Your Directors have pleasure in presenting the 47th Annual Report on thebusiness and operations of Apollo Tyres Ltd. (the Company") together with theaudited financial statements for the financial year ended March 31 2020.
The financial performance of the Company for the financial year ended March 31 2020 issummarised below:
| || |
|Particulars ||March 31 2020 ||March 31 2019 ||March 31 2020 ||March 31 2019 |
| || |
|Net Sales ||108327 ||120896 ||160965 ||172734 |
|Other Income and Other Operating Income ||2642 ||3756 ||2774 ||3986 |
|Operating Profit (EBIDTA including Other Income) ||14278 ||15906 ||19623 ||20818 |
|Less: Depreciation/Amortisation Exp. ||6207 ||4463 ||11381 ||8127 |
|Finance Cost ||2257 ||1379 ||2808 ||1811 |
|Provision for Tax ||728 ||2143 ||670 ||2083 |
|Net Profit before share of Profit in Associate/ Joint Venture and Exceptional Items ||5086 ||7921 ||4764 ||8797 |
|Add: Exceptional Items ||- ||(2000) ||- ||(2000) |
|Add: Share of Profit in Associate/ Joint Venture ||- ||- ||- ||1 |
|Net Profit ||5086 ||5921 ||4764 ||6798 |
In our key market India the tyre industry is closely linked to the automobileindustry. Given the decline in the Indian auto industry the tyre industry also saw adegrowth for FY20. According to the 11 months data of FY20 from Automotive TyreManufacturer Association (ATMA) the tyre industry declined by 6% as compared to the11months numbers of FY19.
In the Company's other key market Europe the tyre industry performed poorly due topoor growth in the auto sector. A detailed analysis of the tyre industry for India andEurope has been shared in the Management Discussion and Analysis section of the annualreport.
On a standalone basis your Company achieved a net sales of ' 108327 million asagainst ' 120896 million during the previous financial year. EBIDTA was at ' 14278million as compared to ' 15906 million during the previous financial year. The Net Profitfor the year under review was ' 5086 million as against '5921 million in the previousfiscal.
The consolidated net sales of your Company was ' 160965 million during FY20 ascompared to ' 172734 million in FY19. The consolidated EBIDTA was '19623 million forFY20 as compared to ' 20818 million for the previous financial year. On consolidatedbasis Apollo Tyres earned a Net Profit of ' 4764 million for FY20 as against ' 6798million for the previous financial year.
The raw material cost in India had fallen by approx. 5% in FY20 over the previous yearaided by a drop in Carbon Black Synthetic Rubber Nylon Fabric and Chemicals prices.
Oil based raw materials witnessed a drop due to reduction in crude oil prices. Brentcrude prices were 14% lower in FY20 over the previous year. The Brent Crude Oil ruled inthe Band of USD 60- 65/bbl for most part of this year however it witnessed a sharp fallin Q4 FY20 to a level of USD 34/bbl in March 2020 due to drop in demand and inability ofthe major oil producing countries to come to an agreement to regulate the production andsupply levels in view of the falling demand on account of COVID-19.
The Indian Rupee was steady at approx. 70 against the USD during first half of theyear. The rupee breached the level of 74 by end of the year registering a modest 1%weakening against the USD over the last fiscal.
The domestic natural rubber prices had seen an increase of approx. 7% in the currentfiscal year over last year. The domestic supplies were partially impacted during the yeardue to erratic weather pattern. The international rubber prices witnessed a spike in H2FY20 on the backdrop of reduced production and supplies from Indonesia and Thailand due tothe onset of fungal leaf disease before easing out towards the end due to demand slowdown.The inverted duty structure on natural rubber continued through the year. The portrestrictions on natural rubber and the pre-import condition on natural rubber importsunder Advance Licences continued during the year.
The anti-dumping duty imposed on imports of Styrene Butadiene Rubber (SBR) from KoreaThailand and Europe continues. Initiation of Bilateral Safeguard Investigation for importof Poly Butadiene Rubber (PBR) from Korea under the India-Korea CEPA was done in the lastyear. Anti-subsidy investigation concerning imports of SBR into India from Korea was alsoinitiated in FY20. The conventional grades of Synthetic Rubber -SBR and PBR
are being produced in India Leading to import substitution. The Solution SBRs and NdNeodymium PBR used in the manufacture of tyres with low rolling resistance and Ultra HighPerformance tyres are not produced in India and need to be sourced from Europe and SouthEast Asia. The custom duty on Bromo Butyl increased from 5% to 10% in July 2019.
The Carbon Black supplies have remained stable after capacity expansion /de-bottlenecking by the local industry and the subdued automobile demand throughout theyear. The anti-dumping duty on imports of Carbon Black from China and rubber chemicalsfrom Europe continues.
