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S H Kelkar & Company Ltd.

BSE: 539450 Sector: Industrials
NSE: SHK ISIN Code: INE500L01026
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OPEN 260.85
52-Week high 361.90
52-Week low 244.50
P/E 53.13
Mkt Cap.(Rs cr) 3,688
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 260.85
CLOSE 259.20
52-Week high 361.90
52-Week low 244.50
P/E 53.13
Mkt Cap.(Rs cr) 3,688
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

S H Kelkar & Company Ltd. (SHK) - Director Report

Company director report

Your Directors take pleasure in presenting their 60th Annual Report on the business andoperations of S H Kelkar and Company Limited (SHK / the Company) and audited financialstatements for the financial year ended 31 March 2016.


Financial Highlights: (Rs. in Cr)
Particulars Standalone Consolidated
2015-16 2014-15 Growth % 2015-16 2014-15 Growth %
Revenue from operations (Net) 560.93 474.07 18.32 926.56 835.53 10.89
EBITDA 116.67 97.07 20.19 164.43 142.32 15.54
Finance Costs 8.45 12.22 (30.85) 14.38 18.52 (22.35)
Depreciation 13.40 15.04 (10.90) 29.41 29.30 0.38
Profit before Tax (PBT) 94.82 69.81 35.83 120.64 94.50 27.66
Taxation 24.01 8.16 194.24 40.43 24.10 67.76
Profit after Tax (PAT) 70.81 61.65 14.86 80.21 70.42 13.90

Business Review

Fragrances have seamlessly transformed themselves into essential day-to-day productsthat form a significant part of personal grooming. Fragrances are today a vital andmainstream element of the cosmetics industry and have gained much attention from consumersacross the globe. Although fragrances constitute a small component of the final FMCGproduct they provide individuality to the product and is many a time the differentiator.

Fragrances are a way of expressing personal style and individuality thereby making ita consumer-driven industry. The fragrances market is also dictated by fickle andever-changing fashion trends. This means that manufacturers in the industry are on aconstant lookout for exciting unique and new fragrances to attract different consumersegments worldwide.

Flavours add essence to life. They have always been significant in adding the extrazing and taste to what we essentially cook and eat. Flavours bring delight to our entirefood experience turning daily meals to treats.

Welcome to Keva! With a strong parentage and long standing presence of over 90 years inthe Fragrance & Flavour Industry Keva (Consolidated SHK) has a comprehensive productlibrary of fragrances ingredients flavours & formulation. Your Company is the largestdomestic fragrance producer in India. Keva’s fragrances have several application usedas raw materials in the fabric care skin and hair care fine fragrance and householdproduct verticals while Keva’s flavouring products are used across diverse industries(bakery products confectionaries dairy products beverages and pharmaceuticals).

The growth in the domestic revenues are largely accredited towards stronger o3take andcost effectiveness across all levels within the organization. Well dispersed customer baseaccounted for the growth with no customer accounting for more than 4% of business revenue.Your Company’s performance is backed by a strong research team of scientists whichhas developed several molecules in the last 3 years.

Keva’s ability to offer tailor-made products as opposed to readymade products hasallowed it to garner consolidated revenues of 926.56 Crores during the year - up by 10.89%over the previous year 2014-15 while the consolidated net profits grew by 13.90%. Withoutprior period adjustments profits grew by 25% over previous year. Fragrances constitute94% of Keva’s sales whereas Flavours account for 6%. The domestic internationalfragrances ratio stands at 65:35 as against 63:37 in financial year 2014-15. This ispartly because of the predominant growth in the domestic fragrances and the slowing downof the growth in the export business partly due to weakening of the Euro and uncertaineconomic conditions in the Middle-East affecting demand. The net operating profit(excluding a one-o3 sale of asset and tax refund in financial year 2014-15) howeverreflects a robust growth of 42%. This has mainly been achieved due to a revenue increaseof approx. C90 Crores improved product mix coupled with management costs which has grownby only 1%. We have also had interest saving of 22% (C14.38 Crores in financial year2015-16 versus C18.52 Crores in financial year 2014-15) due to repayment of workingcapital loans with the proceeds of the IPO received in November 2015. The operating cashflow of the Company also has shown a significant improvement of 40% from C61.71 Crores infinancial year 2014-15 to 86.39 Crores on financial year 2015-16.

On standalone basis your Company achieved a topline of C560.93 Crores in fiscal2015-16 with a growth of 18.32% primarily due to growth in domestic fragrance businessdespite a slow-down in the rural demand due to an uncertain rainfall situation. Profitafter Tax for the current year is C70.81 Crores as against C61.65 Crores in the previousyear representing a healthy growth of 14.86%. The operating cash flow of the Company hasshown a significant improvement of 54.31% from C20.71 Crores in financial year 2014-15 to45.33 Crores on financial year 2015-16.

Keva has recently expanded its operations by setting up a new unit in the existingfacility in Mulund Mumbai. This unit is specially designed for fine fragrances andflavours possessing fully automated infrastructure. This will help Keva cater to the fastgrowing high margin fine fragrance business.

