CED with better corrosion resistance highthrowing power low baking loss and reduction in consumption. With such sustainedinnovations and product improvements KNPL managed to maintain its market leadership inthe CED segment with many new CED lines added this year. KNPL had pioneered the practiceof providing Technical service on Customer Production lines. It has further strengthenedits capability on this front. KNPL has worked extensively on this front to deliver maximumvalue to its customers. The Company provides its Industrial customers with Value Additionsand Value Engineering ideas aimed towards quality improvement and cost reduction. Thisyear KNPL has also added value to its customers by imparting valuable trainings.
KNPL continued the thrust on traditional segments like Oil & Gas Power InfraMetals and Chemical Plants to drive the growth. The focus was also on new segments likeFloor Railways and Coil Coating where KNPL has increased its presence.
The Company works closely with Industry organizations like NACE (National Associationof Corrosion Engineers) and SSPC (Society for Surface Protective Coatings). The Companywas well represented at NACE SSPC and CII events which ensured visibility and connectwith key industry stakeholders.
KNPL has a majority stake in OEM business catering to segments like Fans Drum &Barrels Construction Equipment Helmet LPG etc. KNPL continues to enjoy the majoritymarket share in above segments with new product developments like water base coatings DTMcoatings etc.
KNPL is a leader in the Powder Coating Segment and this year too the Company hasfurther strengthened its share in segments like Auto Ancillaries Furniture White Goods.This year KNPL was able to leverage its tie up with Protech Canada for introducing newproducts. KNPL is the fastest growing Company in the Auto Refinish Business. KNPL providescomplete range of products in the Auto Refinish market. The Company has a stabilizedgrowth both in terms of retail customers as well as winning body shop business. Its strongfocus in this industry and teamwork helped in building network across the length andbreadth of the country. It is engaging in providing multiple technical programs to developthe skills and knowledge of their customers. The Company is now focusing in water bornesystem and other future technology in the auto refinish segment.
[D] OPPORTUNITIES AND THREATS
The introduction of GST is expected to be a game changer for Indian Industry.
India's young population represents a huge opportunity as more and more young Indiansjoin the workforce and will have disposable income available. The trend towards nuclearfamily augurs well for the paint Industry.
Per Capita Paint Consumption
Per capita consumption of Paint in India is much lower than the global average andthat of developed nations. Along with favourable demographics this opportunityrepresentsaforsignificant the paint industry.
With infrastructure sector reforms being the top priority of the current government andkeeping in mind its Smart City initiatives demand for coatings from the infrastructuresector is going to see healthy growth.
Growing Auto Market
Automotive Paints Division significant part of is KNPL and this Sector isexpected to continue to grow in the years to come. This translates into a long termopportunity for KNPL as well which KNPL being the market leader can capitalise on.
Real Estate Sector & Interest Rates
The Real Estate sector witnessed stagnancy during the last year and demonetizationaffected the sector sentiment further. However after remonetisation coupled with lowHousing loan interest rates this sector is poised to grow and activity is expected toincrease.
New Competitors are entering the Indian Paint Market in both Decorative and IndustrialDivisions as they have realized the growth potential that India has to offer. KNPLendeavours to be proactive in countering any challenges that may arise due to increasedcompetition in the market.
Over the past few months inflation is showing an increasing trend which can be athreat to KNPL in the new financial year.
A below par monsoon due to the El Nino effect could have an adverse impact on customerspending ultimately impacting paint consumption in a negative way.
[E] SEGMENT WISE PERFORMANCE
The Company has only one segment of activity named paints in accordance with thedefinition of "Segment" covered under Indian Accounting Standard (Ind AS) 108 onOperating Segments. The performance of the
Company is discussed in this Report.
[F] RISKS AND CONCERNS
In a business environment that is constantly under churn Risk Management becomes a toppriority for KNPL in order to guard against any eventuality while at the same time beingable to extract maximum benefit out of favourable conditions.
The Company follows a Risk Management framework where the risk committee meetsregularly to identify imminent and potential risks as well as documenting risk mitigationmeasures to eliminate or reduce the event impact.
The Company has classified its risks under the following heads.
These risks relate to risks around brand technology industry dynamics like takeoversand alliances. These risks have the potential to impact future business plans of theCompany. Identifying and mitigating these are a strategic priority at KNPL.
Operational Risks for KNPL include risks related to delivery service and quality whichcould impact KNPL's capability to serve its customers. KNPL has a strict review mechanismto ensure these risks do not pose a threat to the Company. In addition to this supplierrisks as well as market risks are monitored carefully.
With a network spanning across India and overseas KNPL makes sure that the businessoperates within the ambit of law and necessary legal compliances are followed. Combiningin-house expertise and knowledge of statutory compliances along with professional legalservices KNPL ensures that there are no lapses on the regulatory front and the
Company functions within the legal and statutory framework.
Finance risks originating out of currency fluctuations and market volatility have thepotential to affect
Company bottom line directly. Thus these risks are dealt with advance planning takingnecessary steps for hedging against such outcomes.
With all operations conducted using business software ensuring high availability ofsystems as well as proper controls to ensure that operations are not compromised remains atop management priority. The Company takes many steps proactively to ensure that potentialrisks are minimized.
Retaining existing talent and attracting new talent takes centre stage as KNPL aims togrow aggressively. The Company has a structure in place for mitigating this risk.
This year the Company has been able to automate the Risk Management framework into adashboard which helps track the risks more effectively.