Nylon fabric showed a moderate weakening in prices in FY20 due to fall in prices incrude oil derivatives. The custom duty on nylon fabric imports continued at 20%. Theanti-dumping duty on Fabric imports continued from China.
Steel Import Monitoring System (SIMS) were introduced by the Ministry of Steel onimport of all steel products into India effective from November 2019 onwards. In additionBureau of India Standards (BIS) norms are being framed for some tyre industry rawmaterials.
The spread of coronavirus pandemic to different countries in the last quarter andresulting lockdown by various countries worldwide leading to shutdown of manufacturingplants including the raw material suppliers added to the slowdown of overall demand andweakening of the various commodities. The supply chains came under pressure due toadditional restrictions and constraints in material movements and port clearances duringthe lockdown. Suitable contingency actions were timely initiated to secure raw materialsupplies from alternate countries and sources of supplies with a close monitoring of thesupplies on a continuous basis.
Your Company has a consistent track record of dividend payment. In compliance with theDividend Distribution Policy of the Company the Board of Directors at its meeting held onFebruary 26 2020 had declared an Interim Dividend of ' 3/- (300%) per share of '1/- each on Equity Share Capital of the Company. The Interim Dividend was paid to theMembers of the Company whose name appeared in the Register of Members as on Record Datei.e. March 5 2020.
The aforesaid interim dividend declared by the Board would be recommended for theapproval of Members as Final Dividend for FY20.
The amount available for appropriations including surplus from previous year amountedto ' 39066 million. Surplus of ' 38066 million has been carried forward tothe balance sheet. A general reserve of ' 1000 million has been provided.
BOARD OF DIRECTORS
A) Appointment/ Re-appointment of Director
Ms. Anjali Bansal (DIN: 0 0 2 0 7 746) was re-appointed as an Independent Director ofthe Company not liable to retire by rotation and to hold office for a second term of 3consecutive years with effect from November 1 2019 to October 31 2022 through PostalBallot on September 20 2019. The Board noted that her continuous association would be ofbenefit to the Company.
Pursuant to the provisions of Section 152(6) of the Companies Act 2013 Mr. SunamSarkar (DIN: 00058859) Director of the Company is liable to retire by rotation and beingeligible offers himself for re-appointment.
None of the aforesaid Directors are disqualified under Section 164(2) of the CompaniesAct 2013. Further they are not debarred from holding the office of Director pursuant toorder of SEBI or any other authority.
B) Changes in Directors and Key Managerial Personnel
During the year under review and between the end of the financial year and date of thisreport following are the changes in Directors and Key Managerial Personnel of theCompany:-
(i) Mr. Nimesh N. Kampani & Dr. S. Narayan Independent Directors have ceased tobe Independent Directors of the Company consequent to their end of tenure on August 52019.
(ii) Re-appointment of General Bikram Singh (Retd.) (DIN: 07259060) as an IndependentDirector for a further period of 3 years from August 11 2020 to August 10 2023 forwhich the approval is sought at the ensuing AGM.
There are no changes in the Key Managerial Personnel of the Company.
C) Declaration by Independent Directors
In terms with Section 149 (7) of the Companies Act 2013 Independent Directors of theCompany have submitted declarations that they meet the criteria of Independence. TheIndependent Directors have also complied with the Code for Independent Directors as perSchedule IV of the Companies Act 2013. All our Independent Directors are registered onthe Independent Directors Databank.
D) Formal Annual Evaluation
Pursuant to the provisions of the Companies Act 2013 the Board is required to carryout annual evaluation of its own performance and that of its Committees and individualDirectors. The Nomination and Remuneration Committee (NRC) of the Board also carries outevaluation of every Director's performance. Accordingly the Board and NRC of your Companyhave carried out the performance evaluation during the year under review.
For annual performance evaluation of the Board as a whole it's Committee(s) andindividual Directors including the Chairman of the Board the Company has formulated aquestionnaire to assist in evaluation of the performance. Every Director has to fill thequestionnaire related to the performance of the Board its Committees and individualDirectors except himself by rating the performance on each question on the scale of 1 to5 1 being Unacceptable and 5 being Exceptionally Good.
On the basis of the response to the questionnaire a matrix reflecting the ratings wasformulated and placed before the Board for formal annual evaluation by the Board of itsown performance and that of its Committees and individual Directors. The Board wassatisfied with the evaluation results.
E) Separate Meeting of Independent Directors
In terms of requirements under Schedule IV of the Companies Act 2013 and Regulation 25(3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 aseparate meeting of the Independent Directors was held on February 26 2020.
The Independent Directors at the meeting inter alia reviewed the following:-
Performance of Non-Independent Directors and Board as a whole.
Performance of the Chairman of the Company taking into account the views ofExecutive Directors and NonExecutive Directors.