Keva has complied with the requirement of IFRA and ISO 9001:2008. Flavour manufacturingfacility of the Company’s subsidiary Keva Flavours Pvt. Ltd. is FSSAI certified andalso registered with the US FDA. Your Company has created a new brand identity of"KEVA" which has been launched during the year.


A detailed analysis of your Company’s performance is discussed in the ManagementDiscussion and Analysis Report which forms part of this Annual Report.


Your Company continues to benchmark itself with the best-of the-breed practices as faras corporate governance standards are concerned and is committed to transparency in allits dealings and places high emphasis on business ethics. A Report on Corporate Governancealong with a Certificate from the Statutory Auditors of the Company regarding compliancewith the conditions of Corporate Governance as stipulated under SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 form part of this Annual Report.


Given the financial performance for financial year 2015-16 on 10 March 2016 yourDirectors had declared an interim dividend of C1.50 per equity share on 144620801 fullypaid-up equity shares of face value of C10/- each for the financial year 2015-16. Thedividend was paid to members whose names were furnished by National Securities DepositoryLimited and Central Depository Services (India) Limited as beneficial owners on 18 March2016.

The Board recommends that the said interim dividend be declared as final dividend forthe financial year 2015-16 subject to approval of the shareholders at the ensuing AnnualGeneral Meeting.

The dividend payout for the year under review has been formulated in accordance withthe Company’s policy to pay sustainable dividend linked to long term growthobjectives of the Company.


As on 31 March 2016 the Company had subsidiaries in India United KingdomNetherlands Singapore and Indonesia as mentioned hereunder:

• Keva Fragrances Pvt. Ltd.

• Keva Flavours Pvt. Ltd.

• K.V. Arochem Pvt. Ltd.

• Saiba Industries Pvt. Ltd.

• Keva UK Ltd. United Kingdom

• Keva Fragrance Industries Pte. Ltd. Singapore

• PFW Aroma Ingredients B.V. Netherlands (step-down subsidiary)

• PT SHKKEVA Indonesia (Indonesia) (step-down subsidiary)

• Keva Chemicals Pvt. Ltd. (step-down subsidiary)

A statement containing the salient features of the financial statement of oursubsidiaries in the prescribed format AOC-1 is appended as Annexure A to this Report. Thefinancials of foreign subsidiaries have been adjusted to align with group accountingpolicies.

Financial and operational performance of the subsidiaries is given hereunder:

Keva Fragrances Private Limited

Keva Fragrances Private Limited is involved in the business of manufacture and exportsof fragrances and flavours. The company registered a marginal increase of 6.15% in revenue(C175.83 Crores in financial year 2015-16 as against C165.64 Crores in financial year2014-15 and 2.14% in profit after tax (C31.01 Crores in financial year 2015-16 as againstC30.36 Crores in financial year 2014-15). This is attributed to slow-down of theinternational business during the financial year 2015-16 primarily due to uncertaineconomic and political conditions in the Middle East.

Keva Flavours Private Limited

It has been said that taste is "King" when introducing new food products toconsumers and hence flavour usage plays a pivotal function in packaged food applicationsin all geographic regions. Keva Flavours Private Limited develops flavours that underpinfood and beverage brands in India. Though the Company has been in the business for severaldecades its focus is on constantly reinventing itself. The result is your Company’sability to consistently create flavours that give brands as edge of novelty allmanufactured at your Company’s state-of-the-art FSSC 22000:2011 certified plant.During the year under review the company recorded revenue of C28.01 Crores fromoperations – up by 8.23% over last year’s sales of 25.88 Crores and profit aftertax of C2.46 Crores as against C1.73 Crores during previous year representing a growth of42.20%. With acquisition of Flavours Division of High-Tech Technologies (refer acquisitionsection) the Company is all set to reflect significant growth in the coming financialyear.

K.V. Arochem Private Limited

K.V. Arochem Private Limited is involved in the manufacture and sale of aromaingredients which are used to impart fragrance to various end-use products. During thefinancial year 2015-16 the company recorded total revenue of C87.04 Crores as againstC55.88 Crores representing a growth of 55.76%. The Company incurred loss of C2.07 Croresas against C5.00 Crores previous year. This is mainly due to accelerated depreciation ofC6.23 Crores on our new investment however the loss has been significantly reduced by58.60% as compared to previous year. The operating cash flow of the Company is positive atC3.38 Crores. In the medium term the company is confident of mitigating its losses andbecoming profitable due to the Company’s ability to manufacture and sell value addedaroma ingredients coming out from its state of the art manufacturing facilities.

Saiba Industries Private Limited

Natural Essential oils & Natural Extracts have become a USP via Aromatherapeuticadditive. Saiba Industries Private Limited is involved in the business of manufacture andsale of plant extracts. During the year under review the company registered an operatingrevenue of C4.06 Crores in the financial year 2015-16 as against C3.40 Crores in financialyear 2014-15 and profit after tax of C0.76 Crores in the financial year 2015-16 as againstC0.90 Crores in financial year 2014-15.

PFW Aroma Ingredients B.V.

