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Berger Paints India Ltd.

BSE: 509480 Sector: Consumer
NSE: BERGEPAINT ISIN Code: INE463A01038
BSE 00:00 | 29 May 492.00 31.50
(6.84%)
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460.20

HIGH

497.00

LOW

457.45

NSE 00:00 | 29 May 491.75 31.35
(6.81%)
OPEN

457.00

HIGH

499.00

LOW

456.65

OPEN 460.20
PREVIOUS CLOSE 460.50
VOLUME 65427
52-Week high 597.45
52-Week low 297.10
P/E 78.72
Mkt Cap.(Rs cr) 47,783
Buy Price 481.55
Buy Qty 500.00
Sell Price 492.00
Sell Qty 18.00
OPEN 460.20
CLOSE 460.50
VOLUME 65427
52-Week high 597.45
52-Week low 297.10
P/E 78.72
Mkt Cap.(Rs cr) 47,783
Buy Price 481.55
Buy Qty 500.00
Sell Price 492.00
Sell Qty 18.00

Berger Paints India Ltd. (BERGEPAINT) - Director Report

Company director report

Your Directors have pleasure in presenting the Annual Report of the Company togetherwith the audited accounts for the financial year ended on31st March 2019.

FINANCIAL RESULTS

( in Crore)
Particulars

Financial Year ended

Standalone

Consolidated

2018-19 2017-18 2018-19 2017-18
Profit before Exceptional Items Depreciation Finance Cost and Tax 863.82 789.93 941.60 852.86
Add: Exceptional Item (28.60) - - -
Add: Share ofProfit/Loss from Joint Ventures - - (0.90) 0.64
Less:
Depreciation and Amortisation Expense 122.17 111.92 137.77 124.21
Finance Cost 20.79 16.20 32.33 24.55
Profit Before Tax 692.26 661.81 770.60 704.74
Less:
Provision for Taxation 253.23 229.97 273.15 243.91
Profit After Taxation 439.03 431.84 497.45 460.83
Add:
Other comprehensive income (loss for the year net of tax) (2.05) 1.16 (10.73) 34.44
Total comprehensive income 436.98 433.00 486.72 495.27

FINANCIAL PERFORMANCE

Highlights of the Standalone Results:

a. Revenue from Operations (excluding GST and excise duty as applicable) for the yearended 31st March 2019 was ? 5515.55 crore (previous year: ? 4705.09 crore)representing an increase of 17.23%.

b. PBDIT (Profit Before Exceptional Items Depreciation Interest and Tax) for the yearended 31st March 2019 was ? 863.82 crore as against ? 789.93 crore in the year 2017-18representing an increase of 9.35%.

c. Net profit for the year ended 31st March 2019 was ? 439.03 crore as against ?431.84 crore in the previous year representing an increase of 1.66%.

d. The Exceptional Item in the statement of Profit and Loss for the standalone resultsabove is the impairment adjustment of ? 28.60 crore recognised in the current year towardscarrying value of the Company's investment in its wholly owned subsidiary Berger PaintsCyprus Limited Cyprus on account of accumulated losses sustained by the ultimate whollyowned subsidiary Berger Paints Overseas Limited Russia due to downturn in the Russianeconomy. However this does not have any impact on the consolidated financial results ofthe Company since year-wise losses have been fully recognised in the respectiveconsolidated financial results in the normal course.

Highlights of the Consolidated Results:

a. Revenue from operations (excluding GST and excise duty as applicable) for the yearended 31st March 2019 was ? 6061.86 crore (previous year : ? 5147.16 crore) - anincrease of 17.77%.

b. PBDIT (Profit Before Exceptional Items Depreciation Interest and Tax) for the yearended 31st March 2019 was ? 941.60 crore as against ? 852.86 crore in the year 2017-18representing an increase of 10.40%.

c. Net profit for the year ended 31st March 2019 was ? 497.45 crore as against ?460.83 crore in the previous year representing an increase of 7.95%.

d. It is to be noted that the Company acquired 51% of the paid up equity share capitalof Saboo Hesse Wood Coatings Private Limited ("SHWCPL") after close of businesshours on 28th January 2019. Accordingly the consolidated financial results incorporatethe financial results of SHWCPL for the relevant period.

The Board recommended dividend of ? 1.90 (190%) per equity share of ? 1/- each for thefinancial year ended 31st March 2019.

MANAGEMENT DISCUSSION AND ANALYSIS PAINT INDUSTRY STRUCTURE AND DEVELOPMENT

The industry classifies paints into two broad categories. These are decorative orarchitectural and industrial paints. Decorative paints include higher end acrylic exteriorand interior emulsions medium range exterior and interior paints low end distemperswall putty wood coatings cement paints primers and thinners - accounting for almost 80%of the paint market in India. Decorative paints can be either water based or solventbased. Preference for water based paints (or emulsions) is on the rise in India in linewith the global trends because of superior aesthetics durability washability andenvironmental reasons. Solvent based paints too continue to attract attention in certaintraditional market segments.

Industrial paints essentially comprise general industrial automotive protectivepowder glass can and pipe coatings. The Company is present in all these areas. Inaddition there are niche segments such as coil coatings automotive refinish coatings andmarine coatings and the Company deals with many of these through its subsidiaries jointventures and strategic alliances.

During the year under review the GDP growth is estimated to hover around 7%. The paintindustry particularly the organised sector as usual registered a higher growth andduring the year with improvements coming mainly from the decorative sector. Effective July2018 the Goods and Services Tax on paints was reduced from 28% to 18%. The Company fullypassed on the benefit to the consumers. The Directors wish to thank the Government forthis positive step making paints more affordable. The Company believes that in the longterm this will increase use of paints thus providing more protection and adding morelife to the country's valuable assets.

In the recent past there have been major structural changes in the form ofdemonetisation and introduction of GST and the country true to its capacity ofadaptation has adjusted to these changes. In so far as the Company is concerned itsnetwork of customers and suppliers have quickly geared themselves up to the new regime.There were some signs ofslowing down of the consumption engine in the last six months ofthe financial year with volumes of fast moving consumer goods cars two wheelers etc.dropping to multi-quarter lows with tighter liquidity and lower investments. The Companybelieves this to be a passing phase - partly ascribable to a protracted winter and thegeneral elections and the situation will improve given a stability in policy formulationand implementation improved liquidity and a good monsoon. The per capita consumption ofpaints in India slightly higher than 3 kgs continues to be much lower in comparison tothe developed economies around the world. While the growth in this consumption pattern isslow it has inched up and with the expected development in the future years theconsumption rate of paints has to improve in urban semi-urban and rural markets.

The Industrial paints businesses serve various industrial customers includingautomobiles utility vehicles such as tractors general industrial goods machinery andhousehold equipment such as fans and refrigerators structures and pipelines power plantsand large factories and installations steel glass and every other items of daily use.These largely depend on the growth of the manufacturing and infrastructure sectors. Whilethere has been some deceleration in automotive paints the impact on other industrialpaints have so far not been so pronounced. That said the country has surged up the ranksof the world's largest economies and is on track to displace the United Kingdom from fifthspot in 2019 according to data from the International Monetary Fund. Only the UnitedStates China Japan and Germany can boast a larger GDP. The country is currently lookingat a GDP of USD 5 trillion by 2025 from USD 2.9 trillion projected for this year. Thatwould allow India to overtake Germany to become the fourth biggest economy. If all goesaccording to plan GDP should then rise to USD 10 trillion by 2032 surpassed only by theUnited States and China. This positive vision for the future of India will onlymaterialize if business and policy-makers pursue an inclusive approach to the country'seconomic and hence consumption growth.

Once a new Government takes over and sets in motion the new policies towards theseobjectives it is expected that industrial growth will rebound in the long run.

COMPANY'S OPERATIONS

Over the last five years (FY 14-15 to FY 18-19) the CAGR of EBIDTA was 15.5%.Consistent with the overall distribution pattern in the industry Decorative paintscontinue to be the largest business segment for the Company and the largest contributor -both in terms of volume and value sales and EBIDTA. Despite a drag in the marketparticularly in the later half as mentioned earlier all other Businesses viz. GeneralIndustrial and Automotive Protective and Powder Coatings also posted consistent growth insales. Margins came under pressure particularly in the second half of the year owing toincreasing raw material prices and inability of the OEM's to absorb the same on account oflack of market demand in their respective areas. The Company continued to counter thechallenges through new and innovative products marketing strategies designed to specificsectors and areas new product lines and service support and specific programmes toidentify and address market needs through tailor-made solutions.

