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Coffee Day Enterprises Ltd.

BSE: 539436 Sector: Services
NSE: COFFEEDAY ISIN Code: INE335K01011
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OPEN 31.60
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VOLUME 509869
52-Week high 50.30
52-Week low 23.25
P/E
Mkt Cap.(Rs cr) 686
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 31.60
CLOSE 30.95
VOLUME 509869
52-Week high 50.30
52-Week low 23.25
P/E
Mkt Cap.(Rs cr) 686
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Coffee Day Enterprises Ltd. (COFFEEDAY) - Director Report

Company director report

Dear Members

Your Directors have pleasure in presenting their 12th Annual Report onbusiness and operations along with the Audited financial statements and the Auditor'sreport of the Company for the financial year ended 31st March 2020.

Financial Highlights:

Amount in Rs. Crores

Particulars Coffee Day Enterprises Limited Coffee Day Enterprises Limited Coffee Day Global Limited Coffee Day Global Limited
(Consolidated) (Consolidated) (Consolidated) (Consolidated)
FY 20 FY 19 FY 20 FY 19
Net Operational Revenue 2522 3569 1509 1795
Finance charges 519 353 212 81
Depreciation 430 269 336 189
Profit Before Tax 701 186 (458) 72
Income Tax 45 66 (150) 24
Profit attributable to the Owners 1883 127 (5) 41

PERFORMANCE OVERVIEW

During the fiscal year ended 31st March 2020 consolidated gross revenuedecline by 28% driven by impetus from Coffee & Multimodal Logistics. The revenue incoffee business contributed a decline of 15% and Multimodal Logistics contributed adecline of 14%. Consolidated Profit after tax attributable to owners is Rs 1884/- Croresfor the year 2019 compared to Profit of Rs 128/- Crores for the previous year. Theincrease of profit is mainly due to one time profit on sale of Mindtree shares. A detailedperformance analysis is provided in the Management Discussion and Analysis segment whichis annexed to this report.

STATE OF THE COMPANY'S AFFAIRS

The state of the Company affairs forms an integral part of Management Discussion &Analysis Report.

DIVIDEND

The Board of Directors of the Company has not recommended any dividend for thefinancial year 2019-20.

TRANSFER TO RESERVES:

In accordance to the provisions of Section 134(3)(j) of the Companies Act 2013(hereinafter “the Act”) the Company has not proposed any amount to transfer tothe General reserves of the Company for the financial year 2019-20.

Deposits:

The Company has not accepted any Deposits under Section 73 and Chapter V of the Act andthe rules made thereunder.

Particulars of Loans Guarantees or Investments:

The details of the loans guarantees and investments are provided in the notes to theaudited financial statements annexed with the Annual report.

Subsidiaries Joint Ventures and Associate Companies:

As on 31st March 2020 the Company has 39 subsidiaries (including indirectsubsidiaries) 1 Associate Companies and 5 Joint Ventures. The details of the Companieswhich are yet to commence operations and which have been liquidated or sold during theyear are mentioned in “Form AOC-1” which is attached as an “Annexure tothe Consolidated Financial Statements.” A statement containing the salient featuresof the financial statements of Subsidiaries Associate Companies or Joint Ventures arementioned specifically in the same annexure as mentioned above. In accordance with Section136(1) of the Act the financial statements of the subsidiaries companies are available onthe Company's official website post approval of the members.

In line with Regulation 24 and Regulation 46(2)(h) of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 (hereinafter “the ListingRegulations”) the Company has formulated a detailed policy for determining‘material' subsidiaries and the said policy is available at the Company's officialwebsite and may be accessed at the link:http://www.coffeeday.com/PDF/MATERIAL-SUBSIDIARIES.pdf

Management Discussion & Analysis Report:

As stated in Regulation 34(2)(e) of the Listing Regulations the Annual report shallcontain a detailed report on Management Discussion & Analysis which is heretoattached with the Annual report in “Annexure-I.”

Corporate Governance:

The report on Corporate Governance along with a Certificate from the Practicing CompanySecretary regarding proper compliance of Corporate Governance pursuant to the requirementsof Schedule V of the Listing Regulations forms an integral part of the Annual Reportstated in “Annexure-II.”

Dividend Distribution Policy:

In accordance with Regulation 43A of the SEBI (Listing Obligations and DisclosureRequirements) (Second Amendment) Regulations 2016 the Board of the Company has adoptedDividend Distribution policy in their meeting held on 18th May 2017 which aims atmarking the right balance between the quantum of dividend paid to its shareholders and theamount of profit retained for its commercial requirements. The said policy is hoisted inthe website of the company.”

Board Diversity:

The Company recognizes and embraces the importance of diverse Board in its success. Webelieve that a truly diverse board will leverage differences in thought perspectiveknowledge industry experience that will help us retain our competitive strength. TheCompany has evaluated the policy with a purpose to ensure adequate diversity in Board ofDirectors which enables them to function efficiently and foster differentiated thoughtprocesses at the back of varied industrial and management expertise. The Board recognisesthe importance of a diverse composition and has therefore adopted a Board DiversityPolicy. The policy is made available at the Company's official website via link:

https://www.coffeeday.com/PDF/BOARD%20DIVERSITY%20POLICY.pdf

Board Evaluation and Policy on Directors' Appointment and Remuneration:

In accordance with Section 178(3) of the Companies Act 2013 the Nomination andRemuneration Committee has specified the criteria and manner for effective evaluation ofperformance of ‘Board' its ‘Committees' and ‘Individual Directors' carriedout either by the Board by the Nomination and Remuneration Committee or by an independentexternal agency and reviewed its implementation and compliance.