[G] RESEARCH AND DEVELOPMENT
Innovation through Research & Development is one of the key Objectives at KNPLwhich has also been incorporated into the Company's Vision statement. KNPL's aim is toleverage the global technical know-how available with the Kansai group for innovation.
New products were developed for the Automotive division including new shadedevelopment. High Solid/ Medium Solid products anti-corrosive primer mono-coatmetallics Acrylic/Epoxy Red CED Super Petrol Taping Lacquer for the two wheelerindustry heavy metal free Epoxy Paint for Auto Ancillaries were a few of the innovativeproducts developed during the financial year.
In the Automotive Refinish segment the Company has enhanced its shade range andportfolio to strengthen its offering.
New products were also introduced in the Decorative division such as Excel Mica Marbleready mix primer cum putty Excel alkali Primer and Impression Glitter Gold and Silver.Similarly the wood coating range was enhanced.
Optimization of formulation was done by undertaking Value Engineering leading tooptimum mix for cost savings. Research and Development continues to be in focus andinnovation still remains the driving force behind Customer service.
[H] INFORMATION TECHNOLOGY
For 2016-17 Digitization mobility and security were the three core IT initiatives.All these initiatives were leveraged to design improved performance and faster decisionmaking to all the core functions in the organization. Continuing from the last yeardigitization initiative exploiting the IT investment done in the "in-memory"computation capabilities various business processes were re-engineered and systematizedin the area of Marketing supply chain manufacturing and finance. This would enabledeeper insight; enhance the service capabilities of the supply chain quicker response tothe and real time information to the markets and influencers customers.
KNPL has always believed into data being a strategic asset. The decision capabilitieswere given a boost by providing next generation exception analytics at an individualemployee level across the organisation which has helped provide visibility into the impactof action on the Key Performance indicator that they are responsible for. As partof our mobility initiative this year our decorative sales team was moved to the mobilityplatform. In addition off-line digital content mobile application was developed for thesales team. The work towards making KNPL GST ready continued in the current year. Beingconscious about the changing IT environment and to safeguard against the vulnerabilitiesthe Company has implemented various security solutions.
At KNPL we believe that people are essential part of the organization as they provideinspiration creativity vision and motivation that keeps us going. People provide theskills and competencies necessary to make organizational strategies work. With theadvancements in technology the significance of people gets augmented multi-fold. Manyefforts are taken to engage the energies and enthusiasm of our people in the mosteffective way.
This year too we continued with our endeavour to maintain a Performance drivenfair and transparent' culture. The Organizational Business Plan is aligned with the KeyResult Areas for each position. The performance review mechanism has now been digitalizedto ensure greater transparency and accuracy. The daily performance dashboard is availableto all the employees and it enables every employee to remain focussed on the prioritiesand continue to contribute to the organization's goals. We have made progress on focusedinitiatives and have grown on our key performance indicators over the year 2016-17. Thishas complimented our commitment to provide a high quality of service to our customers.
KNPL treats the development of its employees with utmost importance. New trainingprograms for frontline staff in both the Decorative and Industrial Divisions wereconducted in order to skill them with new sales techniques and drive the top-line of theCompany. We also introduced a new training program called "Leap" for ourDecorative sales force with an objective to rejuvenate the workforce with sales techniquesthat would enhance their performance. Assessment & Development centers were conductedto objectively evaluate the managerial potential of select personnel.
In order to enhance employee engagement we also introduced an employee recognitionplatform called GEMS. GEMS is a framework for employees to acknowledge support and help bycolleagues in their day to day interaction. It is a company-wide rewards program thatfosters an environment of appreciation.
In-house training workshops on people management excellence and KNPL competencyframework have been designed and conducted by HR.
KNPL strongly believes in Healthy living and adopted the theme of "Be Healthy BeBetter" for the sales team.
KNPL encouraged employees to make small changes in their lifestyle to lead a fit andhealthy life.
HR has leveraged IT to bring about a culture of excellence by focusing on increasedpersonal effectiveness. This was done through several digital Interventions like opinionpolls interactive quiz extending attendance system to field e-exit module inviting newideas through idea management campaigns amongst others.
The in-house knowledge management portal is leveraged to foster a learning workculture. Through this the employees can learn from each other and keep up the momentum ofa learning organization. KNPL continues with its good practices of Corporate Governancethrough the Whistle Blower Policy encouraging growth of individuals irrespective ofgender religion caste or community and policy on "Appropriate Social Conduct atWorkplace". All these policies add up to a congenial work environment to driveperformance that is free from threat or fear.
The above mentioned HR initiatives at KNPL attempt to support and uphold organization'sgoals by fostering an engaging work environment in the dynamic business scenario.
All the above-mentioned initiatives have helped us retain key talent. Our employeestrength is 2697 on 31st March 2017.
[J] AWARDS AND RECOGNITION
Awards by External Agencies:
KNPL Technical Wins 3rd Prize in Indian Paint Association (IPA) Technical PaperCompetition.
Mr. H M Bharuka MD KNPL was awarded the Best CEO in the Chemicals category byBusiness Today at the 4th edition of the Business Today Best CEO Awards in December 2016.
KNPL Quality Team Bawal won the Silver Award at "Quality Circle Forum ofIndia".
Lote plant was Certificateof Merit in the awarded Paints & Allied Products Sectoron 6th December 2016 by Bureau of Energy Efficiency Ministry of Power for itsinitiatives done under ENCON (Energy Conservation) in last 3 years.
Bawal Plant secured Runner-up position in QIMPRO Convention All India levelunder Improvement category.