The Company's premium Decorative products can be classified into interior wallcoatings exterior wall coatings metal finishes wood finishes and undercoats. Amongthese the premium exterior emulsions include WeatherCoat Anti Dustt WeatherCoat Longlife WeatherCoat All Guard and WeatherCoat Smooth. The benefits of WeatherCoat Anti Dusttinclude superior resistance to dust on account of advanced dust guard technology longlasting protection against exterior wall issues absence of stains and black strike marksand a rich soft sheen finish. This is suitable for dusty and dry areas. WeatherCoatLonglife with a 10 year warranty and also with a high sheen is suitable for heavyrainfall areas. The Company's interior emulsions include Silk Glamor Silk LuxuryEmulsion Easy Clean and Easy Clean Fresh. Easy Clean Fresh with a rich luxurious finishbacked up by cross-linking polymers ensure that stubborn stains can be cleaned easily fromthe walls. It can absorb harmful formaldehyde smell purifying the air in the room. Itimparts a fresh fragrance to the interior environment and is useful for those who cannottolerate the smell of coatings when they are applied. This was introduced during the year.All the Company's decorative products including the Luxol line of solvent based paints andwood coatings performed well. Separate strategies are being pursued for urban semi-urbanand rural markets with encouraging results. Training to all the stakeholders in theBusiness remain a key objective.

The Company's construction chemicals business continued to grow at a satisfactory pace.The products include waterproofing solutions for substrates having various degrees ofmoisture roof coatings and tile grouts. The Company's waterproof putty with uniquehydrophobic properties received excellent response from the market.

One of the major deterrents for timely painting of homes is the inconvenience involvedin painting. Berger Express Painting™ endeavours to make painting a hassle free endto end solution for the customers. This involves technical evaluation of paintingrequirements providing accurate quotation furniture shifting and covering painting byspecially trained painters with XP automatic tools site supervision deployment ofdedicated customer executive and customer satisfaction survey. The process is 40 per centfaster than traditional painting and can be carried out at the same cost. More than 90%customers continue to be satisfied with this process - pioneered by the Company. TheCompany's Prolinks Business aimed towards large housing projects continued to clocksatisfactory growth.

While the General Industrial paint business continued to flourish during the yearthere was some sluggishness in the Automotive paint business in the second half of theyear. Overall in spite of the difficulties the Business registered growth in salesthough profit margins were under pressure due to escalating raw material prices. The salesgrowth was made possible through introduction of new customers and new shades andexploratory and developmental work in collaboration with the customers. The Companycommenced manufacturing epoxy CED resin and paste at one of its factories at HindupurAndhra Pradesh in collaboration with Nippon Paint Automotive Coatings Co. Ltd of Japan("NPAU"). The CED paste and resin are vital components of automotive coatingsacting as the undercoat for the automotive top coat applied through electrolytic process.NPAU is known for its quality and the CED paste and resin will be supplied to BergerNippon Paint Automotive Coatings Private Limited ("BNPA") the Company's jointventure with NPAU. The Company will also supply the same to its separate automotivecustomers. The powder coatings business also registered growth and is concentrating onimprovements in productivity higher value added sales exports and reduction of costs.

The Company continues to be the leader in Protective Coatings business in the country.The Business registered strong growth in sales. The earnings were also satisfactory in theface of escalations in raw material prices and somewhat depressed industrial condition inthe second half of the year. The Business serves various sectors which include OEM'scontractors dealers and fabricators and commands a premium because of its quality andexperience in the field. The Business has forayed into various new areas such as pipecoatings and anti-fouling coatings. These involve sophisticated technology and areexpected to generate interest among the customers. The Company continues to supply fireproof coatings by itself as well as from Promat International Limited NV of Belgium withwhich it has a Memorandum ofUnderstanding ("MOU"). The Company has also startedsupplying marine coatings in terms of its MOU with Chugoku Marine Paints Ltd of Japan.

The factories of the Company continued to provide adequate support to the Businesseswith higher supply from all the factories and improved productivity. This was madepossible through upgrading of equipment process improvement and continuous refinement oftechnology installation of energy management systems and refurbishment of storagefacilities allowing higher and more organised storing capacities. Simultaneously theCompany laid stress on training modem measures for learning and daily communication onthe shop floor and implementation of best practices across all the plants. All thefactories scored well on the parameters of housekeeping safety and environment. TheVallabhvidyanagar plant ("WN") belonging to Beepee Coatings Private Limited awholly owned subsidiary of the Company received 1st Prize in the National EnergyEfficient Circle Competition organised by CII-Centre of Excellence for CompetitivenessNew Delhi Silver Award by Green Tech Foundation for best practices in Environment Healthand Safety and National award in the CII-ITC Sustainability Awards 2018 for itsEnvironmental Management initiatives. The Human Resources team at the VVN plant receivedthe 2nd prize at an HR Convention on the theme : "Perform Reform and Transform"at QCFI Vadodara Chapter. The Jammu plant received a Certificate of Appreciation from theNational Safety Council of India Safety Greentech Award - Gold and Environment -Greentech Award from Greentech Foundation and Environment Silver Award from EKDKN (Ek KaamDesh Ka Naam). The Hindupur water based plant received National award in the CII-ITCSustainability Awards 2018 for its Environmental Management initiatives and Four starrating for Best EHS practices competition organised by CII.

Crude oil and crude oil linked derivatives such as monomers and solvents are key rawmaterials of the Company. The rise in crude oil in the first half of the year had acascading effect on the raw material prices. Though it came down somewhat by the secondhalf at the time of this writing the prices are on the uptick again. There was a doubledigit increase in the raw material prices in the year under review. The prices of rutilekey raw material also increased. The Company could not fully compensate the priceincreases through corresponding price increases specially in the industrial area.However the Company's efforts to counter the external pressures with vendor developmentraw material substitution long term relation building exercises employment ofintelligent negotiating techniques and cost reduction tools and increased in-houseproduction of emulsions and resins yielded benefits. In the future too the Company willneed to address such market vagaries with creative solutions.

Research and Development is the mainstay of development and growth of any institutionand the Company continued to provide due attention to this activity anchoring on teambuilding innovation empowerment and coordination with the Businesses and Raw MaterialsDepartment. The activities include getting feedback from the market and the industryassessment of needs benchmarking of data and then putting ideas into work - first at thelaboratory and then on a larger scale. For the longer horizon the activities focus on thefuturistic technologies and upcoming trends. These include recycling of waste dispersiontechnology and optimization of raw materials. A number of fresh products andintermediaries were introduced during the year which included emulsions and resinseco-friendly water based paints new finishes solvent based paints wood coatingsincluding water based wood coatings colorants different protective industrial andautomotive coating systems for various applications. These are catered to specificcustomer needs and have identified properties such as high heat resistance low VOC quickcuring etc. The Company regularly obtains various national and international certificateswhich are required by the customers for the specialized products. Several ingeniousproducts are under development by the Company and these are expected to be rolled out inthe future.

FOCUS AND OUTLOOK FOR 2019 - 20

In the past years one distinctive feature of India's growth has been its ability togrow amid an all-round global declining trend. It has been projected by IMF that world GDPthat grew by 3.8% in 2017 and by 3.6 % in 2018 is likely to drop down to 3.3% in thecurrent year rising to 3.6% in 2020 because of various factors such as escalationsofUS-China trade tensions financial tightening in China economic stress in somecountries growth constraints in auto sector due to compliance to Euro norm in Germanyetc. A look at the projections by ADB indicates that while China has achieved a GDP growthof 6.6% in 2018 it is projected to rise by 6.3% in the current year and marginallydecline to 6.1% in 2020. Compared to that India grew by 7.0% in 2018 slated to rise byaround the same number in 2019 and by 7.3% in 2020. ADB has identified poor agriculturalgrowth and slow growth in private consumption to be the primary factors that has somewhataffected GDP growth. Apart from these factors there are various other short term and longterm weaknesses in Indian economy such as lack of investment particularly in theinfrastructure sector unemployment etc. But that does not take away the incredibleachievement of the country to continue to perform well based on its own initiatives anddomestic consumption. The Company believes that once the new Government takes control itwill start tackling these issues.

