Your Board of Directors have pleasure in presenting the 51st Annual Reportand Audited Accounts of the Company for the Financial Year ended 31st March 2019.
The summarized financial results for the year are as under:
| || || |
(Rs. in Crores)
| || |
| ||2019-18 ||2017-18 ||2019-18 ||2017-18 |
|income || || || || |
|Revenue From Operations (Net) ||3077.8 ||2884.2 ||3077.8 ||2884.2 |
|Other Income ||121.8 ||127.4 ||81.6 ||81.2 |
|Total ||3199.6 ||3011.6 ||3159.4 ||2965.4 |
|EXPENDITURE || || || || |
|Material Costs ||2264.9 ||2103.2 ||2264.9 ||2103.3 |
|Employee Benefit Expenses ||140.7 ||135.5 ||140.7 ||135.5 |
|Finance Costs ||0.9 ||1.4 ||0.9 ||1.4 |
|Depreciation Amortization and impairment ||40.6 ||43.8 ||40.6 ||43.8 |
|Other Expenses ||220.6 ||223.2 ||202.5 ||204.7 |
|Total ||2667.7 ||2507.1 ||2649.6 ||2488.7 |
|Profit Before share of Net Profit of Investments accounted for using equity method and tax ||531.9 ||504.5 ||509.8 ||476.7 |
|Share of Net Profits of an Associate and Joint Ventures accounted for using equity Method ||- ||- ||100.4 ||72.4 |
|Profit Before Tax ||531.9 ||504.5 ||610.2 ||549.1 |
|Tax Expenses: || || || || |
|Current Tax ||165.7 ||131.7 ||165.7 ||131.7 |
|Deferred Tax ||22.1 ||14.6 ||37.1 ||87.3 |
|Total Tax ||187.8 ||146.3 ||202.8 ||219.0 |
|Profit After Tax ||344.1 ||358.2 ||407.4 ||330.1 |
|Total Other Comprehensive Income / (Expenses) for the year ||(24.6) ||13.5 ||(25.6) ||13.2 |
|Total Comprehensive Income for the year ||319.5 ||371.7 ||381.9 ||343.3 |
Global Economic Scenario
The global economic growth maintained its momentum at 3.6% in 2018 after its recordupswing and strong growth witnessed at 3.8% in 2017. The same growth pace was alsowitnessed across Advanced Economies and Emerging Market and Developing Economies whichgrew at 2.2% and 4.5% respectively compared to 2.4% and 4.8% respectively achieved in2017. Business and trade suffered amid an increase in trade tensions between the UnitedStates (US) and China uncertainties over a no-deal Brexit and increasing discord amongstoil producing nations. Emerging Asian and African economies witnessed sluggish businessconfidence whereas Latin American economies continued to remain under pressure with a fewcountries experiencing unprecedented economic crisis. According to the InternationalMonetary Fund (IMF) global economic expansion decelerated in the second half of 2018.
Going forward subdued momentum in global economic activity is expected to continue inearly 2019. Economic growth in 2019 is expected to be at 3.3%. However trade tensionsamongst advanced economies and the Eurozone are expected to gradually stabilize resultingin positive market sentiments which would also accommodate the growth targets of theemerging economies. Global Economic growth is projected to recover at 3.6% in 2020.
(Source: IMF World Economic Outlook April 2019)
Indian Economic Scenario
India is expected to retain its ranking as the world's fastest- growing major economywith country's GDP growing at 7.2% in FY 2018-19 against a modest 6.7% in FY 2017-18 (asper CSO estimates). This growth can be attributed to the fading transitory effects ofdemonetization and Goods and Services Tax (GST) the consequential stabilization of thereform and rise in demand consumption and investment. GST collections for FY 2018-19stood at Rs.11.77 lakh crores and Net Direct Taxes collections for FY 2018-19 stood at Rs.11.17 lakh crores signifying an increase in demand harmonization of the tax regime withtransparency and industry acceptance together with increased compliance.
India climbed up 23 places to be ranked 77th in the 'Ease of Doing Business Report' bythe World bank. This along with further liberalization of Foreign Direct Investments (FDI)policy areas resulted in record FDI inflows during 2018. The country experienced anincrease in manufacturing output employment and sales owing to which the Nikkei IndiaManufacturing Purchasing Managers' Index (PMI) rose to a 14 month high of 54.3 inFebruary 2019 and India's Index of Industrial Production (IIP) rose by 4.4% year-on-yearin 201819 (upto January 2019). Total Merchandise exports during the year increased to USD331 Billion and Total Services exports (upto February 2019) increased to USD 185.5Billion with India's Foreign Exchange Reserves reaching USD 405.6 Billion during March2019.