KNPL Lote was awarded "Certificate of Merit" from National Safety Council(NSC) for the 4th consecutive year Maharashtra chapter for achieving Zero AccidentFrequency Rate in the year 2015.
Bawal Quality Team won the Silver Category Award from the Quality Circle Forum ofIndia.
Lote plant received the Certification of Appreciation from NSC in group B underchemical manufacturing industries for appreciable achievement in Occupational safety andhealth.
Jainpur Plant (PE) won an award for "Excellence in Coating Developments IndustryResearch & Promotion" in 13th International Symposium on Surface Engineering& Paint Coatings.
Awards by Customers:
Daimler India Commercial Vehicles Chennai (DICV) has presented a memento to KNPL in
September 2016 as an appreciation of our contribution.
Kansai Nerolac Paints received 4 awards from Mahindra & Mahindra:
1) Innovation Award for Automotive and Farm Sector.
2) Award for The Tough and Stylish TUV 300'.
3) Award for KUV 100'.
4) Award for Technologically Advanced Mahindra Yuvo'.
KNPL has been honoured with best vendor award in paints category by Suzuki MotorcyclesIndia Pvt Ltd.
Best supplier Award to Hosur Plant by Toyota Kirloskar Motor Limited.
Awarded "Best Vendor" in Paints category by M/s Plastic Omnium.
[k] COMMUNITY DEVELOPMENT
Corporate Social Responsibility (CSR) is generally understood as the way through whicha Company can achieve balance of economic environmental and social imperatives. Thus itcan be said that the CSR approach is holistic and integrated with the core businessstrategy for addressing social and environmental impacts of businesses. Now it is awell-known fact that CSR needs to address well-being of all the stakeholders and not justthe Company's shareholders.
At KNPL we undertake several outreach programs under the umbrella of EnvironmentHealth Education Community Living Livelihood and Skill Enhancement and protection ofHeritage sites.
These CSR initiatives are largely done through the involvement and participation of alarge section of employees thereby instilling a sense of pride and purpose amongst theemployees beyond the conduct of day to day business activities.
Many of the CSR activities are carried out in partnership with government and otherstakeholders so as to create a meaningful impact in the society and improve overallquality of life of people in general and of rural community in particular.
KNPL in collaboration with SBI conducted several Basic painting training programs tothe unemployed rural youth thereby enabling them to not only be self-employed but alsogiving rise to entrepreneurs.
KNPL also carries out various CSR activities under Rural/
Community development Program thereby contributing to make civil society strong and toextend hand in providing basic amenities to the needy. These programs include Health campsin rural area construction of toilets bore wells financial assistance to variouseducational
Institutes to meet their educational requirements Environmental sustenance etc.Preference is given to the local area where the Company operates viz. near Plantlocations and sales depots.
KNPL will continue to support National and State programs and partner with local andgovernment bodies so as make a impactful and effective contribution to society at largewith the involvement and engagement of its employees in the process.
Nerolac launched its first ever Cyclathon' across 46 cities to commemorate thesecond anniversary of the Swachh Bharat campaign. The event brought both Swaasth' orhealth & Swachhata' or cleanliness into focus as it included cycling for around5 km followed by a painting activity at a school. The event was a fun activity involvingNerolac's local teams painters and dealers rallying together as a community to championhealth.
[L] ENVIRONMENT HEALTH & SAFETY
Environment Health & Safety (EHS) is of utmost importance for KNPL. Fireprevention emergency preparedness and response and safety at workplace come under theaegis of Safety. Last year KNPL focused on enhancing safety awareness amongst itsemployees through specially designed "Danger Experience Training program".Employees were provided with practical experience of safety hazards involved in variouspaint manufacturing processes at the safety laboratory. The Company intends to continuethis experiential training program in the coming year and strengthen "Safety
First" culture. KikenYochi Training (KYT) is being exercised aggressively on shopfloor to gather employee feedback on safety hazards in their respective work areas andincrease awareness level to avoid unsafe acts. In addition to this the Company hasinvested in upgradation of fire-fighting installations at its plants to strengthenemergency preparedness.
Occupational health is one of the important factors of Safety. To cater to employeehealth all KNPL manufacturing sites are equipped with dedicated Occupational HealthCentre (OHC) and Ambulance for an emergency situation. The Company facilitates periodicmedical check-up for its employees. Last year Company enhanced focus on employee visitsto OHC (Occupational Health Center).
Internal training to healthcare workers is arranged at all the manufacturing units ofthe Company. Training is focussed on ensuring compliance with respect to Bio-Medical WasteManagement Rules 2016. It includes key topics such as bio-medical waste segregationpackaging transportation safe handling and storage and its disposal methods etc. 18personnel were provided training during the year 2016-17. 8 personnel will be providedtraining in the forthcoming year.
Under environmental domain Reduction and recovery of material losses is one of the keyfocus areas for KNPL.
KNPL focuses immensely on water conservation through its water reuse reduce andrecycle themes. The Company has embraced water efficient technologies in its process tohelp reduce water consumption at source. Zero effluent discharge facilities at our plantsled us to re-utilize whole treated water back into processes.
On the sustainability front Energy Management is key focus area for the Company. Inorder to curtail energy consumption KNPL has invested in energy efficiency measures aswell as in upgradation of machine utilities. KNPL has been proactive in substitution ofnon- renewable energy sources by renewable energy sources. The Company continued toharness solar energy through various initiatives like solar plant sola tubes amongstothers. Further it switched to renewable energy sources through mechanisms such as powerpurchase agreement and wind wheeling. In upcoming years the Company would extend theproportion of renewable energy used.