Under the circumstances there may be some temporary challenges but in the long runthe needs and the compulsions of the economy will ultimately ensure that the necessaryinvestments are made the infrastructure is developed a reasonable income for the ruralpopulation is ensured and employment is generated. The Company is of the view that this isthe time to consolidate put in place the right strategies and to adopt measures toincrease penetration level in the target markets.

PROJECTS

As reported in the previous year the first phase of the emulsion plant with a finalcapacity of 44160 MT per annum in Rishra West Bengal was completed in May 2018.

The epoxy CED resin and paste project set up with technical support from NPAU Japanwith a final capacity of 5640 MT of resin and 840 MT of paste per annum was commissionedat Hindupur in October 2018.

The effective capacity of the Hindupur water based plant was shored up to 109200 KLper annum.

Work is in progress for expansion of solvent based paint manufacturing facility atJejuri in Maharashtra finally by 33600 KL per annum and resin manufacturing facility by24000 MT per annum. This will supply paints to the Company's automotive and protectivecoatings businesses. The powder coating manufacturing capacity at Jejuri is being expandedby 1800 MT per annum. These are expected to be commissioned in 2019. Facilities were putup for manufacture of sag control resin an important intermediary at the same place.

The colorant manufacturing facility with a capacity of 2640 KL per annum is expectedto be commissioned at Rishra West Bengal in 2019. Colorants are vital raw materials ofthe Company.

The aged water based paint manufacturing facility in Rishra is being modified and isexpected to be completed in 2019. This is expected to add a capacity of 24000 KL perannum.

The installation of water and solvent based decorative industrial and protectivecoatings resin putty emulsion and construction chemical manufacturing facility at anestimated investment of ? 250 crore at Sandila Industrial Area in Uttar Pradesh is ontrack. Subject to the Company obtaining all required consents and approvals in time theProject is likely to be completed in the year 2021.

The finished goods warehouse at the WN factory is being revamped with ASRS (AutomaticStorage and Retrieval System) for enhancing storage capacity. Apart from these a numberof projects for reducing cost of energy spares and consumables and enhancing efficiencyof equipment were commissioned during the year.

OPPORTUNITIES AND THREATS

India's consistently high rates of economic growth is driven by a number of positiveswhich include fairly strong institutional infrastructure favourable demographic profileskilled workforce an emerging middle class a dynamic entrepreneurial culture risingproductivity a resilient private sector etc. The country offers an attractive long-termfuture powered largely by a consuming class that's expected to more than treble to 89million households by 2025.

The trickle-down effect of economic liberalization has lifted millions of Indians fromindigence. While much still needs to be done propelled by popular demand nutritionwater sanitation energy housing education and healthcare are receiving and willreceive more and more attention of the Government - which will need to engage privatesector in these areas also. It is estimated that by 2025 India will have 69 cities with apopulation of more than one million each. The smart cities will provide major economicopportunities and at the same time powerful digital technologies are bound to beengaged helping to raise productivity improving efficiency across major sectors of theeconomy and radically altering the nature of provision of services such as education andhealthcare.

The future of consumption in India in 2030 is anchored in rising incomes and abroad-based pattern of growth and benefit sharing. It is anticipated that the growth ofthe middle class will lift nearly 25 million households out of poverty. In addition Indiawill have 700 crore millennials and Gen Z consumers who have grown up in a more open andconfident country and are rightly ambitious. The good sign is that they actually vie foreducation better standards of living and care for their families rather than fritteringaway their wealth.

By 2030 40% of Indians will be urban residents. There will however be more than5000 small urban towns and more than 50000 developed rural towns with similar incomeprofiles where aspirations are fast converging with those of urban India. Neverthelessphysical connectivity digital connectivity and income are constraining the spending andwell-being of rural dwellers and these "access-barriers" need to be addressedto ensure social and economic inclusion in India over the next decade.

As these open up opportunities for the entire industry - in both domestic andindustrial areas these will continue to attract competition from domestic entrepreneursand international paint majors. The Company is well prepared to face this challenge withits strategies and plans - which are discussed and approved by the Directors. Theseinclude marketing production raw material procurement new products and technologies andfuturistic solutions - all the while focusing on reducing costs and increasingshareholders' wealth.

RISKS AND CONCERNS

The Company has formulated a risk policy approved by the Business Process and RiskManagement Committee Audit Committee and the Board of Directors. The Policy seeks to laydown a mechanism for identification of risks inherent in the business operations of theCompany and devise mitigation methods in a dynamic manner which are periodically reviewedand modified considering the size and complexity of the business and the regulatoryrequirements. The Risk Management Policy has been renamed as Risk Management &Materiality Policy which can be viewed at the following web link: https://www.bergerpaints.com/about-us/risk-management-policy.html

The Business Process and Risk Management Committee of the Company devotes considerabletime and attention - not only considering the risk matrix but also discussing every aspectof the risks facing the Company in turns with the concerned Businesses and departmentsmaking recommendations and monitoring the same such that each of the risks aresufficiently addressed.

As mentioned earlier there is a pressure on costs on account of rise in prices of somekey raw materials. Since it may not be possible to completely pass on the increase to thecustomers the Company is always on the lookout for alternate raw materials new sourcesand cost effective formulation without any impact on the quality - which is the keystoneof the Company's success in the market. One other cause of concern has been the volatileIndian Rupee rate and any adverse movement would affect the Company's cost of imported rawmaterials. One other issue that the country must address is uniformity and predictabilityin policies and regulations at the lowest level. It must not while growing succumb topressures to raise non-tariff barriers such as unnecessary approvals filling up of formsand prescription of standards - which are contrary to the international standards or areill fomulated. The ease of doing Business has recognizably improved and there has to becontinuous curb on the propensity to make regulations difficult.

As nearly 10-12 million working-age people emerge in India over the next decade thecountry faces a huge challenge in providing the workforce with the right skills andgainful employment to enable the income growth behind the envisioned consumption of thefuture. It is estimated that more than one-half oflndian workers will require reskillingby 2022 to meet the talent demands of the future. This is going to be a challenge in thefuture and the Company is trying to make its own contribution in this space through itsiTrain Centres - as a part of its CSR activities.

Demand for paints partly depends on good monsoon and till the time of this writing itis predicted to be normal this year.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company is committed to ensure that its operations are carried out within a welldefined internal control framework. Good governance well defined systems and processesrisk assessment a vigilant control function communication and monitoring and anindependent internal audit function are the foundation of the internal control systems.The Company has a well-established internal control system commensurate with its size andspread with defined guidelines on compliance which enable it to run its factoriesoffices and depots with a reasonable degree of comfort. While risks cannot be completelyeliminated the Company always attempts to minimize and mitigate these. The controlenvironment ensures commitment towards integrity and ethical values and independence ofthe Board of Directors from the management. The control activities incorporate amongothers continuous monitoring routine reporting digital business environment withminimum possible interference checks and balances purchase policies authorization anddelegation procedures audits including compliance audits which are periodically reviewedby the Audit Committee and the Business Process and Risk Management Committee. TheInternal Audit Department maintains a regular surveillance over the entire operations. Thedata generated is shared with the Board and various committees evaluated and correctedand recommendations are implemented.

The Company's Enterprise Resource Management Systems with Standard Operating Proceduresbased on work flows and process flow charts also provide a comfort in this regard. TheCompany is fully geared to implement any statutory recommendation which may be made inthis regard.