PFW Aroma Ingredients B.V. is involved in the business of manufacture and sale of aromaingredients. During the year under review the company registered a revenue of C177.52Crores as against C206.28 Crores during the previous year and loss of C2.24 Crores asagainst net profit of C0.55 Crores during the previous year. The revenue declined comparedto the previous financial year primarily due to weakening of the Euro which affected bothsales and costs. Majority of the revenues of the Company are recorded in Euros whereas alarge portion of the raw materials is purchased in USD. The management is in the processof carrying out a comprehensive review of its existing contractual obligations and futurebusiness potential.

Keva UK Limited

Keva UK Limited is authorised by its constitutional documents to manage the investmentof our Company in PFW Aroma Ingredients B.V. The company did not carry any business duringthe year. During the year under review the company registered an operating revenue ofC1.10 Crores as against 1.06 Crores during the previous year and profit after tax of C0.71Crores as against C0.34 Crores during the previous year.

Keva Fragrance Industries Pte. Ltd.

Keva Fragrance Industries Pte. Ltd. Singapore is involved in the business ofproviding sales and marketing assistance to us in South East Asia. In order to spearheadour market access and growth plans of South East Asia we have formed this Company throughwhich our operating subsidiary has been created in Indonesia. During the year underreview the company registered a turnover of C3.01 Crores and a loss of C0.46 Crores asagainst C0.61 Crores during the previous year.

PT SHKKeva Indonesia

PT SHKKeva Indonesia is involved in the business of trading and distribution ofperfumery compounds. During the year under review the company registered an operatingrevenue of C6.24 Crores as against C2.28 Crores during the previous year and loss of C4.51Crores as against C3.51 Crores during the previous year. The Company intends to expand itspresence in Indonesia due to immense potential of the market.

Keva Chemicals Private Limited

Keva Chemicals Private Limited is involved in the business of aroma ingredients etc.During the year under review the Company has not earned any income from operations as nobusiness activity was undertaken by the Company. The Net Loss of the Company during thefinancial year ended 31 March 2016 amounted to C0.15 Lacs as against C0.22 Lacs during theprevious year.


The consolidated financial statements of your Company for the financial year 2015-16are prepared in compliance with applicable provisions of the Companies Act 2013Accounting Standards and as prescribed by Securities Exchange Board of India (SEBI) under(Listing Obligations and Disclosure Requirements) Regulations 2015 (hereinafter referredto as ‘SEBI Listing Regulations’). The consolidated financial statements havebeen prepared on the basis of audited financial statements of the Company and itssubsidiary companies as approved by their respective Board of Directors. The FinancialStatements as stated above are also available on the website of the Company


To achieve inorganic growth in operations your Company is aggressively working foracquisitions of brands businesses etc. which have synergy with the business operationsof the Company. On 02 April 2016 your Company has acquired Rasiklal Hemani Agencies Pvt.Ltd. (RHAPL). RHAPL are the indenting agents in Northern region for Company’sfragrances for 50 years and generate and collect revenues over C125 Cr p.a from NorthIndia region (FY’15 C105 Cr). Through deep industry knowledge and wide network oftrade contacts of its promoters RHAPL has over the years built a strong portfolio ofcustomers for the Company’s fragrances. The acquisition shall enable the Company toexpand the marketing and field activities in Northern region by directly reaching thecustomers through RHAPL’s infrastructure.

Keva further ventured into inorganic growth by taking up an acquisition in the flavoursbusiness too which helped it get new technologies and newer customer base. Your Companyhas acquired through Keva Flavours Pvt. Ltd. (subsidiary) the Business Undertaking ofHi-Tech Technologies comprising of Flavours Division on 02 April 2016. The acquisitionshall enable expanding our presence in the Flavours business.


During the year under review the Board of Directors of your Company considered andapproved the proposal of merger of Keva Fragrances Private Limited with K V ArochemPrivate Limited both of which are fellow wholly-owned subsidiaries of the Company. Themerger is in line with the disclosure made in the Prospectus dated 02 November 2015.

The merger would enable optimal utilisation of existing resources through consolidationof operations into a single legal entity provide an opportunity to leverage and poolskilled and experienced manpower of the respective companies and derive operational andfinancial synergies through prudent financial management and cost reduction. Bothsubsidiaries filed Company Summons for Direction under Sections 391 to 394 of theCompanies Act 1956 in the High Court of Hon’ble Judicature of Bombay Mumbai on 10February 2016 and Petition on 25 April 2016.

The merger being between fellow subsidiaries the same would not result in any changein the shareholding pattern of the Company.


Public Issue

Your Company had come up with an Initial public issue of 28231827 equity shares offace value C10 each for cash at a price of C180 per equity share (including a sharepremium of C170 per equity share) aggregating C5081.73 million consisting of a freshissue of 11666666 equity shares by the Company and an offer for sale of 13141000equity shares 86575 equity shares and 3337586 equity shares by Blackstone CapitalPartners (Singapore) VIFDITwo Pte. Ltd. Blackstone Family Investment Partnership(Singapore) VI-ESC FDI Two Pte. Ltd. and Mrs. Prabha Vaze. The shares of your Company gotlisted on BSE Limited (BSE) and National Stock Exchange of India Limited (NSE) on 16November 2015.