The Company publishes its Environmental and social performance through Sustainabilityreport which is available on the website of the Company.
[M] SUPPLY CHAIN
Supply Chain is an integral and a vital cog in the wheel of KNPL and this year sawincreased focus on optimizing processes in this area.
This year also saw an increase in the number of depots which has enhanced the reach ofKNPL and will help serve customers better. Besides being a nodal point for materialtransfer depots also serve as a check point to connect to the consumers and influencersdirectly.
Tinting is a vital element of the paint manufacturing process. The Company has combinedIT with paint manufacturing technology to develop a system to address this element of themanufacturing process.
The Company continues to invest in various technologies which help KNPL service theJust In Time (JIT) requirements of its Industrial customers and improve service levelcommitments to its Decorative dealers. This year the Company rolled out a QR code andMobility based solution to track deliveries made to its Decorative dealers.
In order to expand production capacities to align with increasing market demand KNPLhas also announced setting up of three new plants viz. Punjab Gujarat and Andhra Pradesh.These plants besides being automated will produce at a much higher productivity level andwill interface with Manufacturing IT Systems to take the benefits of new technology.
Improvements made in ASRS (Automatic Storage and Retrieval System) at Jainpur Plantincreased efficiency of the system. The Advanced Planning and Optimization Module (APO) ofthe SAP system was modified to enable better and effective production and dispatchplanning.
Digitization of manual activities was the focus during the year to enable betterperformance tracking reduction in effort and increase in efficiency. Part of thisactivity was to regularise tasks that are performed on an ad-hoc basis and are outsidethe purview of the IT framework. This led to creation of standardisation and improvementin existing processes as well as increased action accountability.
[n] INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
With an aim to monitor and control day-to-day operations at KNPL the Company has setup internal control systems for regular tracking and reporting. These systems also monitorcompliance to various rules and regulations and adherence to policy requirements. Inorder to strengthen the system of Internal Control and provide board of directors with anadded ability to oversee internal controls Internal Financial Control (IFC) system wasput in place in accordance with the requirements of Section 134(5)(e) of Companies Act2013. Systems of Internal Control were implemented considering the framework suggested inGuidance Note on Audit of Internal Financial Controls over the Financial Reporting issuedby The Institute of Chartered Accountants of India to address its operational andfinancial risk.
Ministry of Corporate Affairs has prescribed the roadmap for the implementation of IFRSin India. Being a listed entity KNPL is covered under Phase 1 which means the Companywould have to prepare its Financial Statements in accordance with IFRS (known as Ind AS)for the financial year beginning with 1st April 2016. Accordingly the Company hasprepared its first Financial Statements which comply with Ind AS applicable for the yearending on 31st March 2017 together with comparative period data as and for the yearended 31st March 2016. In preparing these financial statements the Company's openingbalance sheet was prepared as at 1st April 2015 the Company's date of transition to IndAS.
The Company's Control Efficiency Index (CEI) was improved substantially this year byhorizontal deployment of industry best practices. The Company put in place controlmeasures that are bench marked against global standards of efficient control mechanisms.In order to perform online tracking of the Company's regulatory compliances Compliancesystems were implemented. These systems allow the Company to track its compliancerequirements online thereby enabling stricter adherence to regulations.
[O] AFFIRMATIVE ACTION
The Company has adopted a Code of Conduct for the affirmative purpose of providingemployment opportunities for the socially disadvantaged.
Gross sales and other operating income for the year aggregated to Rs 4936.05 Croresreflecting a growth of 7.2% over the previous year.
Depreciation for the year is Rs 69.49 Crores as against Rs 67.72 Crores in the previousyear.
Other Income was substantially higher at Rs 98.22 Crores as compared to Rs 27.35 Croresfor the previous year mainly due to surplus funds arising out of gain on sale of Chennailand in March 2016 deployed in mutual funds during the year.
The Company continued with its initiatives to reduce procurement cost and to reduceoperational costs.
These initiatives helped the Company in the current year to keep the operational costsunder control and improve the bottom line.
Profit Before Depreciation Interest and Tax (PBDIT) for the year is higher at Rs730.69 Crores compared to Rs 579.98 Crores last year reflecting a growth of 26%. ProfitBefore Tax (PBT) for the year is Rs 759.42 Crores as compared to Rs 539.61 Crores (beforeextraordinary income) of the previous year which is a growth of 40.7% over previous year.
The Company spent Rs 6.46 Crores towards Corporate Social Responsibility compared to Rs5.29 Crores in the previous year.
The Company has not accepted any deposits covered under Chapter V of the Companies Act2013 during the year.
There are no significant any Regulators Courts or Tribunals or material orders passedby against the Company which could impact the going concern status and Company'soperations in future.
There has been no change in the nature of business during the year.
There have been no material changes and commitments affecting the financial position ofthe Company which have occurred between the end of the financial year of the Company towhich the financial statements relate and the date of this Report.
Statements in this Management Discussions and Analysis Report describing the Company'sobjectives estimates and expectations may be "forward looking statements"within the meaning of applicable laws and regulations. Actual results might differmaterially from those either expressed or implied.
