REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31ST MARCH 2017
The Board presents its Ninety-eighth Annual Report together with the Audited FinancialStatements of the Company for the year ended 31st March 2017.
|FINANCIAL RESULTS || || |
| || ||Rs. in crores |
|Particulars ||31st March 2017 ||31st March 2016 |
|Total Revenue from: || || |
|Continuing operations ||3891.96 ||4217.57 |
|Discontinuing operations ||- ||288.77 |
|Total Revenue ||3891.96 ||4506.34 |
|Profit/(Loss) before interest depreciation tax and other amortizations ("EBIDTA") ||134.80 ||(165.30) |
|Add : Exceptional Income ||121.35 ||755.35 |
|Less : Depreciation and Amortization Expenses (Net of transfer from Revaluation ||108.97 ||122.31 |
|Reserve) || || |
|Finance Costs ||268.98 ||677.53 |
|Tax Expenses - Net ||2.33 ||- |
| ||380.28 ||799.84 |
|Profit/(Loss) for the year from continuing operations ||(124.13) ||(209.79) |
|Profit/(Loss) for the year from discontinuing operations ||- ||(34.50) |
|Profit on disposal of Assets and Liabilities of discontinuing operations ||- ||381.41 |
|Profit/(Loss) for the year ||(124.13) ||137.12 |
|Balance of Profit/(Loss) at the beginning of the year ||(451.23) ||(588.35) |
|(Loss) Carried Forward ||(575.36) ||(451.23) |
No dividend is proposed in view of the loss during the year.
The Paid-up Equity Share Capital as on 31st March 2017 remained at B117.27 crores. TheCompany has not during the year issued any shares with or without differential votingrights granted stock options or issued sweat equity shares.
SECURED REDEEMABLE NON-CONVERTIBLE DEBENTURES
10.50% Secured Redeemable Non Convertible Debentures amounting to B200 crores issuedduring the previous year were redeemed in full on 13th April 2016.
The Company has not during the year accepted any deposit within the meaning ofSection 73 of the Companies Act 2013 ("the Act"). Deposits amounting to B4.46lakhs from two persons remained unclaimed as at the end of the year. There were nodeposits not in compliance with the requirements of Chapter V of the Act.
Despite encountering significant challenges during the year the Company earned apositive Earnings Before Interest Depreciation Taxation and other Amortisations("EBIDTA") of B134.80 crores as against a negative EBIDTA of B165.30 crores inthe previous year. Total Revenue for the year on a standalone basis was B3891.96 crores ascompared to B4217.57 crores in the previous year. Sale volumes and net sales realisationsof the Cement Business came under stress during the year owing to subdued demand in theareas which it services. This position was further exacerbated by capacity additions inthis area resulting in further pressure on price realisations. To make matters worseinput cost increases during the year also impacted margins even though the Business mademeasured advances in value engineering of cement inputs. The Business's brand recallgained in strength in the wake of several initiatives carefully conceived to underline thequality superiority of the Birla Shakti brand in the market.
The task before the Tyre Business during the year was to realign manufacturingcapabilities upon the transfer and ultimate disposal of the Business's Uttarakhandmanufacturing facility. Despite unavailability of production from the Uttarakhand facilityduring the year the Business maintained its presence in the market. This would not havebeen possible without a renewed quality emphasis together with the development of marketoriented products. Thus a complete range of tubeless tyres for two and three wheelers apremium range of bias tyres for the commercial vehicle segment christened Platinaand an entirely new range of radial tyres also for the commercial vehicle segment were putinto the market. Investments during the year in increasing the Birla Tyres brandawareness and recall was yet another high point. Sponsorship of the Kolkata based Atleticode Kolkata football team that won the Indian Super League 2016 ("ISL 2016")for instance was a success. Birla Tyres had also been a major sponsor of the ISL2016. Its "Tireless" advertisement campaign was also well accepted. Steepincreases in prices of major inputs during the second half of the year however ranked asa major dampener to its efforts at business consolidation in the revised scenario.Nonetheless the Business endeavoured to counteract this situation with better sourcing aswell as product re-engineering.
MANAGEMENT DISCUSSION & ANALYSIS AND CORPORATE GOVERNANCE
A Management Discussion & Analysis and the Report on Corporate Governance areattached as Annexures I and II respectively of this Annual Report.
The Company has a Risk Management Policy tailored to appropriately appraise the stateof the Company's business risks. The Policy is so structured as to evaluate risks atseveral operational levels so that processes to monitor business risks are effectivelyidentified and mitigation procedures implemented.