Conversion of CCPS D

The Company had received a consideration of C227576250 from Blackstone CapitalPartners (Singapore) VI FDI Two Pte. Ltd. Blackstone Family Investment Partnership(Singapore) VI-ESC FDI Two Pte. Ltd. towards allotment of 9195 Compulsorily ConvertiblePreference Shares of Series D ("CCPS D") of face value of C1000 on 16 April2013. These were subdivided into 919500 CCPS D of face value of C10 each on 17 October2014. On the same date 8275500 CCPS D were allotted as a bonus issue. On 05 October2015 9195000 CCPS D of C10 each were converted to 683135 Equity Shares resulting inan aggregate conversion price of C333.13 per Equity Share.


The Company has not issued shares with differential voting rights nor granted stockoptions nor sweat equity.


Your Company has not accepted any deposits within the meaning of Section 73 of theCompanies Act 2013 read with Companies (Acceptance of Deposits) Rules 2014 during theyear.


Particulars of loans given investments made guarantees given and securities providedas covered under the provisions of Section 186 of the Act are given in the notes to theFinancial Statements.



Particulars of contracts or arrangements with related parties referred to in Section188(1) of the Companies Act 2013 in the prescribed Form AOC-2 is appended as Annexure Bto this Report.


Mr. Ramesh Vaze was re-appointed as the Managing Director by the shareholders in theannual general meeting held on 22 September 2015 for a period of five years with effectfrom 01 September 2015. Mr. Kedar Vaze was re-appointed as the Whole-time Director &Group CEO by the shareholders in the annual general meeting held on 22 September 2015 fora period of five years with effect from 01 September 2015.

Mr. Amit Dalmia Non-Executive Director is liable to retire by rotation at the ensuingAGM pursuant to the provisions of Section 152 of the Companies Act 2013 read with theCompanies (Appointment and Qualification of Directors) Rules 2014 and being eligible hasoffered himself for re-appointment. Your Directors recommend his re-appointment asNon-Executive Director of your Company. Neither the Managing Director nor the Whole-timeDirector of the Company receives any remuneration or commission from any of itssubsidiaries. None of the Directors of the Company has been disqualified to be a Directorof the Company on account of non-compliance with any of the provisions of the CompaniesAct 1956 or Companies Act 2013 as applicable. The Independent Directors have beenfamiliarised with the Company their roles rights responsibilities in the Company etc.The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence as prescribed under the CompaniesAct 2013.


During the year 8 (eight) Board Meetings were convened and held on 17.04.201519.06.2015 19.08.2015 05.10.2015 (2 meetings) 21.12.2015 09.02.2016 and 29.03.2016.The intervening gap between the Meetings was within the period prescribed under theCompanies Act 2013.


The Independent Directors of the Company meet without the presence of the Chairman& Managing Director or Executive

Director or other Non-Independent Directors. These Meetings are conducted in aninformal and flexible manner to enable the Independent Directors to discuss matterspertaining to inter alia review of performance of Non-Independent Directors and theBoard as a whole assess the quality quantity and timeliness of flow of informationbetween the Company Management and the Board that is necessary for the Board toeffectively and reasonably perform their duties. Two such meetings were held during theyear on 19 August 2015 and 29 March 2016.


The Company has constituted various Board level committees in accordance with therequirements of Companies Act 2013. The Board has the following committees as under:Audit Committee Nomination & Remuneration Committee Corporate Social ResponsibilityCommittee Stakeholders’ Relationship Committee Details of the above Committeesalongwith composition and meetings held during the year under review are provided in theCorporate Governance Report forming part of this report.


In terms of the provisions of the Companies Act 2013 read with Rules issuedthereunder the Nomination and Remuneration Committee has formulated a process forevaluation of Board/ Directors/Committees of the Board. Accordingly the performance ofthe Board/Director(s)/Committees for the financial year 2015-16 has been evaluated.

A structured questionnaire has been prepared covering various aspects of thefunctioning of the Board and its Committee such as adequacy of the constitution andcomposition of the Board and its Committees processes followed at the meeting Board`sfocus Board’s strategy and risk management etc. Similarly for evaluation ofIndividual Director’s performance the questionnaire covers various aspects likehis/her contribution in Board and Committee meetings knowledge to perform roleunderstanding of role and responsibilities business of the Company along with theenvironment.

The Independent Directors had met separately without the presence of Non-IndependentDirectors and the members of management and discussed inter-alia the performance of non-Independent Directors and Board as a whole. The Nomination and Remuneration Committee hasalso carried out evaluation of every Director`s performance. The performance evaluation ofall the Independent Directors has been done by the entire Board excluding the Directorbeing evaluated.

The Directors expressed their satisfaction over the evaluation process.


The Company considers human resources as its invaluable assets. The Nomination andRemuneration policy on nomination and remuneration of Directors Key Managerial Personnel(KMPs) Senior Management and other employees has been approved by the Board of Directorsof your Company based on the recommendations of the Nomination and RemunerationCommittee in terms of the provisions of the Companies Act 2013 in order to pay equitableremuneration to the Directors KMPs Senior Management Personnel and employees of theCompany (including its subsidiaries) and to harmonise the aspirations of human resourcesconsistent with the goals of the Company.