4. Unclaimed Dividend
During the year dividend amounting to Rs 3.67 lacs that had not been claimed by theshareholders for the year ended 31st March 2009 was transferred to the credit ofInvestor Education and Protection Fund as required under Section 205A read with Section205C of the Companies Act 1956. As on 31st March 2017 dividend amounting to Rs 87.68lacs has not been claimed by shareholders of the Company. Shareholders are requiredto lodge their claims with the Registrar TSR Darashaw Ltd. for unclaimeddividend. Pursuant to the provisions of Investor Education and Protection Fund (Uploadingof Information regarding unpaid and unclaimed amounts lying with Companies) Rules 2012the Company has uploaded the details of unpaid and unclaimed amounts lying with theCompany on 22nd June 2016 (date of the last Annual General Meeting) on the websiteof the Company www.nerolac.com. The same is also available on the website of the Ministryof Corporate Affairs www.mca.gov.in.
The Directors record their appreciation for the contribution made and support providedby Kansai Paint Co. Ltd. Japan (Kansai). Kansai continues to provide support on processdesign quality improvement world class technology which has helped the Company inmaintaining market leadership in the industrial business including automotive coatings byservicing existing customers better and adding new lines. Kansai also provides technologyfor manufacture of architectural coatings.
The Company also has Technical Assistance Agreement with Oshima Kogyo Co. Ltd. Japanfor manufacturing heat resistance coatings Cashew Co. Ltd. Japan for manufacturingcoatings products MICRON TXL SK-1 and Thinner for MICRON and with Protech ChemicalsLimited Canada for manufacturing powder coating products. The Directors record theirappreciation for the co-operation from these collaborators.
6. Overseas Operations:
a. Operations in nepal
During the year the name of our subsidiary company in Nepal was changed from KansaiPaints Nepal Pvt. Ltd. to KNP Japan Private Limited.
For the financial year ended 31st March 2017 the Turnover of KNP Japan PrivateLimited increased to ` 53.95 Crores as compared to Rs 40.16 Crores for the financial yearended 31st March 2016. Profit Before Tax has increased to Rs 6.87 Crores as compared toRs 4.09 Crores last year. Profit After Tax has increased to Rs 5.12 Crores as compared to` 3.05 Crores last year.
Consolidated financial statement of the Company and of the subsidiaries forms part ofthe Annual Report. A separate statement containing the salient features of the financialstatement of KNP Japan Private Limited is part of this Annual Report.
Annual Audited Accounts of KNP Japan Private Limited are available on the website ofthe Company.
b. Operations in Srilanka
Our subsidiary in Srilanka Kansai Paints Lanka Pvt. Ltd. has commenced its operationson 26th April 2017.
Consolidated financial statement of the Company and of the subsidiaries forms part ofthe Annual Report. A separate statement containing the salient features of the financialstatement of Kansai Paints Lanka Pvt. Ltd. is part of this Annual Report.
Annual Audited Accounts of Kansai Paints Lanka Pvt. Ltd. are available on thewebsite of the Company.
7. New Projects
The Shareholders were informed last year that the Company undertook a comprehensivereview of its manufacturing capacities and had started setting up of a paint manufacturingunit at Saykha Industrial Estate in Gujarat and also a paint manufacturing unit atGoindwal Sahib near Amritsar in Punjab. It was also informed that the Company had startedsetting up a Global R & D Centre at Vashi Navi Mumbai.
The construction of manufacturing unit at Saykha Industrial Estate in Gujarat and atGoindwal Sahib near Amritsar in Punjab and also the construction of Global R &D Centre at Vashi Navi Mumbai are in process as per the planned schedule.
The Company has initiated a project at Achutapuram Visakhapatnam district in AndhraPradesh to set up a paint manufacturing unit having a capacity of 60000 KL per yearwhich is expandable in phases at an estimated cost of Rs 304 crores.
8. Cost Audit
The Ministry of Corporate Affairs (MCA) vide Notification dated 14th July 2016amended the Companies (Cost Records and Audit Rules) 2014 through Companies (Cost Recordsand Audit) Amendment Rules 2016.
As per the Amendment Rules 2016 the Company is required to conduct cost audit of thecost records of its products Thinners and Resins. The Board of Directors has appointed D.C. Dave & Co. Cost Accountants as the Cost Auditor to conduct cost audit of the costrecords of products Thinners and Resins for the financial year 2016-17 and financial year2017-18.
The remuneration of the Cost Auditor as recommended by the Audit Committee and approvedby the Board of Directors is required to be ratified subsequently by the Shareholders.Hence the resolutions at Item nos. 6 and 7 of the Notice of the Annual General Meeting(AGM).
In accordance with Articles of Association of the Company Mr. Masaru Tanaka and Mr.Hidenori Furukawa retire by rotation at this Annual General Meeting and being eligibleoffer themselves for re-appointment.
Mr. Shinji Asatsuma a nominee of Kansai Paint Co. Ltd. Japan resigned from the Boardof Directors of the Company with effect from 29th July 2016. The Board of Directors hasplaced on record its sincere appreciation and gratitude for the valuable and outstandingcontribution made by Mr. Asatsuma during his association with the Company as a Director.
Mr. Katsuhiko Kato a nominee of Kansai Paint Co. Ltd. Japan was appointed as aDirector with effect from 29th July 2016 in the casual vacancy caused by theresignation of Mr. Shinji Asatsuma. Mr. Kato holds office till the ensuing Annual GeneralMeeting. Notices in writing have been received from some Shareholders of the Companyproposing his candidature for the office of the director. Mr. D. M. Kothari Vice Chairmanhas retired from the Board of Directors of the Company with effect from the close ofbusiness on 2nd May 2017. The Board of Directors has placed on record its sincereappreciation and gratitude for the very valuable and outstanding contribution made by Mr.Kothari during his long and fruitful association with the Company as a Director then asthe Managing Director and subsequently as the Vice Chairman of the Company.