The detailed policy in compliance with Section 178(3) of the Act read along withRegulation 19 of the Listing Regulations has been approved by the Board of Directors ofthe Company and is made accessible at the Company's official website at the followinglink: https://www.coffeeday.com/PDF/NOMINATION%20&%20REMUNERATION%20POLICY.pd f

Appointment/ Resignation/ Re-appointment of Board of Directors:

During the year under report there has been a change in the Composition of Board LateV.G.Siddhartha our former Chairman was demised on 31st July 2020. Mrs. SulakshanaRaghavan an Additional Non-Executive Independent Director appointed on the Board on 05thMarch 2019 resigned on 1st August 2019 and Mr. Sanjay Nayar who was a nominee director ofthe company resigned from his post on 13th November 2019.

Mr. Albert Hieronimus Independent Director whose 1st term of 5 years ended on16.01.2020 and appointed as an additional Independent director of the Company in boardmeeting held on 8th January 2020 in this connection the Board has proposed Mr. AlbertHieronimus re-appointment for a further term of 5 years on the board of the companysubject to the approval of shareholders.

Mrs. C H Vasundhandara Devi (DIN: 07789047) was appointed as an Additional Director ofthe Company on 7th December 2020 In this connection the Board has proposed Mrs. C HVasundhandara Devi's appointment for a term of 5 years on the board of the company subjectto the approval of shareholders.

Mr. Giri Devanur (DIN: 00125603) was appointed as an Additional Director of the Companyon 7th December 2020 In this connection the Board has proposed Mr. GiriDevanur's appointment for a term of 5 years on the board of the company subject to theapproval of shareholders.

Mr. Mohan Raghavendra Kondi (DIN: 01718628) was appointed as an Additional Director ofthe Company on 7th December 2020 In this connection the Board has proposed Mr.Mohan Raghavendra Kondi's appointment for a term of 5 years on the board of the companysubject to the approval of shareholders

Mrs. Malavika Hegde shall retire by rotation at the ensuing Annual General meeting andis eligible for re-appointment.

Mrs. Malavika Hegde who is a Non-Executive Director of the Company is proposed to beappointed as whole time Director of the company in the Board meeting held on 7th December2020 subject to the approval of shareholders.

Also the Board proposed to designate Mrs. Malavika Hegde as a Chief Executive Officerof the Company in their meeting held on 7th December 2020.

SIGNIFICANT DEVELOPMENT DURING THE YEAR

Post the unfortunate demise of Chairman Shri V G Siddhartha the Company appointed Mr.Ashok Kumar Malhotra Ex-DIG CBI assisted by M/s. Agastya Legal LLP New Delhi consistingof Legal Professional's head by Senior Partner Dr. M. R. Venkatesh to scrutinize the booksof accounts of the Company and its subsidiaries. The Investigators submitted theirinvestigation report on 24th July 2020 to the Company. The Investigation Reportreported that Rs 3535 Crores is due from Mysore Amalgamated Coffee Estates Limited(MACEL) to the seven subsidiaries of the company. The Company on the receipt ofInvestigation Report appointed Justice. K.L. Manjunath retired Judge of Hon. High Courtof Karnataka to suggest and oversee actions for recovery of the dues from MACEL and tohelp on any other associated matters.

The Management of seven subsidiaries have decided to take a decision on recoverabilityof Rs. 3535 Crores which is due from MACEL to the subsidiaries of the Company after thereceipt of report from Justice K.L.Manjunath.

The day to day operations of the Company are being managed by the promoters family andprofessional team which is ensuring protection of interest of all stakeholders vizshareholders lenders vendors employees etc. The debt levels have reduced significantlyfrom the beginning of the financial year March 2020.

The Company has formed a New Executive Committee on August 08 2019 to address thecrucial items in the interest of the company and for its smooth operations.

Director's Responsibility Statement:

In Compliance with section 134(5) of the Companies Act 2013 the Board of Directorshereby confirms the following:

(a) In the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating 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; and

(e) The Company is responsible for establishing and maintain adequate and effectiveinternal financial controls with regard to it business operations and in the preparationand presentation of the financial statements in particular the assertions on theinternal financial controls in accordance with broader criteria established by theCompany.

Towards the above objective the directors have laid down the internal controls basedon the internal controls framework established by the Company which in all materialrespects were operating effectively as at March 31 2020.

(f) The Directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate. The Company has substantiallycomplied with material provisions of such acts and regulations as are relevant for itsoperations.

Declaration by Independent Directors:

All the Independent Directors have given their declarations stating that they meet thecriteria of independence as laid down under Section 149(6) of the Act read with Regulation16(1)(b) of the Listing Regulations. In the opinion of the Board they fulfil theconditions of independence as specified in the Act and the Listing Regulations and areindependent of the management.

Committees of the Board:

The Company has four main Committees of the Board i.e.:

(a.) Audit Committee

(b.) Nomination and Remuneration Committee and

(c.) Stakeholder's Relationship Committee.

(d.) Corporate Social Responsibility.

The detailed information on each of these committees including its compositionfunctioning and number of meetings are disclosed in the Corporate Governance reportannexed with the Annual report of the Company.

Meetings of the Board:

During the financial year 2019-20 the meetings of the Board of Directors were heldEleven (11) times. Details of these meetings and other Committee/General meetings aregiven in the report on Corporate Governance Report attached with the Annual report.