The Key Objectives of the Policy are:

• To guide the Board in relation to appointment and removal of Directors KeyManagerial Personnel and Senior Management.

• To evaluate the performance of the members of the Board

• To recommend to the Board on Remuneration payable to the Directors KeyManagerial Personnel and Senior Management.

The guiding principles of the policy are to ensure that:

• The level and composition of remuneration is reasonable and sufficient toattract retain and motivate Directors of the quality required to run the Companysuccessfully benchmarks and

• Relationship of remuneration to performance is clear and meets appropriateperformance balance between fixed and incentive

• Remuneration to Directors Key Managerial Personnel and Senior Managementinvolves a pay reflecting short and long term performance objectives appropriate to theworking of the Company and its goals.

In accordance with the Nomination and Remuneration Policy the Nomination andRemuneration Committee:

• Formulates the criteria for appointment as a Director; Key Managerial Personneland Senior Management Identifies persons who are qualified to be Directors and nominatescandidates for Directorships subject to the approval of Board

• Evaluates the performance of the individual directors Recommends to the Boardremuneration to Managing Director / Whole-time Directors

• Ensures that the remuneration to KMP Senior Management and other employees isbased on Company’s overall philosophy and guidelines and is based on industrystandards linked to performance of the self and the Company and is a balance of fixed payand variable pay

• Recommends to the Board sitting fees/commission to the Non- Executive Directors


The Key Managerial Personnel in the Company as per Section 2(51) and 203 of theCompanies Act 2013 are as follows:

Mr. Ramesh Vaze: Managing Director

Mr. Kedar Vaze: Whole Time Director and Group Chief Executive Officer and

Mr. Tapas Majumdar: Executive VP and Chief Financial Officer

Mrs. Deepti Chandratre: Company Secretary & Manager - Legal


In terms of Section 134 (5) of the Companies Act 2013 the directors would like tostate that: a) In the preparation of the annual accounts the applicable accountingstandards have been followed; b) The directors have selected such accounting policies andapplied them consistently and made judgments and estimates that were reasonable andprudent so as to give a true and fair view of the state of a3airs of the Company at theend of the financial year and of the profit or loss of the Company for the year underreview; c) 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;d) The directors have prepared the annual accounts on a going concern basis; e) Thedirectors have laid down internal financial controls to be followed by the company andthat such internal financial controls are adequate and were operating effectively; and f )The directors have devised proper system to ensure compliance with the provisions of allapplicable laws and that such system were adequate and operating effectively.


Your Company’s Auditors B S R & Co. LLP [holding Registration No.101248W/W-100022 with the Institute of Chartered Accountants of India (ICAI)] wereappointed as the Statutory Auditors at the Annual General Meeting of the Company held on18 September 2014 for a term of five consecutive years. As per the provisions of Section139 of the Companies Act 2013 their appointment is to be ratified by the shareholdersunder Section 139 of the Companies Act 2013 at the ensuing Annual General Meeting. TheStatutory Auditors have confirmed their eligibility to the effect that their appointmentif ratified would be within the prescribed limits under the Act and that they are notdisqualified for appointment.

The Auditors’ Report on the Annual Accounts of the Company forms part of theAnnual Report and when read with notes on financial statements is self- explanatory andhence does not call for any further comments under Section 134 of the Companies Act2013. The Auditors’ Report does not contain any qualification reservation or adverseremark.


Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hadappointed M/s. Mehta & Mehta Practising Company Secretaries as its SecretarialAuditor to undertake the secretarial audit for the financial year 2015-16. The SecretarialAudit Report for the financial year ended 31 March 2016 is annexed herewith as Annexure Cto this Report. The Secretarial Audit Report does not contain any qualificationreservation or adverse remark.


Your Company believes that internal control is a necessary concomitant of the principleof governance that freedom of management should be exercised within a framework ofappropriate checks and balances. Your Company remains committed to ensuring an effectiveinternal control environment that inter alia provides assurance on orderly and efficientconduct of operations security of assets prevention and detection of frauds/ errorsaccuracy and completeness of accounting records and the timely preparation of reliablefinancial information. The internal control systems are commensurate with its sizerequirements and the nature of operations. Pursuant to the changes in the Companies Act2013 and Companies (Accounts) Rules 2014 a controls assurance program covering InternalFinancial Controls (IFC) has also been implemented during the year and would continue asan enhancement to the existing internal control systems.

Your Company’s robust Internal Audit processes provide assurance on the adequacyand effectiveness of internal controls compliance with operating systems internalpolicies and regulatory requirements. These systems are designed keeping in view thenature of activities carried out at each location and various business operations.

Haribhakti & Co. LLP had been appointed as Internal Auditors of your Company forthe Financial Year 2015-16 in terms of Section 138 of the Companies Act 2013. A summaryof the Internal Audit Reports containing significant findings by the Internal Auditoralongwith follow-up actions thereafter is placed before the Audit Committee for review.The Audit Committee reviews the comprehensiveness and effectiveness of the report andprovides valuable suggestions and major observations from time to time.