Assessed the quality quantity and timeliness of flow of information between theCompany Management and the Board that is necessary for the Board to effectively andreasonably perform their duties.
F) Remuneration Policy
The Board has on the recommendation of the Nomination & Remuneration Committeelaid down a Nomination & Remuneration Policy for selection and appointment of theDirectors Key Managerial Personnel and Senior Management and their remuneration. Theextract of the Nomination and Remuneration Policy covering the salient features areprovided in the Corporate Governance Report forms part of Board's Report.
The Nomination & Remuneration Policy of the Company is available on the website ofthe Company and the web link is: https://corporate.apollotyres.com/investors/corporate-governance/?filter=CodesPolicies
G) Code of Conduct for Directors and Senior Management
The Company has formulated a Code of Conduct for Directors and Senior ManagementPersonnel and has complied with all the requirements mentioned in the aforesaid code.
PRODUCT & MARKETING
In FY20 the APMEA operations continued its focus on key themes for the Indian market -consolidating its leadership position and expanding market share by introducing newproducts across segments.
In the Medium and Heavy Commercial Vehicle (M&HCV) category the Company's launchedtyres for both Truck Bus Bias (TBB) and Truck Bus Radial (TBR) for the new axle load normsfor trucks.
In one of the fastest growing segment of the LCV/SCV category Pickups the Companylaunched the Endumaxx LT range and offered unmatched cost of ownership highest mileage avery durable product and fuel savings.
The Passenger Vehicle category saw the Company introducing its 2nd generationAll-Terrain SUV tyres Apterra AT2 for the off-road enthusiasts. Further the Companyintroduced Amazer XP a new age low rolling resistance tyre with low noise and highcomfort for the entry level hatchbacks and sedans. This launch was very well received byOEMs as well and readily bagged new OEM fitment for Tata Tigor Tiago (including theElectric Vehicle models) Renault Kwid Datsun Go and Go+.
In the agriculture segment the Company introduced products like VIRAT 23 and VIRATHarvest.
In the two-wheeler segment the Company launched 17 new SKUs for the higher premiumbikes and scooters and extended its steel radial portfolio with the launch of two new SKUs- Alpha S1 140/60 R17 and 130/70 R17.
In Europe Vredestein was recognised as All-Season Manufacturer of the Year' byAuto Bild. The year also saw success in adding Volkswagen (for VW Golf Mark 8) to theexpanding OEM list.
The Company's foray in the TBR segment in Europe is bearing fruits. It launched anadditional SKUs on the 17.5" range bringing its market coverage on 17.5" rangeto 70%.
In Agricultural segment the Company introduced the world's tallest radial flotationtyre and set new standards in terms of rolling ability and soil preservation and in aworld-beating diameter of 2.15 metres. This was followed by the introduction of a newtractor tyre the Vredestein Traxion 65.
In the bicycle tyres the Company was also a proud recipient of the coveted EurobikeAward for its Vredestein Fortezza Flower Power bicycle tyre. In the Motorcyle segment theCompany introduce the Centauro range of sport touring radial tyres designed especially formotorcycles on European roads.
A detailed analysis of the Company's key initiatives for both regions have been sharedin the Management Discussion and Analysis section of the annual report.
With the worldwide outbreak of COVID-19 the global economy is staring at a severerecession. To counter the pandemic countries across the globe have resorted to lockdownswhich have brought the economy to a standstill. While the debate between Lives andLivelihood' rages across the world the International Monetary Fund (IMF) has issued awarning that the repercussion of COVID-19 will be similar to the worst recessionsince the Great Depression" and will dwarf the economic damage caused by the globalfinancial crisis a decade back.
With the countrywide lockdown India will certainly be hit hard and IMF along withother rating agencies have sharply slashed India's growth estimate for FY21 ranging from0% to 1.9% from the 5.8% estimated in January. According to the European EconomicForecast EU economy is expected to contract by 7.5% in 2020 and bounce back by 6% in2021.
The COVID-19 has grave consequences for the automobile industry and all relatedsectors with most automobile manufacturers having announced temporary closures of plantsdue to collapsing demand supply shortages and government measures. OEMs in India areforecasting a degrowth of between 30-40% in FY21 demand given the BS-VI implementation andthe price increase COVID-19 impact poor consumer sentiment and liquidity crunch whichin turn will seriously impact the tyre industry.
Against the bleak global Indian and European outlook Apollo Tyres has adopted acautious approach. The focus is on employee safety and conserving cash. The Company isre-engineering production and cutting down on all bad costs and focusing on the good cost- R&D eTraining Brand building etc.