Particulars of Contracts/arrangements with related parties:

Post the unfortunate demise of Chairman Shri V G Siddhartha the Company appointed Mr.Ashok Kumar Malhotra Ex-DIG CBI assisted by M/s. Agastya Legal LLP New Delhi consistingof Legal Professional's head by Senior Partner Dr. M. R. Venkatesh to scrutinize the booksof accounts of the Company and its subsidiaries. The Investigators submitted theirinvestigation report on 24th July 2020 to the Company. The Investigation Reportreported that Rs 3535 Crores is due from Mysore Amalgamated Coffee Estates Limited(MACEL) to the seven subsidiaries of the company. The Company on the receipt ofInvestigation Report appointed Justice. K.L. Manjunath retired Judge of Hon. High Courtof Karnataka to suggest and oversee actions for recovery of the dues from MACEL and tohelp on any other associated matters.

However all the repetitive Related Party Transactions that were entered into duringthe FY 201920 were on an arm's length basis and in the ordinary course of business. Therewere no materially significant Related Party Transactions made by the Company during theyear that required shareholders' approval under Regulation 23 of the Listing Regulations.Prior omnibus approval from the Audit Committee is obtained for transactions which arerepetitive in nature. Further disclosures are made to the Committee on a quarterly basis.None of the transactions entered into with related parties' falls under the scope ofSection 188(1) of the Act and hence there is no such requirement to enclose ‘FormAOC-2' pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of the Companies(Accounts) Rules 2014.

The Company has adopted a Policy for dealing with Related Party Transactions and ismade available on the Company's official website via web link:https://www.coffeeday.com/PDF/RPT%20POLICY.pdf

Material changes and commitment - if any affecting the financial position of theCompany from the end of the financial year till the date of this Report:

During the year under report Tanglin Developments Limited and the company have agreedto sell the Way2wealth Securities Private Limited and to Shriram Ownership Trust.

Except this there has been no material change and commitment affecting the financialperformance of the Company which has occurred from the end of the financial year of theCompany to which the financial statements relate to till the date of this report.

Change in nature of business:

There has been no change in the nature of business of the Company.

Conservation of Energy Research and Development Technology absorption ForeignExchange Earnings & Outgo:

The information on conservation on energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3) (m) of the Act read with Rule 8 of theCompanies (Accounts) Rules 2014 is provided in “Annexure-III” to this Annualreport.

AUDITORS:

a) Statutory Auditors:

The Company had appointed B S R & Associates Chartered Accountants Bangalore asStatutory Auditors of the Company for a period of Five years in the Annual general Meetingheld on 27th September 2018. B S R & Associates after completing theAudit/ Limited Review Report for the quarter ending on 30th June 2019 resignedfrom the post of Statutory Auditors of the Company due to commercial reasons. The Boardappointed M/s. Venkatesh & Co. Chartered Accountants Chennai as Statutory Auditorsof the Company to fill the casual vacancy caused by resignation of B S R & Associatesin the Board meeting held on 3rd August 2020 subject to the shareholders'approval.

The Company on 9th October 2020 sought the shareholders' approval throughPostal Ballot(e- voting) for an appointment of M/s. Venkatesh & Co. CharteredAccountants Chennai as Statutory Auditors of the company until the conclusion of theforthcoming Annual General Meeting.

The Board has proposed to appoint M/s. Venkatesh & Co. Chartered Accountants asStatutory Auditors of the company for the period of 5 years from the Conclusion of this 12th annual General meeting till the conclusion of 17th Annual GeneralMeeting of the company.

b) Secretarial Auditor:

In accordance with Section 204 of the Act and the rules made there under the Companyhas appointed M/s HRB & Co. to undertake the Secretarial Audit of the Company for thefinancial year ended 31st March 2020. The Secretarial Audit report issued in this regardis attached as “Annexure-IV”.

c) Cost Auditor:

In terms of the provisions of Section 148 of the Act the appointment of the CostAuditors does not apply to the Company.

d) Internal Auditor:

Pursuant to the provisions of Section 138 of the Act read with the Companies (Accounts)Rules 2014 the Company has appointed M/s A B S & Co. Chartered Accountants asInternal Auditors of the Company.

Significant and material orders passed by the Courts/Regulators:

During the year under report there were no significant and material orders passed byCourts/Regulators have been received by the company.

However BSE and NSE have issued notices to the Company with respect to thenon-submission of financial results under Reg 33 of the SEBI (LODR) 2015 for the quarterending on June 30 2019 and September 30 2019. The company could not file the financialresults within the due date due to delay in submission of the Investigation Report.Therefore the shares of the company were suspended from trading on the exchanges from 3rdFebruary 2020. However the company has submitted financial results for all the quartersof financial year 2019-20 and two quarters of financial year 2020-21 and is in the processof re-instating the trading.

Other than under Reg 33 of the SEBI (LODR) 2015 the Company has received a notice andseveral queries regarding sale of shares of Mindtree Limited from SEBI as per SEBI (SAST)Regulations 2011.

In the month of March 2020 the company has received notice from Registrar ofCompanies Karnataka under section 206 of the Companies Act 2013 and we have furnishedall the required information.

The company has submitted Investigation Report to SEBI in turn SEBI raised certainqueries on it and we have clarified all the queries raised by SEBI.

Your company is in continuous touch with all the regulators and statutory authoritiesand making its best efforts to comply with all the statutory matters.