GOING CONCERN STATUS
There were no significant or material orders passed by regulators or courts ortribunals' impacting the Company's going concern status and/or its future operations.
INTERNAL FINANCIAL CONTROLS
The Board reviews from time to time the adequacy and effectiveness of the Company'sinternal financial controls. This year was no exception. The reviews conducted during theyear did not reveal any material deficiencies in the internal financial control structure.
EVALUATION OF BOARD PERFORMANCE
The performance of the Board each Board Member individually including each of theIndependent Directors as well as the working of Board Committees was subjected toevaluation during the year. The Board did not deviate from the assessment mechanismadopted in the previous year. A brief statement on the methodology adopted appears in theReport on Corporate Governance. As required under the provisions of the Act a Meeting ofall Independent Directors was convened and held during the year.
NUMBER OF BOARD MEETINGS
A tentative calendar of Board Meetings to take place in each year is prepared andcirculated to Board Members before the beginning of each Financial Year. During the yearsix Board Meetings were convened and held. These details are provided in the Report onCorporate Governance.
NOMINATION AND REMUNERATION POLICY
The Company's Nomination and Remuneration Policy prepared in conformity with therequirements of the provisions of Section 178(3) of the Act is attached in Annexure III tothis Report.
The Audit Committee is chaired by Amitabha Ghosh an eminent Chartered Accountant withadditional qualification in Banking. Vinay Sah Kashi Prasad Khandelwal Sudip Banerjeeand Lee Seow Chuan are Members of the Committee. Tridib Kumar Das Whole-time Director& Chief Financial Officer is a permanent invitee to the Meetings. The CompanySecretary acts as Secretary to the Committee.
All recommendations of the Audit Committee were duly accepted by the Board and therewere no instances of any disagreement between the Committee and the Board.
CORPORATE SOCIAL RESPONSIBILITY
In the absence of profit there were no compulsions whatsoever on the Company to incurany spends on Corporate Social Responsibility ("CSR") during the year. A nocompulsion situation acted as an added impetus for the Company to keep up all itsprogrammes initiated earlier so as to positively contribute in its small way to societalwell-being keeping in mind the provisions of Section 135 of the Act.
The CCFC-Kesoram Football Academy the soccer nursery promoted by the Company remainsa pivotal CSR project. A nucleus of trainees selected during the year from hundreds ofhopefuls are being rigorously coached by a team of senior trainers in the finer points ofthe game. The project aims not only to foster the game of football in the country but alsoemerge as a source of livelihood for the trainees who are drawn from the weaker sectionsof society. For the Company that achievement will rank as an ornate diadem in its humblequest to serve society at large.
The CSR Policy is available on www.kesocorp.com. As at 31st March 2017 the BoardCommittee on CSR consisted of Manjushree Khaitan as Chairperson Amitabha Ghosh and TridibKumar Das.
The Report on CSR activities as required under the Companies (Corporate SocialResponsibility Policy) Rules 2014 is given in Annexure IV to this Report.
RELATED PARTY TRANSACTIONS
As required under the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 ("SEBI LODR Regulations 2015") related party transactionsare placed before the Audit Committee for approval. Wherever required prior approval ofthe Audit Committee is obtained on an omnibus basis for continuous transactions and thecorresponding actual transactions become a subject of review at subsequent Audit CommitteeMeetings.
All related party transactions/arrangements entered during the year were on an arm'slength basis and in the ordinary course of business.
There were no materially significant related party transactions entered into by theCompany with the Promoters Directors Key Managerial Personnel or other designatedpersons which could conflict with the interest of the Company as a whole and as suchdisclosure in Form AOC-2 pursuant to Rule 8(2) of the Companies (Accounts) Rules 2014 isnot required.
The Company's Related Party Transaction Policy appears on its website with web linkwww.kesocorp.com/DOCS/management_ corner.php#slide_5.
SUBSIDIARY AND JOINT VENTURE COMPANY
As at 31st March 2017 the Company had a wholly-owned subsidiary Cygnet IndustriesLimited ("Cygnet") and a Joint Venture Company Gondkhari Coal Mining Limited("Gondkhari").
The Company's shareholding interest in Cavendish Industries Limited a materialunlisted subsidiary was disposed of on 13th April 2016.
Effective close of business 31st March 2016 the Company's rayon and transparent paperundertaking was transferred upon obtaining the required approvals to Cygnet. As at closeof business on 31st March 2017 Cygnet was a wholly-owned subsidiary. This positioncontinues as on date. Consequently the Consolidated Financial Statements of the Companyin respect of the year appear on Pages 125 to 160.