Management of risk has always been an integral part of the Company’s strategy andstraddles its planning execution and reporting processes and systems. Your Companycontinues to focus on a system-based approach to business risk management.

The Board of Directors of your Company has formulated and approved a Risk ManagementPolicy for good corporate governance in terms of the requirement of the Companies Act2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. ThePolicy has been drafted to identify the risks to the Company and to control and manage therisks and mitigate the loss from the risks. Accordingly the Company manages monitors andreports on the principal risks and uncertainties that can impact its ability to achieveits strategic objectives.

The risks that my affect us include but are not limited to:

• increasing costs of raw material transport and storage; supplier anddistributor relationships and retention of distribution channels inflationary pressuresand other factors affecting demand of our products economic conditions competitive marketconditions attrition of key staff seasonal fluctuations exchange rate fluctuationpolitical risks associated with unrest and instability in countries where we have presenceor

• compliance and regulatory pressures including changes to tax laws andenvironmental laws


Your Company is committed to highest standards of ethical moral and legal businessconduct. The Vigil Mechanism as envisaged in the Companies Act 2013 the Rules prescribedthereunder and the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 is implemented through the Company’s Whistle Blower Policy to provideappropriate avenues to the employees of the Company to report genuine concerns to providefor adequate safeguards against victimisation of persons who use such mechanism and makeprovision for direct access to the Chairman of the Audit Committee.

The Company conducts workshops from time to time to encourage employees to raise any oftheir concerns by way of whistle blowing.

The Whistle Blower Policy may be accessed on the website of the Company

The employees of the Company have the right/option to report their concern/grievance tothe Chairman of the Audit Committee. During the year under review no protected disclosurefrom any Whistle Blower was received by the designated Officer under the Vigil Mechanism.


During the year under review no significant or material orders were passed by theRegulators or Courts or Tribunals which impact the going concern status and Company’soperations in future.


The Company is an equal opportunity employer and consciously strives to build a workculture that promotes dignity of all employees. In line with the requirements of theSexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013the Company has formulated a policy on Prevention of Sexual Harassment at Workplace. ThePolicy is gender neutral. All employees (permanent contractual temporary trainees) arecovered under this Policy. The Company has also set up an Internal Complaints Committeefor providing a redressal mechanism pertaining to sexual harassment at workplace. Therewas no case of sexual harassment reported during the year under review.


Your Company’s overarching aspiration to create significant and sustainablesocietal value inspired by a vision to sub-serve a larger national purpose and abide bythe strong value of trusteeship is manifest in its Corporate Social Responsibility (CSR)initiatives that embrace the disadvantaged sections of society especially in rural India.Towards this end the Company adopted a comprehensive CSR Policy that defines theframework for your Company’s CSR Programme. The CSR Policy may be accessed on theCompany’s website at the link:

The Company has identified following focus areas of engagement which are as under:

• Environment: Environmental sustainability ecological balance conservation ofenergy

• Education & Employability: Girl child education and empowerment equippingand upgradation of educational infrastructure set up with an aim to provide improved andadvanced education system support visually challenged people through perfumery trainingsand employability

• Rural Development: To uplift the masses by working towards health wellbeing andeducation in and around our manufacturing plants; Community Development projects to createlivelihood better environment and infrastructure facilities; To partner in Relief

• Operations in rural areas in case of natural calamity or disaster

The Company also undertakes other need based initiatives in compliance with ScheduleVII to the Act. During the year the Company has spent C0.79 Crore on CSR activities.

The Annual Report on CSR activities is annexed herewith marked as Annexure D.


Your Company has always considered energy and natural resource conservation as a focusarea. Though the Company’s operations involve low energy consumption the Company hasalways been conscious of the need for conservation of energy and has been sensitive inmaking progress towards this end. The Company advocates energy efficiency in the course ofproduction and thereby reduces its carbon footprint. Energy efficiency improvementinitiatives have been implemented across all the Plants and Offices by undertaking variousenergy and resource conservation projects for sustainable development. The manufacturingfacilities of the Company are equipped with hi-tech energy monitoring and conservationsystems to monitor usage minimize wastage and increase overall efficiency at every stageof power consumption.

The following key initiatives have been undertaken by your Company towards conservationof energy/utilising alternate sources of energy:

• Installation of Energy Efficient LED lights in place of conventional lightswhich led to cost saving of C2.80 lacs.

• Close monitoring of lighting system by providing dedicated team to avoidunwanted lighting power.

• Upgradation of drum and can heating system to Energy efficient layout andInsulation to FO tank which led to cost saving of C1.65 lacs.

• Installation of Solar Panels at Mulund Unit

• Installation of DMF i.e. Dual Media pressure sand with activated carbon Filterat Mulund Unit to re-use the treated water from DMF for gardening purpose.

• Implemented tertiary treatment system for Efluent treatment plant to reduce CODload in discharge at Vashivali and Mulund Units of the Group

• Incorporation of Variable Frequency Drives at Vapi Unit of the Group whereverfeasible.