Extract of Annual Return:

An extract of the Annual return in form MGT-9 in compliance with Section 92 of theCompanies Act 2013 read with applicable rules made thereunder is annexed as“Annexure-V” and is placed on the website www.coffeeday.com.

Secretarial Standards:

The Company complies with all Secretarial Standards issued by Institute of CompanySecretaries of India.

Internal Financial Control (IFC) and its Adequacy:

The internal controls of the Company operate through well documented standard policiesand guidelines. The Company has adequate internal financial control procedurescommensurate with its size and nature of business which helps in ensuring orderly andefficient conduct of its business. This system provide a reasonable assurance of financialand operational information complying with applicable statutes safeguarding of assets ofthe Company prevention and detection of frauds accuracy and completeness of accountingrecords and ensuring compliance with corporate policies.

All the significant internal audit observations and management actions thereon arereported to Audit Committee on a quarterly basis. The Audit Committee reviews theoperations and assesses the adequacy of the actions proposed as well as monitors theirimplementation. The internal auditors conduct a quarterly follow-up for implementation ofall audit recommendations and the status report is presented to the Audit Committeeregularly.

The Company's management has assessed the effectiveness of the internal control overfinancial reporting for the year ended 31st March 2020 and based on the assessment;believe that the system is working effectively. The Statutory Auditors have issued areport on the adequacy and effectiveness of the internal control systems over financialreporting.

Whistle Blower Policy/Vigil Mechanism:

As per the requirements laid down under Section 177(9) of the Act and Regulation 22 ofthe Listing Regulations the Company has established the Whistle blower Policy whichencourages Directors and employees to bring to the Company's attention instances ofunethical behaviour actual or suspected incidents of fraud or violation of the Company'sCode of Conduct that could adversely impact on Company's operations and business. ThePolicy provides that the Company investigates such incidents when reported in animpartial manner and takes appropriate action to ensure that requisite standards ofprofessional and ethical conduct are always upheld. The practice of the Whistle blowerPolicy is overseen by the Audit Committee and no employee has been denied access to theCommittee. The Whistle Blower Policy is available on the Company's official website andmay be accessed through web link: http://www.coffeeday.com/PDF/CDEL-Whistle-Blower-Policy.pdf

Particulars of Employees:

As stated in provisions of Section 197(12) of the Act read with Rule 5(2) and 5(3) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 asamended from time to time a statement showing the names and other particulars of theemployees drawing remuneration in excess of the limits set out in the said rules whichincludes the name of top 10 employees in terms of remuneration forms part of this annualreport. Pursuant to the provisions of Section 136(1) of the Act the Board report is beingsent to the shareholders including the said statement.

Disclosure pertaining to the remuneration as required under Section 197(12) of the Actread with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is provided in “Annexure-VI”.

Corporate Social Responsibility (CSR):

Pursuant to the provisions of Section 135 of the Act read with the Companies (CorporateSocial Responsibility Policy) Rules 2014 and on the recommendations of the CSR Committeecomprising of Mr. S.V. Ranganath as the Chairman and Mrs. Malavika Hegde as Members theCSR policy is adopted and approved by the Board of the Company. The said policy has beenhosted on the Company's website and is available on the link:http://www.coffeeday.com/PDF/CSR-Policy-CDEL.pdf. It lays down the purpose of formulationof the policy areas of focus composition of Committee and CSR budget.

Green Initiatives:

In commitment to keep in line with the Green Initiative and going beyond to itelectronic copy of the Notice of 12th Annual General Meeting of the Company are sent toall Members whose email addresses are registered with the Company/DepositoryParticipant(s).

Prohibition and Redressal of Sexual Harassment at Work place:

The Company has zero tolerance for sexual harassment at workplace and has adopted aPolicy on Prevention Prohibition and Redressal of Sexual Harassment at workplace in linewith the provisions of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 and the rules made thereunder. The Policy aims topromote a healthy work environment and to provide protection to employees at workplace andredress complaints of sexual harassment and related matters thereto. The Company has alsoconstituted an Internal Complaints Committee known as the Prevention of Sexual Harassment(POSH) Committee to enquire into complaints of sexual harassment and recommendappropriate action.

During the financial year 2019-20 the Company has not received any complaints onsexual harassment.

Board's response on Auditors qualification reservation or adverse remark or disclaimermade:

Disclaimer of opinion on standalone Report:

1.We have not been provided with sufficient evidence with respect to recoverability ofdues from group companies amounting to INR 1751 Crore (refer note 32 of the standalonefinancial statements). Further we have not been provided appropriate evidence about anyrecognition of fair value of the estimated loss allowance on corporate guarantee given toits subsidiary (as detailed in note 26 of the standalone financial statement) as requiredby Ind AS 109 ‘Financial Instruments'. We are therefore unable to comment on therecoverability of the stated balance from group companies fair value of estimated lossallowance on corporate guarantee given to a subsidiary and the impact on the standalonefinancial statement.

Management's Response:

The Company has given interest free advance of Rs.17506 million to its subsidiarieswhich is repayable on demand. The Company has given a corporate guarantee of Rs. 1000million for a loan taken by a wholly owned subsidiary. As at the date of this Statementsuch corporate guarantee has not been invoked by the lender. The Company is confident thatthe loan will be repaid by the subsidiary in the due course and hence the loss allowanceas per Ind AS 109 Financial Instruments has been estimated by the Management to be Rs.Nil.