Mr. H. M. Bharuka Managing Director is now appointed as the Vice Chairman andManaging Director of the Company for the period from 3rd May 2017 to 31st March 2022subject to the approval of the Shareholders at the ensuing Annual General Meeting to beheld on 21st June 2017. The material terms of appointment of Mr. Bharuka are stated inthe explanatory statement to the Notice of the AGM at item no. 8.
None of the Directors is disqualified for appointment/ re-appointment under Section 164of the Companies Act 2013. As required by law this position is also reflected in theAuditors' Report.
All the Independent Directors on the Board have given a declaration of theirindependence to the Company as required under Section 149(6) of the Companies Act 2013.
The composition of the Board meetings of the Board held during the year and theattendance of the Directors thereat have been mentioned in the Report on CorporateGovernance in the Annual Report.
Mr. H. M. Bharuka Managing Director is a member of the Global Steering Committee ofKansai Paint Co. Ltd. Japan the holding company. Mr. H. M. Bharuka received aremuneration of Rs 73.10 lacs during the year as a member of the Global SteeringCommittee.
10. Key Managerial Personnel
As required under Section 203 of the Companies Act 2013 the Company has noted thatMr. H. M. Bharuka Managing Director Mr. P. D. Chaudhari Whole-time Director Mr.P. D. Pai Chief Financial Officer and Mr. G. T. Govindarajan Company Secretary are theKey Managerial Personnel of the Company.
11. Board Evaluation
The evaluation of all the Directors the Board as a whole and its Committees wasconducted based on the criteria and framework adopted by the Board. The evaluation processhas been explained in the Report on Corporate Governance in this Annual Report. The Boardnoted the evaluation results that were collated and presented to the Board.
12. Remuneration Policy
The Board of Directors of the Company has adopted a Remuneration Policy for determiningqualifications positive attributes and independence of a Director and criteria forDirector's appointment and remuneration. The features of the Policy are as follows:
The Company while constituting the Board shall draw members from diverse fields suchas finance law management architecture technical marketing manufacturing corporategovernance operations or other disciplines related to the Company's business. There shallbe no discrimination on the basis of gender while determining the Board composition.
A director shall be a person of integrity who possesses relevant expertise andexperience. He shall uphold ethical standards of integrity and probity and act objectivelyand constructively. He shall exercise his responsibilities in a bona-fide manner in theinterest of the Company; devote sufficient time and attention to his professionalobligations for informed and balanced decision making; and assist the Company inimplementing the best corporate governance practices.
An Independent director should meet the requirements of the Companies Act 2013 and theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 concerningindependence of directors. The Company shall also obtain certification of independencefrom the Independent Director in accordance with the Companies Act 2013.
The objective of the policy is to have a compensation framework that will reward andretain talent.
The remuneration will be such as to ensure that the correlation of remuneration toperformance is clear and meets appropriate performance benchmarks.
Remuneration to Key Managerial Personnel Senior Management and other employees willinvolve a balance between fixed and variable pay reflecting short and long termperformance objectives of the employees in line with the working of the Company and itsgoals.
For Directors the Performance Pay will be linked to achievement of Business Plan.
For Heads of Department the Performance Pay will be linked to achievement offunctional plan which is derived from the business plan. The functional plan includesboth short-term and long-term objectives.
The above will take into consideration industry performance customer performance andoverall economic environment.
For other management personnel the Performance Pay will be linked to achievement ofindividual set objectives and part of this will also be linked to overall companyperformance.
13. Risk Management Policy
Risk profiling is put in place for all the areas of operations in the Company and wellintegrated in the business cycle. The Company has identified the risk areas in itsoperations along with its probability and severity department wise. The various risks towhich the Company is exposed are as mentioned in the Management and Discussion AnalysisReport under the relevant heading.
An effective Risk Management Framework is put in place in the Company in order toanalyze control and mitigate risk.
The Risk Management Framework comprises of Risk Management Committee and the RiskOfficers. The Risk Management Committee of our Company consists of the ManagementCommittee and the Chief Risk
Officer. The Managing Director the Executive Director and the functional headsconstitute the Management Committee. The Company Secretary is the Chief Risk Officer. TheRisk Officers have been appointed by the functional heads and represent the variousfunctions.
The requirements of Regulation 21 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 with regard to the constitution of a Risk ManagementCommittee are not applicable to our Company as this Regulation is applicable only to top100 listed entities determined on the basis of market capitalisation as at the end ofthe immediate previous financial year. The Board of Directors and the Audit Committeereview the effectiveness of the Risk Management framework and provide advice to the RiskManagement Committee at regular intervals.
The functions of the Risk Management Committee includes preparation of company-wideframework for risk management fixing roles and responsibilities communicating the riskmanagement objective allocating resources drawing action plan determining criteria fordefining major and minor risks deciding strategies for escalated major risk areasupdating company-wide Risk register and preparing MIS report for review of AuditCommittee.
The Risk Management Framework aims to:
(a) address our Company's strategies operations and compliances and provide a unifiedand comprehensive perspective;
(b) establish the risk appetite;
(c) be simplistic and intuitive to facilitate a speedy and appropriate identificationof potential and actual risks and its communication;
(d) seek escalation of the identified risk events to the appropriate persons to enablea timely and satisfactory risk response;
(e) reduce surprises and losses foresee opportunities and improve deployment ofresources;
(f) develop a mechanism to manage risks.