• The cooling tower for Multi-Purpose Plant at Vapi was installed at the terraceof the four storied building to make use of the gravitational force for circulation ofwater which reduced power consumption.

During the current year the Company plans to install sliding vane vacuum pumps inplace of steam ejectors as a measure towards energy conservation. The capital expenditureon energy conservation during the year under review was nil.

To make available the resources for future generation is the ultimate responsibility oftoday’s generation. Hence your Company continues to lay emphasis on conservation ofenergy power and other energy resources. The Company is confident that such measures forconservation of energy will ultimately reduce the cost of production by reducingmaintenance cost and efficient use of resources.


An essential part of being a responsible company and employer is the health and safetyof our employees and the protection of the environment in which we operate. YourCompany’s approach is to institutionalise safety as a value-led concept with focus oninculcating a sense of ownership at all levels and driving behavioural change leading tothe creation of a safety culture. Systemic and structured e3orts continue to be madetowards natural resource conservation by continuously improving resource-use efficienciesand enhancing the positive environmental footprint.

Your Company has addressed the critical area of climate change mitigation throughthrough continuous improvement in energy efficiency enhancing the renewable energyportfolio integrating green attributes into the built environment better efficiency inmaterial utilisation maximising water use efficiencies and rain water harvestingmaximising reuse and recycling of waste and increasing use of post-consumer waste as rawmaterial.


In today’s world perpetually evolving technologies and increasing competitiondefine the global market space. Constant innovation is the backbone of the work culture ofyour Company. In order to maintain its position of leadership the Company hascontinuously and successfully developed innovative methods for absorbing adapting andeffectively deploying new technologies. Driving and sustaining this is critical tobusiness in order to find new areas of growth and to ensure maximum customer satisfaction.

Your Company’s R&D function continues to focus on development of superiorproduct innovations renovation of the current portfolio for superior product experiencebuilding analytical excellence and regulatory compliance for the portfolio. Your Companyhas built up state-of-the-art R & D centres equipped with the infrastructure requiredfor research and new product development and have qualified staff working continuously forbetterment of product and services. Our R&D team continuously does market research aswell as customer survey to understand the needs and requirements of the consumers.Expenditure on R & D during the year under review was C10.63 Crores on standalonebasis and C28.21 Crores on consolidated basis. Quality control for raw materials as wellas our facilities is another aspect of utmost importance to the Company.

Core research areas will enable your Company to innovate ahead of the market andcompetition renovate the products for superior value and sensorial delight costreduction while delivering the same experience for profitable growth and above all builda very strong pipeline of innovation and superior products. The Company’s R&Dinitiatives are reflected in its unique formulations and varied product offerings all thewhile keeping an eye on providing a3ordable products to the customers.

Your Company’s R&D function will continue to focus on consumer insight basedunique differentiated yet relevant superior products renovation of the portfolio forbetter value and sensorial delight leading to sustainable profitable share growth for yourCompany.


The Foreign Exchange earned in terms of actual inflows during the financial year2015-16 is C15.61 Crores as against C8.57 Crores in financial year 2014-15. The ForeignExchange outgo in terms of actual outflows during the financial year 2015-16 is C194.89Crores as against C175.82 Crores in financial year 2014-15.


At Keva key element of its vision is to offer best place to work for people who shareour passion. Our people are one of our unique strengths and each one of our employees isinstrumental to your Company’s success. During the year under review your Companyhas strengthened its last year’s HR focus to drive transformation through growth andhigh performance culture. Your Company has continuously strengthened its talent poolthrough influx of high calibre professionals externally and internally to ready theorganization for future strategy and building capability.

The Company is continuously focused on building high performance culture which has adirect linkage with business. With performance comes a culture of recognition which in along way motivates and inspires people to achieve extra ordinary results. KEVA STAR –our Global Employee Recognition Program aims to appreciate stellar and power packedperformance backed by a positive approach right behaviour and demonstrated e3orts towards‘Walking the Extra Mile’ and ‘Going Above and Beyond’.

Keva offer’s self - paced learning and development opportunities and promises to"sharpen the saw" for our people by providing world class learning solution‘LEAD’ our e-learning initiative. Piloting with Mastering CompetenciesCertification Program Premier online competency certification program allows eachindividual from the management cadre to learn and master the ’Keva BehaviouralCompetency Framework’ thereby deeply embedding winning actions and behaviours.

Human Resource is now digital with HR automation transitioning from paper-based HRprocesses to a streamlined cloud based online system. Your Company embarking upon atransformational journey has implemented Success Factors which is a single window HRplatform. We continuously reinforce quality performance and excellence at corporate andmanufacturing plants. Our quality initiatives like Quality Circles have resulted inenhancing and strengthening productivity and performance.

All the above initiatives have enabled your Company to be ranked 39th Dream Company toWork for at the World HRD Congress at Mumbai in February 2016.