2. It is observed that there has been a change in the percentage of shares held by theCompany in two subsidiaries and one stepdown Subsidiary (as detailed in note 6 of thestandalone financial statement) as of March 31 2020 vis-a-vis March 31 2019 due toinvocation of shares by the lenders of the subsidiaries. However while considering theamount invested in the subsidiaries the Management of the Company has considered theerstwhile shareholding pattern prior to dilution as the Management believes that thechange in shareholding is temporary in nature and the shares pledged will be redeemed backby the Company (as detailed in note 6 of the standalone financial statement). Howeverthese shares have been transferred to such lenders before March 31 2020. Consequentlythe impact of the said transfer of Rs.156 crores on the value of investments loanbalances and the profit/loss on such a transfer has not been reflected correctly thestandalone financial statements of the Company. Accordingly the said treatment by theCompany is not in line with the provisions of the Companies Act 2013 and the requirementsof the Indian Accounting Standards applicable on the Company.

Management's Response:

Change in the percentage of shares held by the Company in its two subsidiaries viz M/sTDL & M/s CDGL as of March 31 2020 visa- vis March 31 2019 due to invocation ofshares pledged to the lenders of the subsidiaries. However while considering the amountinvested in the subsidiaries Company has considered the erstwhile shareholding patternprior to dilution as the Management believes that the change in shareholding is temporaryin nature and the shares pledged will be redeemed back by the Company. However theseshares have been transferred to such lenders before March 31 2020.

3. The Management of the Company has determined that no impairment is required to berecognized on its investments in subsidiaries associates and joint ventures with acarrying value of INR 1866 Crore as at March 31 2020 as required by Ind AS 36‘Impairment of Assets' particularly consequent to developments during this period(refer note 6 of the Standalone Financial Statement). However we have not been providedwith the indicators used and the assessment performed by the Management in order to arriveat this decision. We are therefore unable to comment on whether the value of investmentsrecognized in the standalone financial statement of the Company is appropriate.

Management's Response:

The Company has investments in subsidiaries associates and joint venture amounting toRs. 1866 crores as at 31 March 2020. The Company has carried out impairment assessment ofabove balances in its annual financial statements for the year ended 31 March 2020 asconsistent with its past practice of carrying out impairment assessment at every year-end.The Management of the Company has determined that no impairment is required.

4. The Standalone Financial Statements of the Company has been prepared by theManagement and Board of Directors using the going concern assumption (Refer note 38 of thestandalone financial statement). The matters detailed in the above paragraphs may have aconsequential implication on the Company's ability to continue as a going concern. We aretherefore unable to comment on whether the going concern basis for preparation of theStatement is appropriate.

Management's Response:

These standalone financial results for the quarter and year ended 31 March 2020 havebeen prepared on a going concern basis in view of the positive net worth of the Companyamounting to Rs.3173 crores as at 31 March 2020 significant value in diversifiedportfolio of investments held in subsidiaries / joint ventures / associates establishedtrack record of the Company to monetize it's assets as demonstrated by sale of stake inMindtree Limited sale of Global Village Tech Park owned by its wholly-owned subsidiaryTanglin Developments Limited sale of stake in Way2Wealth Group entities profitableresorts operations and consequential ability to service the obligations.

Disclaimer of opinion on Consolidated Report:

1. It is observed that there has been a change in the percentage of shares held by theCompany in three of its subsidiaries as of March 31 2020 vis-a-vis March 31 2019 due toinvocation of shares by the lenders of the subsidiaries. However while considering theamount invested in the subsidiaries the Management of the Company has considered theerstwhile shareholding pattern prior to dilution as the Management believes that thechange in shareholding is temporary in nature and the shares pledged will be redeemed backby the Company (refer to note 62 of the Consolidated Financial statement). However theseshares have been transferred to such lenders before March 31 2020. Consequently theimpact of the said transfer (of Rs.156 crores) on the standalone financial statements isnot correctly reflected.

Further the impact of the aforesaid on the consolidated financial statements of theCompany including but not limited to the profit attributable to the non-controllinginterest in the Company are also not correctly reflected. Accordingly the said treatmentby the Company is not in line with the provisions of the Companies Act 2013 and therequirements of the Indian Accounting Standards applicable on the Company.

Management's Response:

Change in the percentage of shares held by the Company in its three subsidiaries vizM/s Tanglin Developments Limited M/s Coffee Day Global Limited & Sical LogisticsLimited as of March 31 2020 vis-a-vis March 31 2019 due to invocation of shares pledgedto the lenders of the subsidiaries. However while considering the amount invested in thesubsidiaries Company has considered the erstwhile shareholding pattern prior to dilutionas the Management believes that the change in shareholding is temporary in nature and theshares pledged will be released back to the Company. However these shares have beentransferred to such lenders before March 31 2020.

2. In respect of the Holding Company and some of the subsidiaries there are instancesof noncompliance with certain debt covenants and defaults in repayment of interest andborrowing as per the schedule of repayment. However we are unaware of any consequentaction if any taken by bankers/ lenders as provided in the relevant loan agreements(refer note 23A of the consolidated financial statement). We are therefore unable tocomment on the consequential adjustments that might impact this statement on account ofnon-compliance with debt covenants.

Management's Response:

The Group has borrowings amounting to Rs. 3013 crores as at 31 March 2020. There havebeen certain covenant breaches with respect to certain borrowings taken by the group fromvarious lenders. Such breaches entitle the lenders to recall the loan. On the date of thisstatement there have been certain defaults in repayments of principal and interest of theloans and certain lenders have exercised their rights including recall the loans. Allinterests including unpaid interest also accounted in the books.