Key Financial Ratios

Ratios

Standalone

Consolidated

FY 2018-19 FY 2017-18 FY 2018-19 FY 2017-18
Debtors Turnover 9.41 8.50 8.89 8.10
Inventory Turnover (on material cost of goods sold) 3.27 3.04 3.30 3.10
Interest Coverage Ratio 36 42 25 30
Current Ratio 1.65 1.62 1.69 1.68
Debt Equity Ratio # 0.09 0.07 0.21 0.19
Operating Profit Margin % 15.7 16.8 15.5 16.6
Net Profit Margin 8.0 9.2 8.2 9.0
Return on Net Worth (RONW) @ 19.4 21.3 21.3 22.5

# There was a 28.6% change in the Company's standalone debt:equity ratio. Since theCompany's debts are nominal it has a low debt:equity ratio. The Company's operations andcapital expenditures are funded largely through its retained earnings and accumulatedreserves. As a result any small variation in debt can result in a change of 25% in theratio. The increase in debt was largely for capital expenditures incurred during the year.

@ The change in return on net worth was on account of project capital expendituresmade the commensurate return on which will be available in the medium term.

BERGER ROCK PAINTS PRIVATE LIMITED

The Company acquired 40800000 equity shares of Berger Rock Paints Private Limited("Berger Rock") representing 51% of the paid up equity share capital of BergerRock upon incorporation of Berger Rock on 25th September 2018 at a consideration of ?40800000/- by way of subscription to the equity shares at face value of? 1/- eachpursuant to shareholders' agreement entered between the Company and Rock Paint Co. Ltd.of Japan ("Rock Paint"). Rock Paint holds the balance 49% of the share capital.Berger Rock is a subsidiary of the Company. Rock Paint is a leading manufacturer ofautomotive refinish paints in Japan and is well known in the industry for the quality andutility of its products. Berger Rock has started selling superior automotive refinishpaints. Berger Rock will benefit from the market knowledge and infrastructural strength ofthe Company in India and the technical expertise and high end products from Rock Paint.The Company's intimation in this regard pursuant to Regulation 30 of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 can be viewed at the followingweb link:https://www.bergerpaints.com/media/media

ACQUISITION OF EQUITY SHARES IN SABOO HESSE WOOD COATINGS PRIVATE LIMITED

The Company acquired 10303580 equity shares of Saboo Hesse Wood Coatings PrivateLimited ("SHWCPL") representing 51% of the paid up equity share capital ofSHWCPL after the close of business hours on 28th January 2019 at a cash consideration of?1.5 crore. The balance 49% of the share capital is held by Hesse Shares GmbH of Germany aleading international wood coatings manufacturer. SHWCPL is a subsidiary of the Company.SHWCPL manufactures imports and sells a wide variety of wood coatings including alkyd PUpigmented PU UV coatings water based wood coatings etc. The business and expertise ofSHWCPL can gainfully supplement the Company's existing wood coatings business. TheCompany's intimation in this regard pursuant to Regulation 30 of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 can be viewed at the followingweb link:https://www.bergerpaints.com/media/media. The name of SHWCPL is beingchanged to Berger Hesse Wood Coatings Private Limited.

ADEQUACY OF INTERNAL FINANCIAL CONTROLS RELATED TO FINANCIAL STATEMENTS

The Company has policies and procedures for ensuring orderly and efficient conduct ofits business including adherence to the Company's policies the safeguarding of itsassets the prevention and detention of frauds and errors the accuracy and completenessof accounting records and the timely preparation of reliable financial disclosures whichare reviewed by the Board and Audit Committee from time to time.

EMPLOYEE STOCK OPTION SCHEME

Your Company re-introduced the ESOP Scheme aligned with the Securities and ExchangeBoard of India (Share Based Employee Benefits) Regulations 2014 in the year 2016 inaccordance with the approval of the members granted at the Annual General Meeting held on3rd August 2016.

In accordance with the aforesaid scheme of 2016 and the earlier scheme of 2010 theCompensation and Nomination and Remuneration Committee has alloted 25621025 and 94696equity shares of? 1 each (face value) to eligible employees upon exercise of their optionsearlier granted to them. The allotment of the aforesaid shares were made on 12th April2018 3rd May 2018 and 19th December 2018 respectively. For further details pleaserefer to Annexure A to this report where detailed information required to bedisclosed in terms of the provisions of the SEBI (Share Based Employee Benefits)Regulations 2014 are enclosed.

Further in accordance with Rule 12 of the Companies (Share Capital and Debenture)Rules 2014 the Company has allotted shares to Key Managerial Personnel (KMPs) on 19thDecember 2018 on their exercising the options as 2nd and 1st tranche of ESOPs earliergranted to them and the details of the allotments made are as follows:

NAME OF KMPs DESIGNATION NO. OF EQUITY SHARES ALLOTTED
MR ABHIJIT ROY MANAGING DIRECTOR & CEO 2448 shares
MR SRIJIT DASGUPTA DIRECTOR-FINANCE & CFO 1883 shares
MR ANIRUDDHA SEN SR. VICE PRESIDENT & COMPANY SECRETARY 1256 shares

Please also visit the weblink: https://www.bergerpaints.com/investors/esop-disclosure.htmlfor disclosures under Regulation 14 of the aforesaid Regulations.

HUMAN RESOURCES

The functions of the Human Resources in the Company include tracking applicants andhiring strategically streamlining the on- boarding process managing benefits trainingpeople building effective teams guiding line managers in HR related issues trainingassisting in providing adequate challenges and excitement in workplace identifying andremunerating the performers and recognising talents but at the same time rewarding hardwork and loyalty and managing industrial relations. These are always carried out whileensuring that each of the team members are ingrained with the Company's signature cultureand values of ethics and governance.

Attracting and retaining manpower is one of the topmost challenges faced by an industryin India. The Company has attempted to address these issues through various methods ofrecruitment including employee referral and job portal providing a flexible yetchallenging work atmosphere with freedom to innovate and framing suitable remuneration andincentive schemes. The number of employees trained and training hours per employeecontinued to grow and new training modules continue to be put in place. The HR processesand transactions are being digitalised to the maximum extent possible.

The number of people employed as on 31st March 2019 was 3450 (31st March 2018:3130). The Industrial Relations were generally satisfactory during the year.

Your Company wishes to put on record its deep appreciation of the co-operation extendedand efforts made by all employees.

TRANSFER OF SHARES TO INVESTOR EDUCATION AND PROTECTION FUND

The Ministry of Corporate Affairs (MCA) vide notification no. S.0.2866 (E) dated 5thSeptember 2017 enforced sections 124(6) and 125 of the Companies Act 2013 read with theInvestor Education and Protection Fund [IEPF] (Accounting Audit Transfer and Refund)Rules 2016 which require companies to transfer the underlying shares to the IEPF inrespect of which the dividends have remained unclaimed for a consecutive period of sevenyears. Accordingly during the year under review on 27th April 2018 the Company hadtransferred 295496 equity shares (0.03% of paid up capital) to IEPF.

POLICY FOR PREVENTION OF SEXUAL HARASSMENT

Your Company has framed a policy on the Prevention of Sexual Harassment of Women atworkplace which commits to provide a workplace that is free from all forms ofdiscrimination including sexual harassment. The Policy can be viewed at the followingweblink: www.bergerpaints.com/about-us/sexual-harassment-policy.html

As per the Policy any complaint received shall be forwarded to an Internal ComplaintCommittee ("ICC") formed under the Policy for redressal. The investigation shallbe carried out by ICC constituted for this purpose. There was no such complaint during theyear. ICC comprises the following members who have been reappointed by the Board foranother period of 3 years with effect from 1st February 2018as per the Regulations:

1. Ms Rishma Kaur (The Presiding Officer)

2. Mr Srijit Dasgupta

3. MrAniruddhaSen

4. Ms Supama Mitra (NGO representative).

SUBSIDIARY AND JOINT VENTURES

Your Company has the following 5 wholly-owned subsidiaries as on the date of thisreport: - (i) Beepee Coatings Private Limited ("Beepee Coatings") in Gujarat;(ii) Berger Paints (Cyprus) Limited ("Berger Cyprus") in Cyprus; (iii) LusakoTrading Limited ("Lusako Trading") in Cyprus; (iv) Berger Jenson & Nicholson(Nepal) Private Limited Nepal ("BJN") and (v) Saboo Coatings Private Ltd (nowrenamed SBL Specialty Coatings Private Limited).