Gondkhari Coal Mining Limited ("Gondkhari") a Special Purpose Vehicle("SPV") was incorporated in 2009 as a Joint Venture between the Company (45.46%shareholding) Maharashtra Seamless Limited (30.30% shareholding) and Dhariwal Power &Alloys Private Limited (formerly known as Dhariwal Infrastructure Limited) (24.24%shareholding). The joint venture was set up as per Central Government directives todevelop and work the Gondkhari Coal Block in the State of Maharashtra that the CentralGovernment had allocated. The Supreme Court vide judgment dated 25th August 2014 readwith Order dated 24th September 2014 cancelled the allocation of all coal blocks(including Gondkhari) by the Central Government. The deallocation of the coal block hasmade the SPV virtually defunct.
In view of the provisions of Paragraphs 11 28 of Accounting Standards ("AS")21 and Paragraph 38 of AS 27 consolidation of the Financial Statements of these companiesas at 31st March 2017 are not mandated. Therefore a Report on the performance andfinancial position of these companies as required under Rule 8(1) of the Companies(Accounts) Rules 2014 is not annexed to this Report.
A Statement containing salient features of the financial statement of the wholly-ownedsubsidiary in Form AOC-1 is attached in Annexure V to this Report.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
The following inter corporate financial exposures were taken by the Company during theyear:
|Company ||Balance as at 31st March 2017 (C in crores) |
|A. Cygnet wholly-owned subsidiary || |
|(i) Investment ||30.05 |
|(ii) Loan ||529.29 |
|B. Camden Industries Limited || |
|(i) Loan ||0.58 |
Subject to the above the Company has taken no other financial exposure to any othercompany within the meaning of the provisions of Sections of 186 of the Act during the yearwhether in terms of loans guarantees or investments.
The Whistle Blower Policy of the Company is available on its website www.kesocorp.com.
STATUTORY AUDITORS AND REPORT
Messrs. Price Waterhouse Chartered Accountants ("PW") were appointedAuditors for a period of three years at the Company's Ninety-sixth Annual General Meeting("AGM") from the conclusion of the Ninety-fifth AGM till the conclusion of theNinety-eighth AGM. As such PW retire at the conclusion of the Ninety-eighth AGM. In viewof the provisions of Section 139 of the Act PW can no more continue as the Auditors. TheBoard upon the advice of the Audit Committee wishes to recommend the appointment ofDeloitte Haskins & Sells Chartered Accountants as Auditors for a period of fiveyears from the conclusion of the Ninety-eighth AGM. A Resolution to this effect is beingproposed at the forthcoming AGM.
The Report of the Statutory Auditors for the year ended 31st March 2017 forming partof the Annual Report does not contain any qualification reservation observation adverseremark or disclaimer.
Upon a recommendation from the Audit Committee Mani & Co. Cost Accountants wereappointed to audit the cost accounting records maintained by the Company for theFinancial Year ended 31st March 2017 at a total remuneration of B5.02 lakhs excludingtaxes and reimbursement of out of pockets as stated herein:
|Product ||Name of Cost Auditor ||Remuneration in lakhs |
|Cement ||Mani & Co. ||3.10 |
|Tyre Tube & Flaps ||Mani & Co. ||1.92 |
|Total || ||5.02 |
As per Section 148(3) of the Act the remuneration payable to the Cost Auditorsrequires ratification by Shareholders. An appropriate Resolution to this effect is beingproposed at the forthcoming Annual General Meeting.
The Board reappointed Salil Banerjee FCS Practising Company Secretary (CPRegistration No. 1140) to audit the secretarial records of the Company in respect of theFinancial Year 2016-17.
The Report of the Secretarial Auditor is attached in Annexure VI to this Report. Thereare no qualifications in the Report.
PARTICULARS OF EMPLOYEES
Disclosures pertaining to remuneration and other particulars as prescribed under theprovisions of Section 197 of the Act read with Rule 5 of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are set out in Annexure VII and formspart of this Report. None of the employees listed in the said Annexure is related to anyDirector of the Company.
As per the provisions of Section 136 of the Act this Annual Report and Accounts isbeing sent to each Member and others entitled thereto excluding the information onemployee particulars as per Rule 5(2) and Rule 5(3) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 as amended. This information is readilyavailable for inspection by Members at the Company's Registered Office between 3 PM and 5PM on all working days (excluding Saturdays) up to the date of the forthcoming AnnualGeneral Meeting. Should any Member be interested in obtaining a copy (including throughemail: firstname.lastname@example.org) s/he should write to the Company Secretary at the Company'sRegistered Office.
DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE
The Company has in place the requisite Internal Committees as envisaged in the SexualHarassment of Women at workplace (Prevention Prohibition and Redressal) Act 2013.
No complaints on the issues covered by the above Act were received during the year.
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to Section 134(5) the Act and based upon representations from the Managementthe Board to the best of its knowledge and belief states that: (a) in the preparation ofthe Annual Accounts applicable accounting standards has been followed along with properexplanation relating to material departures; (b) such accounting policies have beenselected and applied consistently and such judgments and estimates have been made that arereasonable and prudent so as to give a true and fair view of the state of affairs of theCompany at the end of the Financial Year ended 31st March 2017 and of the loss for thatperiod; (c) proper and sufficient care was taken 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; (d)the Annual Accounts have been prepared on a going concern basis; (e) internal financialcontrols have been laid down to be followed by the Company and that such internalfinancial controls are adequate and operating effectively; and (f) proper systems havebeen devised to ensure compliance by the Company with the provisions of applicable lawsand that such systems were adequate and working effectively.
Manjushree Khaitan's (DIN 00055898) term as a Whole-time Director will end owing toefflux of time from close of business on 4th February 2018. It is proposed to renew herterm for another two years and an appropriate Resolution to this effect is being proposedat the forthcoming AGM. Her brief profile is given in the Report on Corporate Governance.
Tridib Kumar Das (DIN 01063824) was appointed as a Whole-time Director effective 1stApril 2016. The arrangement was determined through mutual consent from close of businesshours on 31st March 2017. It is proposed to appoint him afresh for a three year termeffective 1st April 2017 and an appropriate Resolution to this effect is being proposedat the forthcoming AGM. His brief profile appears in the Report on Corporate Governance.
All Independent Directors have furnished to the Company the requisite declarations thatthey meet the independence criteria as laid down under Section 149(6) of the Act and theListing Agreement/SEBI (Listing Obligations and Disclosure Requirements) Regulations2015.
Vinay Sah (DIN 02425847) Director nominated by Life Insurance Corporation of Indiaretires by rotation and being eligible offers himself for reappointment. His briefprofile is given in the Report on Corporate Governance.
KEY MANAGERIAL PERSONNEL
The following functioned as Key Managerial Personnel during the year:
|Manjushree Khaitan ||Executive Vice Chairperson |
|Tridib Kumar Das ||Whole-time Director and Chief Financial Officer |
|Gautam Ganguli ||Company Secretary |
Upon cessation of employment Arvind Kumar Singh Chief Executive Officer Business Operations and Enrico Malerba Chief Business Officer ceased to be Key ManagerialPersonnel effective 5th May 2016 and 1st March 2017 respectively.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNING AND OUTGO
Information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withRule 8 of The Companies (Accounts) Rules 2014 set out in Annexure VIII to this Report.
MATERIAL CHANGES BETWEEN THE END OF THE FINANCIAL YEAR AND DATE OF REPORT
There have been no material changes between the end of the Financial Year and the dateof this Report.
EXTRACTS FROM ANNUAL RETURN
Details forming part of extract from the Company's Annual Return in Form MGT 9 arefurnished in Annexure IX to this Report.
ANNEXURES FORMING PART OF THIS REPORT
I Management Discussion & Analysis
II Report on Corporate Governance
III Nomination & Remuneration Policy
IV Report on Corporate Social Responsibility (CSR) activities
V AOC 1
VI Secretarial Audit Report
VII Remuneration related disclosures per Section 197
VIII Energy Conservation Particulars
IX Annual Return Extracts
The Board wishes to gratefully acknowledge the understanding and support received bythe Company from its employees. It would wish to thank the banking system the CentralGovernment the various State Governments and the local authorities for the supportreceived during the year.
This Report will be incomplete without a specific appreciation for the Members of theCompany who have shown immense confidence and understanding in the Company's well being.
| || ||Basant Kumar Birla || |
| || ||Chairman || |
| || ||Manjushree Khaitan || |
| ||Tridib Kumar Das ||Executive Vice Chairperson || |
| ||Whole-time Director & || || |
| ||Chief Financial Officer || || |
| || ||Amitabha Ghosh || |
| || ||Kashi Prasad Khandelwal || |
| || ||Sudip Banerjee ||Director |
| || ||Lee Seow Chuan || |
|Place: Kolkata ||Gautam Ganguli ||Vinay Sah || |
|Date: 28th April 2017 ||Company Secretary || || |