Through the Risk Management framework system and process are set to identify gaugeand mitigate any potential risk promptly efficiently in order to and manage and controlthem effectively. Clearly defined work profiles and assigned responsibilities are well atplace throughout the organization at all levels and all functions ensuring smooth flowof information across various levels within the organization.
14. Dividend Distribution Policy
The Dividend Distribution Policy of the Company has been formulated to ensurecompliance with the provisions of Regulation 43A of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015.
The Board will assess the Company's financial requirements including present andfuture organic and inorganic growth opportunities and other relevant factors as mentionedin this policy before declaring dividend in any financial year.
The Board may consider not declaring dividend or may recommend a lower payout for agiven financial year after analyzing the prospective opportunities and threats or in theevent of challenging circumstances such as regulatory and financial environment. TheDividend (including interim and/or final) for any financial year shall be declared or paidby the Company for any financial year out of the profits of the Company for that yeararrived at after providing for depreciation in accordance with the provisions of theCompanies Act 2013 or out of the profits of the Company for any previous financialyear(s) arrived at after providing for depreciation in accordance with the provisions ofthe Companies Act 2013 and remaining undistributed or out of both. The Company maybefore the declaration of any dividend in any financial year transfer such percentage ofits profits for that financial year as it may consider appropriate to the reserves of theCompany. The Company shall follow the provisions of the Companies Act and all the relevantrules and regulations of the Companies Act and/or any regulatory enactment(s) as may beapplicable while declaring and paying dividend for any financial year. The rate ofDividend shall be fixed by the Board of Directors of the Company. Final dividend proposedby the Board of Directors if any would be subject to the approval of the shareholders atthe Annual General Meeting.
The Board of Directors shall recommend dividend in compliance with this policy theprovisions of the Companies Act 2013 and Rules made there under and other applicablelegal provisions.
The Company will consider various internal and external factors including but notlimited to the following before making any recommendation for dividend:
(i) Internal factors:
a. Profitable growth of the Company and specifically profits earned during thefinancial year as compared with previous years and internal budgets;
b. Cash flow position of the Company;
c. Accumulated reserves;
d. Stability of earnings;
e. Future cash requirements for organic growth/ expansion and/or for inorganic growth;
f. Contingent liabilities;
g. Deployment of funds in short term marketable investments and/or long terminvestments;
h. Capital expenditure(s); and
i. The ratio of debt to equity.
(ii) External factors:
a. Economic environment;
b. Cost and availability of alternative sources of financing;
c. Inflation rate;
d. Industry outlook and stage of business cycle for underlying businesses;
e. Prevailing Taxation Policy or any amendments expected thereof with respect toDividend distribution;
f. Changes in the Government policies industry specific rulings & regulatoryprovisions; and
g. Any other relevant factors that the Board may deem fit to consider before declaringDividend. Apart from the above the Board also considers past dividend history and trackrecord of previous Dividends distributed by the Company. The Board may additionallyrecommend special dividend in special circumstances.
Subject to applicable regulations the Company's retained earnings shall be appliedfor:
Funding inorganic and organic growth needs including working capitalcapital expenditure repayment of debt etc.
Buyback of shares subject to applicable limits
??Capitalisation of shares
Issue of Bonus shares
Payment of Dividend in future years
Investment in new business(es) and/or additional investment in existingbusiness(es)
??General corporate purposes including contingencies
??Any other permissible usage as per law.
The Company currently has only one class of shares viz. Equity shares for which thispolicy is applicable. The policy will be subject to review if and when the
Company issues different classes of shares.
The Dividend Distribution Policy of the Company is also available on the websiteof the Company at https://nerolac.com/financial/policies.html#scroll
15. Corporate Social Responsibility
The Board has constituted a Corporate Social Responsibility (CSR) Committee as per theprovisions of Section 135 of the Companies Act 2013. The functions of the CSR Committeeare to:
(a) formulate and recommend to the Board a Corporate Social Responsibility Policywhich shall indicate the activities to be undertaken by the Company as specified inSchedule VII of the Act;
(b) recommend the amount of expenditure to be incurred on the activities referred to inClause (a); and
(c) monitor the CSR policy of the Company from time to time.
The members of the CSR Committee are Mr. D. M. Kothari Mr. H. M. Bharuka Mr. N. N.Tata and Mrs. Brinda Somaya. Mr. D. M. Kothari is the Chairman of the CSR Committee. Theindependent Directors on the CSR Committee are Mr. D. M. Kothari Mr. N. N. Tata and Mrs.Brinda Somaya. With effect from 3rd May 2017 the CSR Committee will be re-constituted asfollows: Mr. H. M. Bharuka (Chairman) Mr. N. N. Tata and
Mr. P. D. Chaudhari.
The CSR Committee meetings held during the year and attendance of the members of theCSR Committee at the meetings are as follows:
|Date of Meeting ||Members Present at the Meeting |
|29-07-2016 ||Mr. D. M. Kothari |
| ||Mr. H. M. Bharuka |
| ||Mr. N. N. Tata |
| ||Mrs. Brinda Somaya |
|27-03-2017 ||Mr. D. M. Kothari |
| ||Mr. N. N. Tata |
| ||Mrs. Brinda Somaya |
The Board has also framed a CSR Policy for the Company on the recommendations of theCSR Committee. The Report on CSR activities as required under Companies
(Corporate Social Responsibility) Rules 2014 including a brief outline of theCompany's CSR Policy total amount to be spent under CSR for the financial year amountunspent and the reason for the unspent amount is set out at Annexure-1 forming part ofthis Report.