The following companies are wholly-owned subsidiaries of the Company's above namedsubsidiaries: - (i) Bolix S.A. Poland - wholly-owned subsidiary of Lusako Trading; (ii)Berger Paints Overseas Limited ("BPOL") Russia - wholly-owned subsidiary ofBerger Cyprus. Bolix S.A. Poland has 4 subsidiaries viz.: Bolix UKRAINAsp.z.o.o.Ukraine ("Bolix Ukraine") BUILD-TRADE sp.z.o.o.Poland ("BuildTrade Poland") Soltherm External Insulations Limited U.K. ("SolthermU.K.") Soltherm Insolations Thermique Exterieure SAS France ("SolthermFrance").

Surefire Management Services Ltd. UK ("SMS") clarified as Subsidiary in theprevious year is determined to be a Joint Venture of Bolix S.A. Poland with Agility EcoSystems Limited UK based on the criteria of joint control. Details in respect of SMS areprovided in Part B of AOC-1 forming a part of the Financial Statement.

The Company now has two other subsidiaries viz. Berger Rock Paints Private Limited andSaboo Hesse Wood Coatings Private Limited.

The statement relating to the above companies as specified in Sub-section (3) ofSection 129 of the Companies Act 2013 is attached to the Report and Accounts of theCompany.

During the year under review BJN-Nepal showed good performance with a revenue fromoperations of? 197.2 crore.

Saboo Coatings Private Ltd (now renamed SBL Specialty Coatings Private Limited)continued to perform well with a revenue from operations of? 106.3 crore during the year2018-19. The name of Saboo Coatings Private Limited has been changed to SBL SpecialtyCoatings Private Limited with effect from 6th May 2019.

Bolix S.A.(including its subsidiaries) also posted encouraging results with a revenuefrom operations of? 251.4 crore.

The performance ofBeepee Coatings was satisfactory with a revenue from operations of?24.9 crore.

Berger Paints Cyprus Limited ("BPCL") is a special purpose vehicle for thepurpose of making investments in your Company's interests abroad. So is Lusako TradingLimited.

As mentioned earlier in the report considering the accumulated losses of Berger PaintsOverseas Limited ("BPOL") the Company's investments in Berger Paints CyprusLimited Cyprus the holding company of BPOL were assessed on a prudent basis forimpairment provision of ? 28.60 crore in the year 2018-19. This appears as an exceptionalitem in the standalone financial results towards carrying value of the Company'sinvestments in Berger Paints Cyprus Limited. However this does not have any impact on theconsolidated financial results of the Company since year wise losses have been fullyrecognised in the respective consolidated financial results in the normal course. Therevenue from operations ofBerger Paints Overseas Limited ("BPOL") was ? 9.8crore.

Berger Rock Paints Private Limited ("Berger Rock") which had just startedoperations recorded revenue from operations of ? 1.5 crore during the year ended 31stMarch 2019. It had commenced sales in January 2019.

Saboo Hesse Wood Coatings Private Limited ("SHWCPL") recorded revenue fromoperations of? 1.35 crore during the year ended 31st March 2019 after acquisition of itsshares by the Company after close ofbusiness hours on 28th January 2019.

Berger Becker Coatings Private Limited the Company's joint venture with BeckerIndustrifarg Sweden showed good performance with revenue from operations of? 365.1crore.

Berger Nippon Paint Automotive Coatings Private Limited ("BNPA") theCompany's joint venture with Nippon Paint Automotive Coatings Co. Ltd. of Japan("NPAU") posted revenue from operations of? 156.6 crore. BNPA now suppliescoatings to 4 wheeler passenger cars and SUVs 3 wheelers and related ancillaries apartfrom coatings for plastic automotive substrates. It plans to progressively enhance itscapabilities in this area over the next few years. During the year the Company investedan amount of ? 39.20 crore in BNPA by way of subscription to 392000 equity shares ofBNPA of face value of? 1000 each. NPAU also subscribed to 408000 equity shares of BNPA.The funds will be used for the proposed expansion of BNPA's facilities to cater to its newcustomers and increasing businesses.

The salient features of the financial statements of subsidiaries associate companiesand joint ventures are given in the Statement in Form AOC-1 forming a part of thefinancial statement attached to this Directors' Report pursuant to first proviso tosub-section (3) of Section 129 of the Companies Act 2013 read with Rule 5 of theCompanies (Accounts) Rules 2014.

Pursuant to Regulation 16(c) of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 a material subsidiary in a year shall be a subsidiary whose income ornet worth exceeds 10% of the consolidated income or net worth respectively of the Companyand its subsidiaries in the immediately preceding accounting year. At present there isno such material subsidiary of the Company within the meaning of the above Regulation.

CONSOLIDATED FINANCIAL STATEMENTS

The duly audited Consolidated Financial Statements as required under the IndianAccounting Standard 110 provisions ofRegulation 36 ofSecurities and Exchange Boardoflndia (Listing Obligations and Disclosure Requirements) Regulations 2015 and Section136 of the Companies Act 2013 have been prepared after considering the audited financialstatements of your Company's subsidiaries and appear in the Annual Report of the Companyfor the year 2018-19.

CORPORATE GOVERNANCE

Your Company re-affirms its commitment to the standards of corporate governance. ThisAnnual Report carries a Section on Corporate Governance and benchmarks your Company withthe relevant provisions of the Securities and Exchange Board of India (Listing Obligationsand Disclosure Requirements) Regulations 2015.

Pursuant to the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 as amended a certificate obtained from a practising Company Secretary certifyingthat the Directors of the Company are not debarred or disqualified from being appointed orcontinue as directors of the companies by the Securities and Exchange Board ofIndia/Ministry of Corporate Affairs forms part of the report as Annexure D.

During the year under review your Company has carried out the Secretarial Auditpursuant to Section 204 of the Companies Act 2013. The Secretarial Audit Report isattached as Annexure 4A to this Report. An Annual Secretarial Compliance report asper Securities and Exchange Board oflndia circular dated 8th February 2019 is alsoattached as Annexure 4B as an additional disclosure.

The Board of Directors has appointed Messrs Anjan Kumar Roy & Co. PractisingCompany Secretaries (FCS No. 5684 CP. No. 4557) as the Secretarial Auditor to conductaudit of the secretarial records for the financial year 2018-19 and 2019-20.

The SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and theSEBI (Prohibition of Insider Trading) Regulations 2015 were amended during the year andthe Company is taking all steps to comply with the requirements thereof.

TECHNOLOGY AGREEMENTS

Your Company has a Technical License Agreement with Nippon Paint Automotive CoatingsCo Ltd. of Japan.

FIXED DEPOSIT

The Company had earlier discontinued acceptance of fixed deposits since 2002 andaccordingly no fresh deposit was accepted during the year. As per the provisions ofSection 125 of the Companies Act 2013 all unclaimed deposits have been transferred toInvestor Education and Protection Fund (IEPF) Account.

EXTRACT OF ANNUAL RETURN

The extract of the Annual Return of the Company as on 31st March 2019 in Form MGT 9 inaccordance with Section 92(3) of the Act read with Companies (Management andAdministration) Rules 2014 is available on the website of the Company at https://www.bergerpaints.com/investors/annual-reports.htmland is set out in Annexure 1 to this Report.

MEETINGS OF THE BOARD OF DIRECTORS AND ATTENDANCE THEREAT

The details of meetings of the Board and attendance of Directors are given in theReport on Corporate Governance - Annexure B.

A. AUDIT COMMITTEE

The details of Audit Committee are given in the Report on Corporate Governance - AnnexureB. The Board has accepted and implemented all recommendations of the Audit Committee.

WHISTLE BLOWER POLICY

Pursuant to Section 177 of the Companies Act 2013 the Company along with itssubsidiaries have complied with the laws and the codes of conduct applicable to them andhave ensured that the business is conducted with integrity and that the Company'sfinancial information flow is accurate. In case of any violation or complaint a reportmay be made under the Whistle-Blower Policy established by the Company. The said policyhas been modified pursuant to the amended Regulations of the SEBI (Prohibition oflnsiderTrading) Regulations 2015. Also the "Prevention of Insider Trading Code" inCorporate Governance Report contains highlights of the same. The Policy can be accessed athttps://www.bergerpaints.com/about-us/whistleblower-policy.html

B. CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

The Company has constituted a Corporate Social Responsibility Committee in accordancewith the terms of reference of Section 135 of the Companies Act 2013. The details of theCommittee are given in the Report on Corporate Governance - Annexure B. Therequired details as specified in Companies CSR Policy Rules 2014 is given in Annexure2.