3. Impairment for Goodwill of INR 375 Crore arising on consolidation has not beenconsidered in the consolidated financial statement (Refer note 6 of the consolidatedfinancial statement). The valuation report assessing the value of the said intangibleasset has also not been provided to us. The above impairment is required by Ind AS 36‘Impairment of Assets' in view of the developments during the period including theinvestigation report submitted to the company. We are therefore unable to comment onwhether any provisions on account of impairment is required and the impact of the same onthis statement

Management's Response::

The Group has goodwill amounting to Rs. 375 crores as at 31 March 2020. The ParentCompany has carried out impairment assessment of the goodwill in its annual financialstatements for the year ended 31 March 2020 and has impaired goodwill of Rs.134 crore inthis annual financial statement.

4. Auditors of 4 subsidiaries which in turn has 3 step-down subsidiaries (constituting61% of revenue) based on their review have issued a disclaimer ofconclusion/qualification due to the possible impact of the recoverability of dues fromMysore Amalgamated Coffee Estates Limited (‘MACEL') a related party which inaggregate has a group exposure to the extent of Rs. 3513 Crores as detailed in note 57 ofthe statement

Management's Response:

The Board of Directors of the Parent Company at their meeting held on 30 August 2019appointed Mr. Ashok Kumar Malhotra retired DIG of Central Bureau of Investigation (CBI)who is assisted by Agastya Legal LLP (led by its senior partner Dr. M R Venkatesh) toindependently investigate the circumstances leading to the statements made in the letterof the Promoter and the then Chairman and Managing Director of the Company late Mr. V. G.Siddhartha dated 27 July 2019 and to scrutinize the books of accounts of the Company andits subsidiaries. Investigation had completed on 24 July 2020 and the report had mentionedMACEL owes a sum of Rs.3535 crores to the subsidiaries of CDEL as at 31 July 2019. out ofthe above a sum of Rs.842 crores was due to these subsidiaries by MACEL as at 31 March2019 as per the Consolidated Audited Financial Statements. Therefore a sum of Rs.2693crores is the incremental outstanding that needs to be addressed. The Company appointedRetired Hon'ble Justice Sri.K.L.Manjunath Judge of Hon'ble High Court of Karnataka tosuggest and oversee actions for recovery of the dues from MACEL and to help on any otherassociated matters. No decision has been taken on recoverability of the dues from MACEL bythe seven subsidiaries of the company. The Management of seven subsidiaries have decidedto take a decision on recoverability of Rs. 3535 Crores which is due from MACEL to thesubsidiaries of the Company after the receipt of report from Justice K.L.Manjunath.

5. Auditors of 3 subsidiaries based on their review have issued a disclaimer ofconclusion due to doubts on the recoverability of dues from 3 parties classified underother advances along with certain capital advance supplier and debtor balancesaggregating to Rs.364 crores (refer to note 42 of the consolidated financial statement).

Management's Response:

The group has created provision for Capital advances Supplier advance and doubtfuldebts amount to Rs.364 crores. However the groups efforts for the recovery will continue.

6. Further the component auditor of the subsidiary company has also highlightednon-compliance to the Indian Accounting Standards governing Investment Property on thegrounds that the subject properties have not been valued in with the methodologyprescribed under the applicable Accounting Standard but as per the value prescribed bythe Government of Karnataka. (Refer note 5C of the Consolidated Financial Statement)

Management's Response:

The company obtains independent valuations for its major investment properties at leastannually. The latest valuation is done on the basis of Guidance value as notified byGovernment of Karnataka and hence the company is unable to present the disclosurerequirement as required by the Ind AS. The fair value of investment property has beendetermined by external independent property valuers having appropriate recognisedprofessional qualifications and recent experience in the location and category of theproperty being valued.

7. Auditor of 1 subsidiary which in turn has 14 step-down subsidiaries and 2 joint(constituting 29% of revenue) based on their review have issued a qualified opinion dueto acute liquidity crunch in one of its step-down subsidiaries as qualified by therespective component auditor of the step-down subsidiary and also due to the liquiditycrunch faced by the Company itself as evidenced by losses incurred during the year excessof current liabilities over current assets loans due for repayment of the subsidiary andother step-down entities for which the holding company was the guarantor.

Management's Response:

The subsidiary has incurred losses during the Financial year has excess of currentliabilities over current assets loans that have fallen due for repayment loans whichhave fallen due of subsidiary companies for which the Holding Company is the guarantor.These events indicate that a material uncertainty related to the going concern assumptionexists and the Group's ability to continue as a going concern is dependent on thefinancial support from the group and generation of the expected cash flows throughoperations to be able to meet its obligations as and when they arise. However the Groupis confident of meeting its obligations in the normal course of business and accordinglythe accounts of the Group have been prepared on a Going Concern basis.

8. Further the auditor of another subsidiary has also highlighted that the Company(refer to note 59 of the consolidated financial statement) is required to be registeredunder section 45-IA of the Reserve Bank of India Act 1934 and has sought a one-timeexemption of the same and response from the Reserve Bank of India (RBI) is awaited

Management's Response:

The financial income of the Parent Company Coffee Day Trading Limited (‘CDTL')and Way2Wealth Securities Private Limited (W2WSPL) earned during the year ended 31 March2020 constitutes more than 50% of its total income for the said period and financialassets constitutes more than 50% of its total assets as at 31 March 2020 therebyrequiring these entities to register themselves as Non-Banking Financial Companies(‘NBFC') with the Reserve Bank of India (RBI) as per the requirements of Section45-IA of Reserve Bank of India Act 1934. On 13 March 2020 the Parent Company and CoffeeDay Trading Limited have made an application to the Deputy General Manager of theDepartment of Non-Banking Supervision requesting for a onetime exemption from obtainingregistration as NBFC under the provisions of RBI. As of the date of this Statement theParent Company and CDTL are awaiting response from RBI. W2WSPL has not filed anapplication with the RBI till date seeking condonation of the above non-compliance.