Disclosures with respect to the remuneration of Directors Key Managerial Personnel andemployees as required under section 197 of the Companies Act 2013 read with Rule 5 (1) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are givenin Annexure E to this Report. Details of employee remuneration as required underprovisions of section 197 of the Companies Act 2013 read with Rule 5(2) & 5(3) ofCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 also formspart of this Report. However as per the provisions of Section 136 of the Companies Act2013 the report and accounts are being sent to the Members and others entitled theretoexcluding the said information which is available for inspection by the Members at theRegistered Office of the Company during business hours on working days of the Company upto the date of the ensuing Annual General Meeting. If any Member is interested inobtaining a copy thereof such Member may write to the Company Secretary in this regard.


Industrial Relations at all the units remained cordial. This has helped to build ahealthy relationship and resolve issues through mutual dialogue. A couple of majorachievements in this area were the successful conclusion of a long term wage settlementbetween the Company and trade union at Vashivali Plant that took effect retrospectivelyfrom 01 January 2015 and will be in force till 31 December 2018 and conclusion of a longterm wage settlement between K. V. Arochem Pvt. Ltd. subsidiary of the Company and tradeunion at Vapi Plant that took effect retrospectively from 01

July 2014 and will be in force till 30 June 2017. The settlements are expected tocontribute towards enhancing productivity at the plants to adapt to a richer work culture.The Board acknowledges the contribution of the workers and the employees towards meetingthe objectives of the Company.


The Company supported by a robust backbone of modern IT infrastructure has been ableto achieve a strong year on-year performance. The deployment of our ERP system based onSAP was fully completed in financial year 2014-15. SAP system has allowed your Company tostandardize a lot of business processes across the group and allow faster and moreaccurate group reporting.

CUPID is a homegrown ERP application for a Customer Project Integrated DevelopmentProcess that provides a state of the art solution for project management. CUPID provides asingle platform for managing customer projects right from the moment sales person entersthe customer’s project until the time samples are delivered to the sales person forcustomer submission. At present CUPID is used for fragrances business and has been quitesuccessful since launch. We are planning to extend it to the Flavours business soon.

While SAP and CUPID together generate a lot of transactional data the real power ofdata lies in its interpretation - Ability to analyse business data and get an overview atthe click of a button; Ability to compare business results vs. set targets; Ability tosetup KPIs and monitor performances of key aspects of business. All this has been madepossible with Qlikview. Qlikview extracts data from SAP / CUPID and from other datasources and provides an online overview of the health of business.

With all our operations supported globally through SAP we now have a major asset toenable significant further improvements and efficiencies. These systems herald a new phaseof continuous improvement and allow us to gather analyse and leverage business data inways never before possible. It will contribute to our ambition in IT to be innovativedeliver solutions to the business in agile ways and offer the right service at the rightcost.


The details forming part of the extract of the Annual Return in Form MGT- 9 inaccordance with Section 92(3) of the Companies Act 2013 read with the Companies(Management and Administration) Rules 2014 are set out herewith as Annexure F to thisReport.


Your Company has been honoured with several prestigious awards and accolades which hasstrengthened its capability and governance. Here is a quick glimpse of some of them:

1. Best in Culture Transformation – adjudged Finalist by People Matters atBangalore India 2015. The L&D Leadership League recognizes the best of the bestpractices in the learning function. The category Culture Transformation recognized theoutstanding Culture Transformation practice of Keva - business people and culture.

2. 39th Rank - Dream Companies To Work For by World HRD Congress at Mumbai India2016. The World HRD Congress recognizes corporate and individuals for their contributionin employee engagement strategic HR management talent management recruiting andstaffng. We were adjudged 39th ranked out of top 50 select organizations amongst over 400participating organizations.

3. ISO 9001: 2008 standard recertified - Our sustained QMS (Quality Management System)implementation has been validated at Vashivali plant Raigad Maharashtra India in August2015.

4. FSSC 22000: 2012 Certification- Our robust Food Safety Management System in place inour subsidiary Keva Flavours Pvt. Ltd. that meets the requirements of our customers andconsumers has been certified at Vashivali plant Raigad Maharashtra India in October2015. Food Safety System Certification provides a framework for effectively managingorganization’s food safety responsibilities. FSSC 22000 is fully recognized by theGlobal Food Safety Initiative (GFSI) and is based on existing ISO Standards.

5. URSA (Understanding Responsible Sourcing Audit) certified – Our VashivaliPlant Raigad Maharashtra India in December 2015 has been certified for URSA. This is anaudit protocol which enables independent assessment of our performance and complianceagainst all applicable laws and regulations and the additional requirements ofUnilever’s Responsible Sourcing Policy (RSP).


Your directors place on record their appreciation of the continued support extendedduring the year by the company’s customers business associates suppliers bankersinvestors and government authorities. Your directors would also like to thank all theirshareholders for their continued faith in the company and its future. The Directors alsoacknowledge the unstinted commitment and valued contribution of all employees of theCompany.

For and on behalf of the Board of Directors of
S H Kelkar and Company Limited
CIN: L74999MH1955PLC009593
Ramesh Vaze Kedar Vaze
Mumbai Managing Director Director & Chief Executive Officer
27 May 2016 DIN: 00509751 DIN: 00511325