C. COMPENSATION & NOMINATION & REMUNERATION COMMITTEE

The details of the Committee are given in the Report on Corporate Governance - AnnexureB.

D. SHAREHOLDERS' COMMITTEES

The details of the Committees are given in the Report on Corporate Governance - AnnexureB.

BUSINESS RESPONSIBILITY REPORT

SEBI has made it mandatory to publish a Business Responsibility Report (BRR) by the top500 companies based on market capitalization in their Annual Report in terms of Regulation34(2)(f) of the Listing Regulations with the stock exchanges. The Company accordinglycomplied with the requirement and had framed a Business Responsibility Policy in line withthe suggested framework as provided by SEBI based on the National Voluntary Guidelines onSocial Environmental and Economic Responsibilities of Businesses published by theMinistry of Corporate Affairs. The said Policy was adopted at the Board Meeting held on30th May 2017 and can be viewed at https://www.bergerpaints.com/about-us/business-responsibility-policy.htmlMr Abhijit Roy Managing Director and CEO has been nominated as the directorresponsible for implementing the Business Responsibility Policy and Mr Aniruddha SenSenior Vice President and Company Secretary has been nominated as the BusinessResponsibility Head. As required the BRR for 2018-19 is attached to this report as Annexure6.

DIRECTORS' RESPONSIBILITY STATEMENT

Your Directors wish to inform that the Audited Accounts containing Financial Statementsfor the financial year ended 31st March 2019 are in full conformity with the requirementsof the Act. They believe that the Financial Statements reflect fairly the form andsubstance of transactions carried out during the year and reasonably present yourCompany's financial condition and results of operations.

Your Directors further confirm that in preparation of the Annual Accounts:

i) The applicable accounting standards have been followed and wherever required properexplanations relating to material departures have been given

ii) The Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit or loss of the Company for that period

iii) Proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities

iv) The Accounts have been prepared on a going concern basis

v) The Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and operating effectively

vi) The Directors have devised proper systems to ensure proper compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

STATEMENT OF DECLARATION BY INDEPENDENT DIRECTORS

The following are the Independent Directors of your Company:-

1) Mr Dhirendra Swarup

2) Mr Gopal Krishna Pillai

3) Mr Pulak Chandan Prasad

4) MrKamalRanjanDas

5) Mr Naresh Gujral

6) Mr Anoop Hoon*

7) Mrs Sonu Halan Bhasin*

* Appointed with effect from 1st February 2019

The Company has received declarations from all the Independent Directors confirmingthat they meet the criteria for independence in the required format under the CompaniesAct 2013 and as required under Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015.

POLICY ON APPOINTMENT AND REMUNERATION OF DIRECTORS KEY MANAGERIAL PERSONNEL AND OTHEREMPLOYEES

The Company has formulated a Remuneration Policy pursuant to the provisions of Section178 and other applicable provisions of the Companies Act 2013 and Rules thereof.

The Policy is available at the following weblink: www.bergerpaints.com/about-us/remuneration-policy.html

QUALIFICATION OR RESERVATIONS IN STATUTORY AUDIT REPORTS

Your Board has the pleasure in confirming that no qualification reservation adverseremark or disclaimer has been made by the Statutory Auditors or Company Secretary inPractice in their Audit Reports issued to the Company.

LOANS COMMITMENTS AND CONTINGENCIES INVESTMENTS

Particulars of loans given investments made guarantees given and securities providedif any along with the purpose for which the loan or guarantee or security is proposed tobe utilised by the recipient are provided in the standalone financial statement (pleaserefer Notes 5a 5b 9a and 34 of the standalone financial statement).

RELATED PARTY TRANSACTIONS

The Company has always been committed to good corporate governance practices includingin matters relating to Related Party Transactions (RPTs). Endeavour is consistently madeto have only arm's length transactions with all parties including Related Parties. TheBoard of Directors of the Company has adopted the Related Party Transaction policyregarding materiality of related party transactions and also on dealings with RelatedParties in terms of Regulation 23 of Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 with Stock Exchanges andSection 188 of the Companies Act 2013. The policy is available at the following weblink:https://www.bergerpaints.com/about-us/rpt-policy.html

Pursuant to the amended Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 a policy on materiality of related partytransactions and on dealing with related party transactions has to include clear thresholdlimit duly approved by the Board and such policy has to be reviewed by the Board once inevery three years and updated accordingly. Accordingly the Board has amended and adopteda new policy and the said policy has been uploaded on the website of the Company at https://www.bergerpaints.com/about-us/rpt-policy.html

All related party transactions have been carried out at arms' length basis in theordinary course of business. There is no material related party transaction i.e.transaction exceeding 10% of the annual consolidated turnover as per the last auditedfinancial statements of the Company or a transaction involving payments made to a relatedparty with respect to brand usage or royalty which exceed 2% of the annual consolidatedturnover of the Company as per last audited financial statements of the Company enteredduring the year by your Company and accordingly the disclosure of Related PartyTransaction as required under section 134(3)(h) of the Companies Act 2013in Form AOC-2 isnot applicable.

POLICY TO DETERMINE MATERIAL EVENTS

As per the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 theCompany has framed a policy for determination of materiality based on criteria specifiedin the regulations. The Policy is available at the following web link: https://www.bergerpaints.com/about-us/policy-determine-material-events.html

POLICY FOR PRESERVATION OF DOCUMENTS

As per Regulation 9 of SEBI (Listing Obligations and Disclosures Requirements)Regulations 2015 the Company has framed a policy for Preservation of Documents based oncriteria specified in the said Regulations. The Policy is available at the following weblink: https://www.bergerpaints.com/about-us/policy-preservation-documents.html

SIGNIFICANT CHANGES

During the Financial Year 2018-19 no significant change has taken place which couldhave an impact over the financial position of the Company. However during the year asreported earlier in this Report there were formation of Berger Rock Paints PrivateLimited and acquisition of shares of Saboo Hesse Wood Coatings Private Limited.

DIVIDEND

The total comprehensive income of the Company is ? 436.98 crore for the year 2018-19.

Your Directors recommend a dividend of ? 1.90 per share i.e. @190% for the year underreview. This if approved will absorb an amount of? 222.44 crore (compared to ? 210.71crore in the previous year) including Dividend Distribution Tax based on the currentpaid-up capital of the Company and will be paid to those members holding shares in thephysical mode whose names appear in the Register of Members as on 5th August 2019 and forshares held in electronic form to those whose names appear in the list ofbeneficialholders furnished by respective Depositories as at the end ofbusiness hours on 29th July2019.

In accordance with Regulation 43A of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company has formulated a Dividend DistributionPolicy. The Policy is available at the following weblink: https://www.bergerpaints.com/about-us/dividend-distribution-policy.html

In terms of the provisions of Section 124 of the Companies Act 2013 your Company hastransferred an amount of? 1783245 (Interim) and ? 2891075 (Final) to the InvestorEducation and Protection Fund in respect of dividend amounts lying unclaimed/ unpaid formore than seven years from the date they became due i.e. for the year ended 31st March2011.

Pursuant to the provisions of the Investor Education and Protection Fund (Uploading ofInformation Regarding Unpaid and Unclaimed Amounts Lying with Companies) Rules 2012 theCompany has filed the necessary form and uploaded the details of unclaimed amounts lyingwith the Company ason31st March 2011.

Conservation of Energy & Technology Absorption

Information pursuant to Section 134(3)(m) of the Companies Act 2013 read with theCompanies (Accounts) Rules 2014 is annexed to Annexure 5 of this report.

Foreign Exchange Earnings and Outgo

Foreign Exchange Earning and Outgo of the Company are ? 8.07 crore and ? 740.29 crorerespectively. Primarily earnings were from exports and consultancy services and outgo wastowards import payments.

Particulars of Employees

In terms of the provisions of Section 134 read with Rule 5(2) of Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 particulars of certain category ofemployees have been set out in Annexure 3 of this report.