The APMEA region is witnessing some traction in demand in the CV and the agri space andit has put in place all necessary plans to tap this demand. In the multiple categorieslike LCV/ SCV two-wheeler and OHT the Company will continue its efforts to driveradialisation as it offers the best value to the customers and maintaining the strongtechnology strength of the Company. In other categories the Company is continuing itsprogress in numerous product developments to compete and gain market share whilst keepingits customers business needs at the forefront. There are a host of new product launchesplanned in FY21 and the Company is exploring the digital medium and innovative ways likevirtual launches to reach the customers.
The Europe region will continue to focus on the passenger car segment and introduce newdedicated UHP products in the AllSeason and Winter range to gain market share. The yearahead will also see an acceleration of introducing the TBR range in key European markets.The Company will continue to target growing the overall distribution footprint by engagingnew customers across Europe and penetrating the car dealer channel.
MANUFACTURING FACILITY AT ANDHRA PRADESH
The Company was allocated ~256 acres land by Andhra Pradesh Industrial InfrastructureCorporation (APIIC) for setting up project. The Company obtained pre establishmentapprovals from various Departments including Consent for Establishment Building planapproval and Fire NOC before start of construction in November 2018. Services andexternal infrastructure work is in final stages of completion. Manpower recruitment iscompleted training is in progress. Total 151 management personnel have been recruited.All major process equipment for PCR and TBR tyres have been commissioned. Pre operationalapprovals are being obtained to start commercial production. Capacity creation is beingstaggered in line with market requirement to the extent possible.
MATERIAL CHANGES AND COMMITMENTS
Except the impact of COVID-19 as mentioned in this report no material changes andcommitments affecting the financial position of your Company have occurred between the endof the financial year of the Company to which the financial statements relate and on thedate of this report.
SIGNIFICANT MATERIAL ORDERS PASSED BY REGULATORS
No significant material orders have been passed during the year under review by theregulators or courts or tribunals impacting the going concern status and Company'soperations in future.
CHANGE IN THE NATURE OF BUSINESS IF ANY
There is no change in the nature of business of your Company during the year underreview.
INTERNAL FINANCIAL CONTROLS
Internal Financial Control (IFC) means the policies and procedures adopted by theCompany for ensuring the orderly and efficient conduct of its business includingadherence to Company's policies the safeguarding of its assets timely prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information.
The Company has identified and documented key internal financial controls as part ofstandard operating procedures (SOPs). The SOPs are designed for critical processes acrossall plants warehouses and offices wherein financial transactions are undertaken. The SOPscover the standard processes risks key controls and each process is identified to aprocess owner. In addition the Company has a well-defined Financial Delegation ofAuthority (FDOA) which ensures approval of financial transaction by appropriatepersonnel.
The Company uses SAP-ERP to process financial transactions and maintain its books ofaccounts. The SAP has been setup to ensure adequacy of financial transactions andintegrity & reliability of financial reporting. SAP was implemented in the Europeanoperations in year 2016. SAP was also implemented at Company's Greenfield plant inHungary.
The financial controls are evaluated for operating effectiveness through management'songoing monitoring and review process and independently by Internal Audit. The testing ofcontrols by Internal Audit are divided into three separate categories; a) automatedcontrols within SAP b) segregation of duties within SAP and restricted access to keytransactions c) manual process controls.
In our view the SOPs FDOA SAP-ERP and independent reviews by the Internal Audit helpin establishing adequate internal financial controls with reference to its financialstatements and such internal financial controls are operating effectively.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
As required by Regulation 34 (2) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 a detailed Management Discussion and Analysis Report ispresented in a separate section forming part of the Annual Report.
SUBSIDIARY/ ASSOCIATE COMPANIES
As the Company follows its vision to become a global tyre brand of choice it hasmultiple Subsidiaries for facilitating these operations in various countries. As on March31 2020 your Company had 35 Overseas Subsidiary Companies (including step subsidiaries)1 Associate Company and 1 Joint Venture.
Apollo (South Africa) Holdings (Pty) Ltd. had executed a sale of shares agreement withTacoma Foods (Pty) Ltd. to sell its entire stake in Pressurite (Pty) Limited effective May31 2019. Hence Pressurite (Pty) Limited is no more an Associate Company of Apollo (SouthAfrica) Holdings (Pty) Limited.
Rubber Research LLC a wholly owned subsidiary of Apollo Tyres Cooperatief U.A. wasliquidated on July 25 2019.
S.C. Vredestein RO S.R.L. a wholly owned subsidiary of Apollo Vredestein Kft. wasliquidated on November 11 2019.
As per the provisions of Section 129 of the Companies Act 2013 the consolidatedfinancial statements of the Company its Subsidiaries and Associates are attached in theAnnual Report. A statement containing brief financial details of all the Subsidiaries andAssociates of the Company for the year ended March 31 2020 forms part of the AnnualReport. The annual accounts of Subsidiaries and Associates will be made available toshareholders on request and will also be kept for inspection by any shareholder at theRegistered Office and Corporate Office of your Company. A
statement in Form AOC-1 containing the salient features of the financial statements ofthe Company's Subsidiaries Associates and Joint Venture is also attached with financialstatements.