9. In a letter dated July 27 2019 signed by late Mr. V. G. Siddhartha the Promoterand then Chairman and Managing Director of the Parent Company which has come to light itwas inter- alia stated that the Management and auditors were unaware of all histransactions. Attention is drawn to note 57 of the Statement wherein consequently theBoard of Directors have initiated an investigation into the circumstances leading to thestatements made in the letter and to scrutinize the books of accounts of the Company andits subsidiaries. The investigation report submitted on July 24 2020 has concluded that asum of INR 3535 Crore is due from MACEL a related entity to the subsidiaries of CDEL ason July 31 2019. The report further concludes that out of this sum INR 842 Crore was dueto the subsidiaries as on March 31 2019 and the balance sum of INR 2693 Crore is theincremental outstanding which needs to be addressed. Further the Board of the Company inthe board meeting on August 21 2020 appointed Retired Hon'ble Justice Sri K L Manjunathformer Judge of Hon'ble High Court of Karnataka to suggest and oversee actions forrecovery of the dues from MACEL and to help on any other associated matters. The futurecourse of action will be decided by the Management based on the decision taken by the Hon'ble Justice Sri K L Manjunath. We are unable to comment on the appropriateness of thetransactions including regulatory non-compliances if any and the recoverability of theamounts due in the absence of requisite evidence not being made available to us and itsimpact to the Statement.

Management's Response:

The Board of Directors of the Parent Company at their meeting held on 30 August 2019appointed Mr. Ashok Kumar Malhotra retired DIG of Central Bureau of Investigation (CBI)who is assisted by Agastya Legal LLP (led by its senior partner Dr. M R Venkatesh) toindependently investigate the circumstances leading to the statements made in the letterof the Promoter and the then Chairman and Managing Director of the Company late Mr. V. G.Siddhartha dated 27 July 2019 and to scrutinize the books of accounts of the Company andits subsidiaries. Investigation had completed on 24 July 2020 and the report had mentionedMACEL owes a sum of Rs.3535 crores to the subsidiaries of CDEL as at 31 July 2019. out ofthe above a sum of Rs.842 crores was due to these subsidiaries by MACEL as at 31 March2019 as per the Consolidated Audited Financial Statements. Therefore a sum of Rs.2693crores is the incremental outstanding that needs to be addressed. The Company appointedRetired Hon'ble Justice Sri.K.L.Manjunath Judge of Hon'ble High Court of Karnataka tosuggest and oversee actions for recovery of the dues from MACEL and to help on any otherassociated matters. No decision has been taken on recoverability of the dues from MACEL bythe seven subsidiaries of the company. The Management of seven subsidiaries have decidedto take a decision on recoverability of Rs. 3535 Crores which is due from MACEL to thesubsidiaries of the Company after the receipt of report from Justice K.L.Manjunath.

Secretarial Audit Qualifications:

1. In terms of provisions of Section 117 a copy of every resolution in respect ofmatters specified in resolutions passed in pursuance of sub-section (3) of section 179shall be filed with the Registrar within thirty days of the passing or making thereof .TheBoard of Directors on 31.07.2019 has constituted Executive Committee delegating the powersvested with the powers granted to Erstwhile Administrative Committee. A copy of Resolutionis not been filed with the Registrar of Companies.

Management's Response:

The management of the Company has taken note of the Ministry's General Circular No.12/2020 dated 30.03.2020 on Companies Fresh Start Scheme 2020 which is extended till 31stDecember 2020 for filing the required forms. The same will be filed within the due date.

2. In terms of provisions of Section 135 of the Companies Act2013 the company wasrequired to constitute a Corporate Social Responsibility Committee of the Board consistingof three or more directors out of which at least one director shall be an independentdirector. The company could not comply the same.

Management's Response:

Due to unavoidable circumstances there was a delay in re-constitution of CSR Committee.However The Board on 7th December 2020 reconstituted the Committee inaccordance with Section 135 of the Companies Act 2013.

3. In terms of provisions of Section 203 of the Companies Act2013 every listedcompany shall have either managing director or Chief Executive Officer or manager and intheir absence a whole-time director as whole-time key managerial personnel. The companycould not comply the same

Management's Response:

Mrs. Malavika Hegde who is a Non-Executive Director of the Company is proposed to beappointed as whole time Director (CEO)of the company in the Board meeting held on 7thDecember 2020 subject to the approval of shareholders in this convening Annual GeneralMeeting.

4. Whereas in terms of the Regulation 17 (1)(c) of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 The board of directors of the top 1000 listedentities (with effect from April 1 2019) and the top 2000 listed entities (with effectfrom April 1 2020) shall comprise of ‘not less than six directors '. The companycould not comply the same.