STATEMENT OF EVALUATION OF BOARD OF DIRECTORS AND COMMITTEES THEREOF

The Company follows the provisions of the Companies Act 2013 and Securities &Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 ("Listing Regulations") in relation to Directors' appointmentsqualifications and independence.

Pursuant to Section 178(3) of the Companies Act 2013 and the relevant provisions ofthe Listing Regulations the Compensation and Nomination and Remuneration Committee isentrusted with responsibility of formulating criteria for determining qualificationspositive attributes and independence of a Director. The same is available at the followinglink: https:/bergerpaints.com/about-us/ criteria-policy.html

The Compensation and Nomination and Remuneration Committee have laid down the followingcriteria for evaluating the performance of the Board ofDirectors. The same is available atthe following link: https:/bergerpaints.com/about-us/criteria-policy.html

SIGNIFICANT AND MATERIAL ORDER PASSED BY REGULATORS OR COURTS OR TRIBUNALS IMPACTINGTHE GOING CONCERN STATUS AND OPERATIONS OF THE COMPANY

Pursuant to Section 134(3)(q) of the Companies Act 2013 read with Companies (Accounts)Rules 2014 it is stated that no material order has been passed by any regulator courtor tribunal impacting the Company's operations and its going concern status during theFinancial Year 2018-19.

DIRECTORS

Pursuant to Article 112 of the Articles of Association of the Company Mr Kuldip SinghDhingra (DIN: 00048406) and Mr Gurbachan Singh Dhingra (DIN: 00048465) retire by rotationand being eligible offer themselves for re-appointment.

Mr Kuldip Singh Dhingra is an industrialist and promoter of the Company. He has over 50years of experience in paint and related industries and his contribution to the paintindustry is well known and internationally acclaimed. Mr Kuldip Singh Dhingra is a sciencegraduate from Hindu College University of Delhi and Chairman of the Board of Directors ofthe Company. Mr Kuldip Singh Dhingra is 72 years old.

Mr Gurbachan Singh Dhingra is a graduate from Punjab University and an industrialist.He is a promoter of the Company holds the position of Vice-Chairman of the Board ofDirectors and has almost 50 years of experience in the paint industry. He has practicalexperience in building and commissioning of many paint factories and also has experiencein the technical aspects of paint industry. Mr Gurbachan Singh Dhingra is 69 years old.

Mr Naresh Gujral (DIN: 00028444) (‘Mr Gujral') Mr Dhirendra Swarup (DIN:02878434) (‘Mr Swarup') and Mr Gopal Krishna Pillai (DIN: 02340756) (‘MrPillai') are Independent Directors of the Company appointed pursuant to approval ofMembers under provisions of the Companies Act 2013 through resolutions passed at theAnnual General Meeting held on 3rd August 2015. Their terms up to five years on the Boardof Directors of the Company will expire on 19th August 2019 7th September 2019 and 11thSeptember 2019 respectively.

The Company was received notice from a member proposing the candidature of Mr Gujral asDirector. As per Section 149 and other applicable provisions of the Companies Act 2013and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and pursuantto the recommendation of the Compensation and Nomination and Remuneration Committee theBoard of Directors of the Company has recommended re-appointment of Mr Gujral for a secondterm of five years from 20th August 2019 to 19th August 2024 for approval of the membersat the forthcoming Annual General Meeting by way of a special resolution. Mr Gujral willnot be liable to retire by rotation.

Mr Naresh Gujral is a fellow member of the Institute of Chartered Accountants of India.He is the founder of Span India Group one of the leading exporter of high-end fashiongarments to Europe from India. He is an eminent industrialist and social activist. MrGujral was a non-executive Director of the Company from 12th February 2003 to 25thAugust 2011. After a brief hiatus he was appointed Independent Director on 20th August2014. Mr Gujral holds 7000 equity shares of? 1/- each of the Company. Mr Gujral is71years old.

At the recommendation of the Compensation and Nomination and Remuneration Committeethe Board had appointed Mrs Sonu Halan Bhasin (DIN: 02872234) ("Mrs Bhasin") andMr Anoop Hoon (DIN: 00686289) ("Mr Hoon") as additional Directors on the Boardin non-executive independent positions with effect from 1st February 2019 to holdoffice up to the date of the next Annual General Meeting. The Company has received noticesin writing from two members proposing the candidatures of Mrs Bhasin and Mr Hoon asDirectors. As per Sections 149 and 160 and other applicable provisions of the CompaniesAct 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015and pursuant to the recommendation of the Compensation and Nomination and RemunerationCommittee the Board of Directors of the Company has recommended the appointment of Mrs.Bhasin and Mr Hoon for five years till 31st January 2024. Accordingly approval has beensought from the members at the forthcoming Annual General Meeting for appointment of MrsBhasin and Mr Hoon as Independent Directors for the aforesaid period. Mrs Bhasin and MrHoon will not be liable to retire by rotation.

Mrs Bhasin is a B.Sc (Hons) Mathematics St Stephen's College Delhi University andMBA: Faculty of Management Studies (FMS) Delhi University. She has a wide professionalexperience and was the Chief Operating Officer of Tata Capital Ltd. Before that sheworked with YES Bank ING Barings Pvt Bank and ING Vysya Bank and Tata AdministrativeServices in senior positions. She is the Founder and Managing Partner of FAB-Families andBusiness and Editor-in-Chief of Families and Business Magazine. She has authored the book- The Inheritors - Stories of Entrepreneurship and Success. Mrs Bhasin was appointed amember of the Audit Committee on 1st February 2019 and its Chairman on 30th May 2019.She does not hold any share of the Company. Mrs Bhasin is 56 years old.

Mr Hoon is a graduate in Economics and post graduate in Industrial Relations andPersonnel Management from XLRI Jamshedpur. He was associated with Century Plywood (India)Ltd. as President (Marketing & OD) during the period 2008 to 2015. He was earlierassociated with Bells Control Ltd. BOC Gases Ltd. Fortis Health Care Ltd. TheGramophone Co. of India (HMV) Ltd. (as the CEO) Dunlop Tyres Asian Paints and others. Hehas experience in marketing sales organisational development HR supply chain andbranch commercial functions and had served as Business Head of several businesses while inthe companies in which he had worked. Mr Hoon was appointed member of the Business Processand Risk Management Committee and Compensation and Nomination and Remuneration Committeeon 1st February 2019. Mr Hoon does not hold any share of the Company. Mr Hoon is 64 yearsold.

Ms Rishma Kaur (Ms Kaur) (DIN : 00043154) and Mr Kanwardip Singh Dhingra (Mr Dhingra)(DIN: 02696670) were appointed as Directors in whole-time employment of the Companydesignated as Director & National Business Development Manager Retail and Director& National Business Development Manager Industrial respectively for a period of fiveyears up to 2nd August 2019at the Annual General Meeting held on 3rd August 2015. Theirterms of appointment will expire on 2nd August 2019.

Ms Kaur holds a B.Sc. in Business Studies from University of Buckingham U.K. Ms Kaurhas been working with the Company since April 2011 and has successfully led BusinessDevelopment efforts in the Company in respect of Retail Business in addition to providingguidance and handling various other matters such as Marketing and Corporate Affairs. MsKaur is a member of the Business Process and Risk Management Committee and CSR Committeeof the Board. Ms Kaur holds 600000 equity shares of ? 1/- each of the Company.

Mr Dhingra holds a Bachelor's Degree in Chemical Engineering from University of AkronAkron Ohio U.S.A with specialization in Polymer Engineering and Minor in Chemistry.Prior to joining the Company Mr Dhingra gathered working experience in the field ofpaints and specialty coatings in The Rohm & Haas Company Texas USA and The SherwinWilliams Company Ohio U.S.A. Mr Dhingra has been working with the Company since April2011 and has successfully led business development efforts in the Company in respect ofIndustrial Business in addition to providing guidance and handling various other matterssuch as Projects and Procurements. Mr Dhingra is a member of the Business Process and RiskManagement Committee and CSR Committee of the Board. Mr Dhingra holds 600000 equityshares of? 1/- each of the Company.