Your Company has following material unlisted Subsidiaries viz. Apollo Vredestein B.V.Apollo Tyres (Hungary) Kft. Apollo Tyres B.V. Apollo Tyres Cooperatief U.A. and ApolloTyres Holdings (Singapore) Pte Ltd. as on March 31 2020.
Pursuant to Regulation 24(1) of the SEBI (Listing Obligations and DisclosureRequirements) (Amendment) Regulations 2018 Mr. Akshay Chudasama an Independent Directorof the Company was nominated as Director on the Board of Apollo Vredestein B.V. ApolloTyres (Hungary) Kft. Apollo Tyres Holdings (Singapore) Pte Ltd. and Ms. Pallavi Shroffan Independent Director of the Company was nominated as Director on the Board of ApolloTyres B.V. & Apollo Tyres Cooperatief U.A with effect from April 1 2019.
a) Apollo Vredestein B.V.
Apollo Vredestein B.V. focuses on manufacturing marketing sales and distribution oftyres and supplies tyres for passenger cars commercial vehicles agricultural andindustrial vehicles and bicycles. The Company's distribution network extends throughEurope.
During FY20 new product lines have been introduced in the Business categoriespassenger car two wheelers agricultural and truck & bus. Key Technology developmentsdone during the year were Ultra Low Rolling Resistance RunFlat and Foam Applications.These developments are strongly supported by Material Developments including newinnovative Raw Materials and new Processes in mixing building and curing.
At the close of FY20 the Company submitted a Request for Advice to specialize Enschedeplant over a period of two years in order to have a sustainable business' and focuson producing only high-value tyres. Given the current operating environment the Companycannot produce certain tyre sizes at a sustainable and competitive level and plans tospecialise towards high-value tyres to secure a sustainable future for the plant in theNetherlands. Currently the Company is in discussion with Works Council to reach aconclusion on the way forward.
b) Apollo Tyres (Hungary) Kft.
Apollo Tyres (Hungary) Kft. was established with an aim to set up a state of theart' automotive tyre manufacturing facility in Hungary which will produce both passengercar tyres and commercial vehicle tyres.
During FY20 the company has completed its Greenfield project within the agreedtimelines. Production ramp up for both Passenger car & Commercial vehicle tyrescontinued during the year.
c) Apollo Tyres Holdings (Singapore) Pte. Ltd.
The Company is a private Company limited by shares incorporated and domiciled inSingapore. The principal activities of the Company is that of sourcing raw materials forApollo manufacturing plants in India and Europe besides the provision of other services tothe group. 50% of the raw material procurement is for Natural Rubber. Major sourcingcountries are Thailand Indonesia and China. Company has also started outsourcing finishedgoods for APMEA and AVBV regions for certain specific tyre/tube range.
Global Supply Chain team based out of Singapore consolidates and manages Global OceanFreight Transport Optimization Offtake activities Supply Chain Cost Analysis andreduction Mould Management and Certification Projects.
In addition Corporate HR team based out of Singapore is managing and facilitatingthe effective deployment of HR systems and policies in key areas such as TalentAcquisition Rewards & Mobility Talent Management and core HR processes which arealigned to the business objectives of Apollo Tyres with the mandate of enhancingorganizational effectiveness contain people costs and human capital utilization.
d) Apollo Tyres B.V.
Apollo Tyres B.V. incorporated in Netherlands is a Holding Company with twoSubsidiaries Apollo Vredestein B.V. and Apollo Tyres (Hungary) Kft.
e) Apollo Tyres Cooperatief U.A.
Apollo Tyres Cooperatief U.A. a direct Subsidiary of the Company is incorporated inNetherlands. The Company is primarily acting as a Holding Company.
During the year under review your Company did not accept deposits covered underChapter V of the Companies Act 2013.
M/s. Walker Chandiok & Co LLP Chartered Accountants Firm Registration No.001076N/N500013 (the firm licenses audit software as well as audit methodology from GrantThornton International Ltd) had been appointed as Statutory Auditors of your Company fora period of 5 years from FY18 to FY22 at the Annual General Meeting held on July 5 2017.
The report given by M/s. Walker Chandiok & Co LLP Chartered Accountants StatutoryAuditors on financial statements of the Company for FY20 is part of the Annual Report. Thecomments on statement of accounts referred to in the report of the Auditors are selfexplanatory. The Auditors' Report does not contain any qualification reservation oradverse remark.
During the year under review the Auditors had not reported any matter under Section143(12) of the Companies Act 2013. Therefore no detail is required to be disclosed underSection 134(3)(ca) of the Companies Act 2013.