Management's Response:

The Company had six Directors as per SEBI(LODR) (amendment) Regulations 2018 witheffect from 1st April 2019 namely:

Name of Director DIN Designation
1 Mr. V.G Siddhartha 00063987 Chairman & Managing Director
2 Mrs. Malavika Hegde 00136524 Non-Executive Director
3 Mr. Sanjay Nayar 00002615 Nominee Director
4 Mr. S V Ranganath 00323799 Independent Director
5 Dr. Albert Hieronimus 00063759 Independent Director
6 Mrs. Sulakshana Raghavan 03523815 Independent Director

After the sad demise of our beloved Chairman Mr. V.G.Siddharth Mrs. SulakshanaRaghavan and Mr. Sanjay Nayar resigned from the Board on 1st August 2019 and13 th November 2019.

Since the Company is not in the top 2000 listed entities as on 31.03.2020 the Companyneed not have minimum six directors. However the Board in their Meeting held on 7thDecember 2020 has appointed three Additional Directors. Therefore the newly constitutedBoard consists of Six Directors.

5. Whereas in terms of the Regulation 24A of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 read with Circular No. CIR/CFD/CMD1/27/2019dated 08.02.2019 Every listed entity in India shall undertake secretarial audit and shallsubmit Annual secretarial compliance report within 60 days of the end of the financialyear. Due to spread of COVID-19 the said due date was extended. However the companycould not comply the same.

Management's Response: Due to COVID-19 lockdowns and its related restrictions theAuditor could not complete the work within the stipulated time.

6. Whereas in terms of the Regulation 33 of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 regarding delayed submission offinancial resultfor the year ended 31st March2020 the quarter ended 30.06.2019 quarter ended 30.09.2019quarter ended 31.12.2019 and the quarter ended 31.03.2020. Company has also receivednotices offine in this regard from the Stock Exchanges. Since the company continued to bein non-compliance the stock exchanges have suspended the trading.

Management's Response:

The company has submitted financial results for all the quarters of financial year2019-20 and two quarters of financial year 2020-21 and is in the process of lifting thesuspension of trading.

7. Whereas in terms of the Regulation 30(2) of the SEBI (Substantial Acquisition ofShares and Takeovers) Regulations 2015 The promoter of the company shall together withpersons acting in concert with him disclose their aggregate shareholding and votingrights as of the 31.03.2020 in such form as may be specified within 7 days from the endof the said financial year. The company could not comply the same.

Management's Response:

Due to unavoidable circumstances the company could not receive the declaration from thepromoters within the stipulated time. The Company has taken note of the same and has putin compliance tracker to avoid such delays in future.

8. Whereas in terms of the Regulation 31(4) of the SEBI (Substantial Acquisition ofShares and Takeovers) Regulations 2015 The promoter along with persons acting in concertof the company shall declare to stock exchanges & Audit Committee on a yearly basiswithin 7 working days from the end of such financial year that he has not made anyencumbrance directly or indirectly ‘other than ' those already disclosed during thefinancial year. The company could not comply the same.

Management's Response:

Due to unavoidable circumstances the company could not receive the declaration from thepromoters within the stipulated time. The Company has taken note of the same and has putin compliance tracker to avoid such delays in future.

9. Whereas in terms of the Regulation 7(2)(a) of the SEBI (Prohibition of InsiderTrading) Regulations 2015 Every promoter member of the promoter group designated personand director of every company shall disclose to the company the number of such securitiesacquired or disposed of within two trading days of such transaction if the value of thesecurities traded whether in one transaction or a series of transactions over anycalendar quarter aggregates to a traded value in excess of ten lakh rupees or such othervalue as may be specified. The share pledged by the promoters was not disclosed to thecompany within the prescribed time.

Management's Response:

Due to unavoidable circumstances the company could not receive the declaration from thepromoters within the stipulated time. However on receipt of such declaration the companyhas intimated within the stipulated time.

Risk Management and Assessment:

The Company is exposed to various risks considering the diversified parametersaccording to the different business sectors of the Company such as coffee businesstechnology park business logistics business financial services business and resortbusiness. The Audit Committee oversees the area of financial risks and controls. Majorrisks identified by the business and functions are systematically addressed throughmitigating actions on continuing basis. The Company has incorporated sustainability in theprocess which helps the Board to align potential exposures with the risk appetite andhighlight risks associated with chosen strategies.

Details in respect of frauds reported by Auditors under Section 143(12):

There was no instance of fraud during the year under review which required theStatutory Auditors to report to the Audit Committee and / or Board under Section 143(12)of the Act and the rules made thereunder.

Statutory Disclosures:

None of the Directors of your Company are disqualified as per provisions of Section164(2) of the Companies Act 2013. Your Directors have made necessary disclosures asrequired under various provisions of the Act and SEBI (Listing Obligations and DisclosureRequirements) Regulation 2015.

General Disclosures:

a) Buy back of securities:

In accordance with Section 68 of the Act the Company has not bought back any of itssecurities during the year.

b) Sweat Equity:

The Company has not issued any Sweat Equity Shares under the provisions of Section 54of the Act.

c) Bonus Shares:

In terms of Section 63 of the Act the Company had not issued Bonus Shares during theyear under review.

d) Employee Stock Option Plan:

Pursuant to the provisions of Section 62 of the Act the Company has not provided anyStock Option to the Employees of the Company.

Acknowledgement:

The Directors would like to express their gratitude towards the Company's employeescustomers Banks and institutions investors and academic partners for their continuoussupport. They also

thank the concerned government departments and agencies for their co-operation. TheDirectors appreciate and value the contribution made by every member of the ‘CoffeeDay' family.

Place: Bangalore

For Coffee Day Enterprises Limited

Date:7th December2020 S.V. Ranganath Malavika Hegde
Interim-Chairman & Director
Independent Director
DIN: 00323799 DIN: 00136524

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