Since 2015 both Ms Kaur and Mr Dhingra had assumed major responsibilities in thebusiness and operations of the Company and had engaged themselves in wide areas ofactivities. In recognition of their initiatives and in terms of the recommendation made bythe Compensation and Nomination and Remuneration Committee the Board of Directorsincreased their monthly remuneration to an amount not exceeding ? 4600000 per annum witheffect from 1st April 2018 till the date of the next Annual General Meeting subject toapproval of the shareholders under Section 196 of the Companies Act 2013 and designatedthem as Executive Directors.

The said increase in remuneration of Ms Kaur and Mr Dhingra will not fall within thepurview of Section 188 of the Act and since their remuneration individually or takentogether with previous transactions during a financial year would not exceed ten percentof the annual consolidated turnover of the Company as per the last audited financialstatements of the Company they will not qualify as a material related party transactionunder the provisions of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 ("Listing Regulations").

Upon recommendation of the Compensation and Nomination and Remuneration Committee andpursuant to the provisions of Sections 196 197 Schedule V and all other relevantprovisions of the Companies Act 2013 and the Listing Regulations the Board of Directorshas re-appointed Ms Kaur and Mr Dhingra as Executive Directors in whole-time employment ofthe Company for a period of five years with effect from 3rd August 2019 to 2nd August2024 subject to approval of the shareholders at the forthcoming Annual General Meeting ata remuneration to be fixed by the Compensation and Nomination and Remuneration Committeesubject to a ceiling of ? 10000000 (Rupees one crore) per annum. As mentioned earlierthe aforesaid appointment and payment of remuneration will not attract the provisions ofSection 188 of the Companies Act 2013. They will also not qualify as material relatedparty transaction under the provisions of Listing Regulations as long as theirremuneration individually or taken together with previous transactions during a financialyear do not exceed ten percent of the annual consolidated turnover of the Company as perthe last audited financial statements.

Structure of the Board of Directors

Name of Directors Non-executive Executive Independent Lady
Mr Kuldip Singh Dhingra Y N N N
Mr Gurbachan Singh Dhingra Y N N N
Mr Abhijit Roy N Y N N
Ms Rishma Kaur N Y N Y
Mr Kanwardip Singh Dhingra N Y N N
Mr Kamal Ranjan Das Y N Y N
Mr Naresh Gujral Y N Y N
Mr Gopal Krishna Pillai Y N Y N
Mr Pulak Chandan Prasad Y N Y N
Mr Dhirendra Swarup Y N Y N
Mr Anoop Hoon * Y N Y N
Mrs Sonu Halan Bhasin * Y N Y Y

*Appointed wef 1st February 2019

FAMILIARIZATION PROGRAMME OF INDEPENDENT DIRECTORS

The Company believes that the best training is imparted when dealing with actual rolesand responsibilities on the job. To this extent the Company arranges detailedpresentation by Business and Functional Heads on various aspects including the businessenvironment economy performance of the Company industry scenario sales and marketingproduction raw materials research and development financial controls the Company'sstrategy etc. Visits to factories are also undertaken from time to time. This can be seenat the following weblink:https://www.bergerpaints.com/about-us/familiarization-program.html

INFORMATION AS TO REMUNERATION OF DIRECTORS AND EMPLOYEES

Pursuant to Section 197 of the Companies Act 2013 ("the Act") read withCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 thefollowing disclosures are made:-

1) Ratio of remuneration of Directors/KMP to the median remuneration of the employees:

Name of Directors/KMPs Remuneration Received (? ) Ratio as to that of the Median Employee Percentage increase in Remuneration
Mr Kuldip Singh Dhingra 1000000 1.83:1 0.00
Mr Gurbachan Singh Dhingra 1000000 1.83:1 0.00
Mr Abhijit Roy 30104164* 55.09:1 18.23
Mr Kanwardip Singh Dhingra 4532366 8.29:1 94.40
Ms Rishma Kaur 4535787 8.30:1 93.50
Mr Kamal Ranjan Das 300000 0.55:1 0.00
Mr Pulak Chandan Prasad - - -
Mr Naresh Gujral 720000 1.32:1 0.00
Mr Dhirendra Swarup 720000 1.32:1 0.00
Mr Gopal Krishna Pillai 720000 1.32:1 0.00
Mr Srijit Dasgupta 14854179* 27.18:1 7.82
Mr Aniruddha Sen 10772312* 19.71:1 16.83
Mr Anoop Hoon # - - -
Mrs Sonu Halan Bhasin # - - -

* Remuneration does not include value ofESOP's granted.

# Appointed wef 1st February 2019.

Note - The median employee remuneration for 2018-19 is : ? 546446 p.a.

2) Percentage (%) increase in remuneration during the Financial year 2018-19 : Pleasesee (1) above.

3) Percentage (%) increase in the median remuneration of employees during the Financialyear 2018-19 : 4.14 %

4) Number of permanent employees on the rolls of the Company as on31st March 2019:3450

5) Average percentile increase already made in the salaries of employees other than themanagerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration -The averagepercentile increase of employee was 15.88% as compared to an average percentile increaseof 29.98% of managerial remuneration. The increase of managerial remuneration is based ongrowth criteria.

6) Pursuant to the requirement of Section 197(14) of the Act the following disclosureis made in respect to remuneration received by Directors:

Name Nature of Transaction Amount (? )
Ms Rishma Kaur Executive Director and also a Director in U.K. Paints India Private Limited (Holding Company) Consultancy fees received from U.K. Paints India Private Limited for consultancy rendered to U.K. Paints India Private Limited 33 Lakhs
Mr Kanwardip Singh Dhingra Executive Director and also a Director in U.K. Paints India Private Limited (Holding Company) Consultancy fees received from U.K. Paints India Private Limited for consultancy rendered to U.K. Paints India Private Limited 27 Lakhs

Affirmation

It is hereby affirmed by the Chairperson of the Company that the remuneration paid toall the employees Directors and Key Managerial Personnel of the Company during theFinancial Year 2018-19 are as per the Remuneration policy framed by the Compensation andNomination and Remuneration Committee of the Company.

LISTING WITH STOCK EXCHANGES

Your Company is listed with The Calcutta Stock Exchange Limited BSE Limited andNational Stock Exchange of India Limited and the Company has paid the listing fees to eachof the Exchanges. The addresses of these Stock Exchanges and other information forshareholders are given in this Annual Report.

COST AUDITORS

The Board of Directors have re-appointed M/s N. Radhakrishnan & Co. 11A DoverLane Flat Bl/34 Kolkata - 700029 for conducting cost audit at the Company's factoriesat Howrah Rishra Goa Puducherry Jejuri Naltali and at the Nalbari and Hindupurfactories of the Company's British Paints Division and M/s Shome & Banerjee & Co.2nd Floor 5A Narulla Doctor Lane West Range Kolkata - 700017 for conducting cost auditat its Jammu factory and for the factories of British Paints Division at Jammu Surajpurand Sikandrabad under Section 148 of the Companies Act 2013 read with Companies (CostRecords and Audit) Rules 2014 for the year 2019-20.The said reports for the year 2017-18were filed on 13th October 2018.

STATUTORY AUDITORS

The Statutory Auditors Messrs. S.R. Batliboi & Co. LLP Chartered Accountantswere appointed pursuant to the provisions of Sections 139142 of the Companies Act 2013and the Rules made thereunder from the conclusion of the 91st Annual General Meeting up tothe conclusion of the Sixth Annual General Meeting to be held after the 91st AnnualGeneral Meeting. Pursuant to Section 40 of the Companies Amendment Act 2017 madeeffective from 7th May 2018 ratification at every Annual General Meeting by Members isno longer necessary till the conclusion of the Sixth Annual General Meeting. The StatutoryAuditors had furnished their eligibility to continue as Auditors from the conclusion ofthe ensuing Annual General Meeting till the subsequent Annual General Meeting.

APPRECIATION

Your Directors place on record their deep appreciation of the assistance and guidanceprovided by the Central Government and the Governments of the States of India itssuppliers technology providers and all other stakeholders. Your Directors thank thefinancial institutions and banks associated with your Company for their support as well.Your Directors also thank the Company's dealers and its customers for their unstintedcommitment and valuable inputs.

Your Directors acknowledge the support received from you as shareholders of theCompany.

On behalf of the Board of Directors
Place: Kolkata Kuldip Singh Dhingra
Dated: 30th May 2019 Chairman