M/s. N.P. Gopalakrishnan & Co. Cost Accountants were appointed with the approvalof the Board to carry out the cost audit in respect of the Company's plants at Perambra(Kerala) Limda (Gujarat) Chennai (Tamil Nadu) and Chinnapandur (Andhra Pradesh) as wellas Company's leased operated plant at Kalamassery (Kerala) for FY20.
Based on the recommendation of the Audit Committee M/s. N.P. Gopalakrishnan & Co.Cost Accountants being eligible have also been appointed by the Board as the CostAuditors for FY21 subject to Members' approval. The Company has received a letter fromthem to the effect that their re-appointment would be within the limits prescribed underSection 141(3)(g) of the Companies Act 2013 and that they are not disqualified for suchre-appointment within the meaning of Section 141 of the Companies Act 2013. Theremuneration to be paid to M/s. N.P. Gopalakrishnan & Co. for FY21 is subject toratification of the shareholders at the ensuing AGM.
Cost records as specified by the Central Government under SubSection (1) of Section 148of the Companies Act 2013 are made and maintained by the Company.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 your Company hadreappointed M/s. PI & Associates Company Secretaries as Secretarial Auditor of theCompany for FY20 to undertake secretarial audit of the Company.
The Secretarial Audit Report does not contain any qualification reservation or adverseremark. Secretarial Audit Report given by Secretarial Auditors is annexed with the reportas Annexure I.
MEETINGS OF THE BOARD OF DIRECTORS
A calendar of meetings is prepared and circulated in advance to the Directors. Duringthe year 5 (five) Board meetings were convened and held. The intervening gap between themeetings was within the period prescribed under the Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015. The details of all Board/Committee meetings held are given in the Corporate Governance Report.
The details of the Audit Committee including its composition and terms of referencementioned in the Corporate Governance Report form part of Board's Report.
The Board during the year under review had accepted all recommendations made to it bythe Audit Committee.
The Company has formulated a vigil mechanism through Whistle Blower Policy to deal withinstances of unethical behaviour actual or suspected fraud or violation of Company'scode of conduct or ethics policy. The details of the policy are explained in the CorporateGovernance Report and also posted on the website of the Company.
COMMITTEES OF BOARD
Pursuant to requirement under Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Board of Directors has constituted variousCommittees of Board such as Audit Committee Nomination & Remuneration CommitteeStakeholders Relationship Committee Business Responsibility Committee Risk ManagementCommittee and Corporate Social Responsibility Committee. The details of composition andterms of reference of these Committees are mentioned in the Corporate Governance Report.
During the year under review on March 23 2020 the Authorised Share Capital of theCompany was increased from ' 750000000 (Rupees seven hundred and fifty milliononly) to ' 15750000000 (Rupees fifteen thousand seven hundred and fifty milliononly) divided into:-
(i) 750000000 (Seven hundred and fifty million) Equity Shares of ' 1/- each;
(ii) 150000000 (One hundred and fifty million) Preference Shares of ' 100/-each.
As on March 31 2020 the Issued Subscribed and Paid-up Equity Share Capital of theCompany was 572049980 equity shares of ' 1/- each.
As on April 22 2020 the Issued Subscribed and Paid-up Preference Share Capital was54000000 6.34% Compulsorily Convertible Preference Shares of ' 100/- each.
a) Issue of equity shares with differential rights
Your Company has not issued any equity shares with differential rights during the yearunder review.
b) Issue of sweat equity shares
Your Company has not issued any sweat equity shares during the year under review.
c) Issue of employee stock options
Your Company has not issued any employee stock options during the year under review.
d) Provision of money by Company for purchase of its own shares by employees or bytrustees for the benefit of employees
Your Company has not made any provision of money for purchase of its own shares byemployees or by trustees for the benefit of employees during the year under review.
COMPULSORILY CONVERTIBLE PREFERENCE SHARES
During the year under review the Members of the Company approved the issue of 6.34%Compulsorily Convertible Preference Shares (CCPS) upto 108000000 (One hundred and eightmillion) having a face value of ' 100/- each aggregating to ' 10800000000(Rupees ten thousand eight hundred million only) to be allotted to Emerald Sage InvestmentLtd (the Allottee') an affiliate of Warburg Pincus LLP by way of preferentialallotment on a private placement basis in Public category. The aforesaid CCPS shall beconvertible into 63050966 (Sixty three million fifty thousand nine hundred and sixtysix) equity shares of the Company at a face value of ' 1/-each at a conversionprice of ' 171.29 each.
The Company entered into an Investment Agreement dated February 27 2020 and AmendmentAgreement dated April 21 2020 with Allottee certain specified persons belonging to thepromoter and promoter group of the Company for the aforementioned preferential allotment.
In terms of the Amendment Agreement dated April 21 2020 the parties agreed to makethe allotment in 2 Tranches.