16. Particulars of Loans Guarantees or Investments under Section 186 of the CompaniesAct 2013
Loans Guarantees and Investments covered under the provisions of Section 186 of theCompanies Act 2013 are given in the notes to the financial statements provided in thisAnnual Report.
17. Related Party Transactions
All transactions entered into with the Related Parties in terms of Section 2(76)and Section 188 of the Companies Act 2013 read with Regulation 2(zc) and Regulation 23 ofthe SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 during thefinancial year were in the ordinary course of business and on arm's length basis and donot attract the provisions of Section 188 of the Companies Act 2013. There were noMaterial Related Party Transactions during the year. Thus disclosure in Form AOC-2 is notrequired.
18. Audit Committee
The Company has an Audit Committee in place constituted as per the provisions ofSection 177 of the Companies Act 2013. The members of the Audit Committee its terms ofreference the meetings of the Audit Committee and attendance thereat of the members ofthe Committee is mentioned in the Corporate Governance Report under the appropriateheading.
19. Whistle Blower Policy
The Company has a Whistle Blower Policy to report genuine concerns and grievances. Theimplementation of the Whistle Blower Policy has been mentioned in the Report of CorporateGovernance.
20. Prevention of Sexual Harassment at workplace
The Company has adopted a policy with the name "Policy on Appropriate SocialConduct at Workplace". The policy is applicable for all employees of theorganization which includes corporate office branches depots and manufacturinglocations etc.
The policy is applicable to non-employees as well i.e. business associates vendorstrainees etc. A Complaints Committee has also been set up to redress complaints receivedon sexual harassment as well as other forms of verbal physical written or visualharassment.
During the financial year under review the Company has not received any complaints ofsexual harassment.
21. Corporate Governance
As required by Schedule V(C) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 a detailed report on Corporate Governance is given as apart of the Annual Report. The Company is in full compliance with the requirements anddisclosures that have to be made in this regard. The Auditors' Certificate of thecompliance with Corporate Governance requirements by the Company is attached to the Reporton Corporate Governance.
22. General Shareholder Information
General Shareholder Information is given in Item No. 9 of the Report on CorporateGovernance forming part of the Annual Report.
23. Business Responsibility Report
Regulation 34(2)(f) of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 as amended with effect from 1st April 2016 requires that in case ofthe top 500 listed companies based on market capitalisation the Annual Report shallcontain a Business Responsibility Report describing the initiatives taken by the Companyfrom an environmental social and governance perspective in the format specified by SEBI.The Business Responsibility Report in the format suggested by SEBI forms part of theAnnual Report.
24. Particulars regarding Employees Remuneration
The statement containing particulars of employees as required under Section 197(12) ofthe Companies Act 2013 read with Rule 5(2) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 forms part of this Report as Annexure-2.
25. Directors' Responsibility Statement
As stipulated under the provisions contained in Section 134(3)(c) read withSection 134(5) of the Companies Act 2013 the Directors hereby state that:
(i) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;
(ii) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit of the Company for that period;
(iii) the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;
(iv) the Directors have prepared the annual accounts on a going concern basis;
(v) the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and
(vi) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
26. Energy Technology Absorption & Foreign Exchange
Statement giving the particulars relating to conservation of energy technologyabsorption and foreign exchange earnings and outgo as required under Section 134(3)(m)read with Rule 8(3) of the Companies (Accounts) Rules 2014 is enclosed as Annexure-3 tothis Report.
27. Extract of Annual Return
In accordance with Section 134(3)(a) of the Companies Act 2013 an extract of theAnnual Return in the prescribed format is appended as Annexure-4 to this Report.
28. Statutory Auditors
The Company Auditors B S R & Co. LLP Chartered Accountants have been appointedfor a period of 5 years from the 94th AGM till the 99th AGM. Pursuant to provisions ofSection 139(1) of the Companies Act 2013 read with the Companies (Audit and Auditors)Rules 2014 the appointment of B S R & Co. LLP as Auditors of the Company for aperiod of 5 years shall be subject to ratification by shareholders at every AGM.Accordingly the appointment of B S R & Co. LLP as the Auditors of the Company fromthis AGM till the conclusion of next AGM is put forth for your approval.
The Auditors' Report is clean and there are no qualifications in their Report.
29. Secretarial Auditor
Pursuant to the provisions of Section 204 of the Companies Act 2013 the Company hadappointed M/s Ragini Chokshi & Co. Practicing Company Secretaries as the SecretarialAuditor of the Company for the year 2016-17 to conduct secretarial audit and to ensurecompliance by the Company with various Acts applicable to the Company. The SecretarialAudit Report for the financial year 2016-17 issued by M/s Ragini Chokshi &. Co. isannexed to this Report as Annexure-5. There are no qualifications or adverse remarks intheir Report.
Your Directors wish to express their grateful appreciation for the co-operation andsupport received from customers parent company collaborators vendors shareholdersfinancial institutions banks regulatory authorities and the society at large.
Deep appreciation is also recorded for the dedicated efforts and contribution of theemployees at all levels as without their focus commitment and hard work the Company'sconsistent growth would not have been possible despite the challenging environment.
| ||For and on behalf of the Board |
| ||P. P. Shah |
| ||Chairman |
|Mumbai 2nd May 2017 || |