In Tranche 1 CCPS allotment of 54000000 (Fifty four million) aggregating to '5400000000 (Rupees five thousand four hundred million only) was made to the allottee onApril 22 2020 which shall be convertible into 31525483 equity shares of ' 1/-each at a conversion price of ' 171.29 within 18 months from the date of allotment.Such conversion may take place earlier of either (i) at the option of the ProposedAllottee or (ii) at the earliest date occurring at any time after 21 (twenty one) tradingdays from the date of issue of the CCPS to the Proposed Allottee on which the 21 (twentyone) days' average of the daily volume weighted average price of the equity shares of theCompany on the National Stock Exchange of India Limited reaches at least the conversionprice of the CCPS.
The Tranche 2 CCPS of 54000000 (Fifty four million) amounting to '5400000000 (Rupees five thousand four hundred million only) will be allotted on orbefore October 7 2020 in accordance with the terms of an amendment agreement executed onApril 21 2020 amongst the Company the Allottee and certain persons belonging to thepromoter and promoter group of the Company subject to members approval.
After Tranche 1 the cumulative fully diluted ownership of affiliates of private equityfunds managed by Warburg Pincus LLC on a converted basis including the Allottee as ondate is approximately
13.7%. Post the allotment of Tranche 2 CCPS this would increase to approximately 18%.
The following series of Secured Redeemable Non-Convertible Debentures (NCDs) wereissued and allotted by the Company through Private Placement:-
|Series of NCDs ||No. of NCDs @ Face Value ' 1000000 each ||Value (' in Million) ||Date of Allotment |
|1 APT 8.75% NCDs 2030 ||5000 ||5000 ||April 9 2020 |
|2 Apollo Tyre 7.70% NCDs 2025 ||5000 ||5000 ||May 18 2020 |
The aforesaid NCDs are listed on the debt segment of the National Stock Exchange ofIndia Limited (NSE).
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186
During the year under review your Company has not given any loan or guarantee which iscovered under the provisions of Section 186 of the Companies Act 2013. However detailsof investments made during the year are given under notes to the financial statements.
RELATED PARTY TRANSACTIONS
All contracts/ arrangements/ transactions entered by the Company during the financialyear with related parties were in the ordinary course of business and on an arm's lengthbasis and do not attract the provisions of Section 188 of the Companies Act 2013. Duringthe year the Company had not entered into any contract/ arrangement/ transaction withrelated parties which could be considered material in accordance with the policy of theCompany on materiality of related party transactions.
Suitable disclosures as required by the Indian Accounting Standards have been made inthe notes to the financial statements. The policy on related party transactions asapproved by the Board is uploaded on the Company's website.
a) The details required pursuant to Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are provided in the CorporateGovernance Report.
b) During the year under review Mr. Neeraj Kanwar (DIN: 00058951) Vice Chairman &Managing Director also received remuneration from Apollo Tyres (UK) Pvt. Ltd. whollyowned Subsidiary of the Company.
PARTICULARS OF EMPLOYEES
Particulars of employees as required in terms of the provisions of Section 197 of theCompanies Act 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are set out in Annexure A to the Board's Report.
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
Your Company has in place a formal policy for prevention of sexual harassment of itsemployees at workplace and the Company has complied with provisions relating to theconstitution of Internal Committee under the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013.
During the year under review there were no cases filed pursuant to the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.
HEALTH SAFETY & ENVIRONMENT
As a firm commitment to Health Safety and Environment (HSE) the year saw multipleinitiatives to implement and review the HSE plans and achieve the defined KPIs. Fordetails on HSE please refer to Management Discussion and Analysis Report.
AWARDS AND RECOGNITIONS
In its constant quest for growth and excellence your Company was honoured andrecognised at various forums. The prominent Awards are listed below for your reference.
|Name of the Award ||Category ||Awarded by |
|India's Best Companies to Work For 2019 ||Auto & Auto Components Industry ||Great Places To Work |
|Pitch Top 50 Brands ||Globetrotters ||Exchange4media |
|Brand Vid 2019 ||Best Brand Influencer Collaboration ||Indian Television |
|Consumer Reports Survey || ||Consumer Reports |
|Compliance 10/10 awards ||Compliance Program Award ||Legasis (Co-hosted by BSE) |
|ICSI CSR Excellence award 2019 ||Best Corporate in Large Category ||Institute of Company Secretaries of India (ICSI) |
|EFFIE Awards ||Automotive Aftermarket ||Effie |
|The Customer FEST Award 2020 ||Best Reward Program || |
|IPR Leadership Awards ||Excellent Contribution in the Field of Patents ||Social Talks |
|Assocham Women Achiever's Award 2019 ||Best Organisation supporting Women 360 degree Best Initiative taken by Women ||Assocham India |
The Company has constituted a Risk Management Committee (RMC) of the Board comprisingof Directors and Senior Executives of the Company. The RMC has a Risk Management Charterand Policy that is intended to ensure that an effective Risk Management framework isestablished and implemented within the organisation. The Company has also formed InternalRisk Committees (IRCs) which review risk registers for Asia Pacific Middle East Africa(APMEA) Region including India Europe region and Corporate Functions headed by President(APMEA) President (Europe) and Chief Financial Officer as Chairman of the respectiveCommittees. The IRCs review each risk on a quarterly basis and evaluate its impact andplans for mitigation. The terms of reference of the RMC including its composition arementioned in the Corporate Governance Report which forms part of the Board's Report.
CORPORATE SOCIAL RESPONSIBILITY
The Company initiated its CSR activities way before the Companies Act 2013 came inexistence. The Company has a well-defined CSR policy which is made as per the requirementof Section 135 of the Companies Act 2013. All the CSR activities are aligned withNational Goals and Sustainable Development Goals. The Company has a CSR team whoexclusively works towards achievement of CSR goals of the organisation. All the CSRactivities of the Company are routed through registered trust (Apollo Tyres Foundation)and runs under the close monitoring and guidance of CSR committee.
In the reporting year the organisation has undertaken various initiatives related toHealthcare Programme for Trucking Communities Solid Waste Management and SanitationProgramme Livelihood for Underprivileged Women Biodiversity Conservation andPhilanthropy Initiatives; focussing on eradicating hunger and poverty preventive healthand promoting education.
Corporate Social Responsibility Report pursuant to clause (o) of sub section (3) ofSection 134 of the Act and Rule 9 of the Companies (Corporate Social Responsibility)Rules 2014 including salient features mentioned under outline of Company's CSR policyforms part of this Report as Annexure II.
The CSR Policy of the Company is available on the website of the Company and theweblink is: - https://corporate.apollotyres.com/investors/corporate-governance/?filter=CodesPolicies
BUSINESS RESPONSIBILITY REPORT
SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 mandates thetop 500 Listed Companies by market capitalisation to include Business ResponsibilityReport (BR Report") in their Annual Report.
Your Company falls under the top 500 Listed Companies by market capitalisation.Accordingly a BR Report describing the initiatives taken by the Company from anenvironmental social and governance perspective forms part of this Report as AnnexureIII.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
Particulars required under Section 134(3)(m) of the Companies Act 2013 read with Rule8 of the Companies (Accounts) Rules 2014 regarding conservation of energy technologyabsorption and foreign exchange earnings and outgo are given in Annexure IV forming partof this report.
The extract of the annual Return in Form MGT-9 is enclosed herewith as Annexure Vforming part of this report.
As per Section 134 (3) (a) of the Companies Act 2013 the Annual Return referred to inSection 92 (3) has been placed on the website of the Company www.apollotyres.com under theInvestors Section.
CORPORATE GOVERNANCE REPORT
Your Company always places major thrust on managing its affairs with diligencetransparency responsibility and accountability thereby upholding the important dictumthat an organisation's corporate governance philosophy is directly linked to highperformance.
The Company is committed to adopting and adhering to established world-class corporategovernance practices. The Company understands and respects its fiduciary role andresponsibility towards its stakeholders and society at large and strives to serve theirinterests resulting in creation of value and wealth for all stakeholders.
The compliance report on corporate governance and a certificate from M/s. WalkerChandiok & Co LLP Chartered Accountants Statutory Auditors of the Company regardingcompliance of the conditions of corporate governance as stipulated under Chapter IV ofSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 is attachedherewith as Annexure VI to this report.
DIRECTORS' RESPONSIBILITY STATEMENT
As required by Section 134(3)(c) of the Companies Act 2013 your Directors state that:
(a) in the preparation of the annual accounts for the financial year ended March 312020 the applicable accounting standards had been followed along with proper explanationrelating to material departures;
(b) the Directors had 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 and loss of the Company for that period;
(c) the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
(d) the Directors had prepared the annual accounts on a going concern basis;
(e) the Directors had Laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and
(f) the Directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
During the year under review your Company had complied with all
the applicable Secretarial Standards.
Your Company's organisational culture upholds professionalism integrity and continuousimprovement across all functions as well as efficient utilisation of the Company'sresources for sustainable and profitable growth.
Your Directors wish to place on record their appreciation to the respective StateGovernments of Kerala Gujarat Haryana Tamil Nadu and Andhra Pradesh and the NationalGovernments of India Netherlands and Hungary. We also thank our customers businesspartners members bankers and other stakeholders for their continued support during theyear. We place on record our appreciation for the contribution made by all employeestowards the growth of your Company.
| ||For and on behalf of the Board of Directors |
|Place: New Delhi ||ONKAR S. KANWAR |
|Date: May 19 2020 ||Chairman & Managing Director |