Going forward the Indian economy is likely to sustain the growth achieved in 2018-19with annual growth expected to remain above 7%. India's strong and improving macroeconomicfundamentals supported by rise in demand consumption output and investment along-with astable Government at the Centre with focus on infrastructure development would contributeto its economic growth. In the Interim Budget 2019-20 the Government made an allocationof Rs. 4.56 lakh crores for the infrastructure sector including railways roadwaysshipping and aviation. This was in addition to the Governments plans to build 100 smartcities 50 Economic corridors 35 multimodal logistics parks installation of 175 GWrenewable power capacity by 2022 and further impetus on increasing affordable housing withits 'Housing for all by 2022' or PMAY Urban and Grameen initiative. Structural policyreforms such as focus on the Agrarian and rural sections of the economy Direct BenefitsTransfer Scheme for small and marginal farmers Minimum Selling Price for Agriculturalproduce restructuring and recapitalization of the Banking sector introduction of theInsolvency and Bankruptcy Code (IBC) implementation RERA and REITS in the real estatesector digitization and connectivity drive with Bharat Net
Digital India and global outreach of the Make in India initiative are further expectedto contribute to the economic growth.
Performance of the Company Total Income
Revenue achieved during the current year was Rs. 3077.8 Crores as against Rs. 2884.2Crores in the previous year resulting in a 6.71% year-on-year growth with growth achievedacross all major product lines of which Electrical Cables achieving a 8.2% growth andConsumer Products achieving a 18.5% Growth. Total Income for the year stood at Rs. 3199.6Crores as against Rs. 3011.6 Crores in the previous year.
Profit Before Tax was recorded at Rs. 531.9 Crores as against Rs. 504.5 Crores duringthe previous year resulting in a rise of 5.5%. The overall rise in the Profit Before Taxwas lower than the growth in Revenue due to increased material costs during the year.
Electrical cables which contribute approximately 80% of the Company's total revenuecater to the Real Estate market and therefore the segment's performance is directlyrelated to the overall performance of the Real Estate sector. The Real Estate -residential market during the last six years saw a steady decline in the total number ofprojects launched (decrease of 56% from 2013 to 2018) and sold (decrease of 26.4% from2013 to 2018) accompanied by an increase in the unsold inventory (an increase of 60% from2013 to 2018) (Source: Knight Frank Research and Liases Foras). This mounting pressurealong-with demonetization GST implementation and introduction of RERA peaked out during2018 and saw a radical stalling of projects being executed which eventually reflected inthe Company's performance this year.
The Management Discussion and Analysis (MDA) forming part of this Report in AnnexureA inter-alia deals adequately with the operations as well as the current and futureoutlook of the Company.
The subdued pace in the global economic activity continued to reflect on the Company sexports which although grew at 10% year-on-year stood at a modest Rs. 30.4 Crores asagainst Rs. 27.5 Crores during the previous year.
The short term debt programs of your Company continue to be rated by CRISIL. Since thelast few years these have been accorded the highest ratings that CRISIL issues (A1+).CRISIL has also retained the AA+/stable rating for the Company's long term debt offerings.During the year however no debt papers were issued. As on the date of this report yourCompany continues to remain debt free.
Financial costs have been contained to the minimum required levels. The Companycontinues to meet all its financial commitments in a timely manner.
Based on the Company's performance the Directors are pleased to recommend a Dividendof Rs. 4.5 per equity share i.e. 225 % of the face value of Rs. 2 each for approval ofthe members at the ensuing Annual General Meeting. The total dividend outgo would involvea cash outflow of Rs. 83.0 Crores (including dividend tax).
As required by the SEBI (Listing Obligations and Disclosure Requirements) (SecondAmendment) Regulations 2016 the Company has formulated and adopted a dividenddistribution policy which is available on the Company's website www.finolex.com
Transfer to Reserves
The Company has not transferred any amount to the reserves during the current financialyear.
During the year under review the Company has not accepted any deposit covered underChapter V of the Companies Act 2013
Change in Nature of Business
There has been no change in the nature of business of the Company during the year underreview.
New Products and Expansion Finolex House
During the year under review your Company launched the first of its exclusive retailstore chains 'Finolex House' in Chennai.
This was followed by progressive openings of 'Finolex House' stores at Vadodara Bhopaland Ghaziabad. Your Company plans to open 50 such 'Finolex House' stores across the lengthand breadth of the country very soon. During the last two years your Company had venturedinto newer product segments tapping further into the Fast Moving Electrical Goods (FMEG)market such as LED based lamps low duty switch gear fans and water heaters. During theyear under review this segment experienced newer product offerings and also successfullyexpanded its market reach. However such FMEG products also require the consumers to beable to see touch and feel the premium quality of the products and giving them anopportunity to provide their valuable feedback in terms of appearance quality perceptionand price/ performance expectations for imminent volumes growth.
This will now be achieved through the exclusive Finolex House stores and your Companyexpects larger volumes of revenues from such products.
Your Company has capex plans for normal growth in all its existing lines wherein theCompany plans to invest Rs. 200 Crores in the coming years. This includes the plans to setup another plant to manufacture solar cables using electron beam radiation technology atits complex in Urse. The project is still in its inception phase and will shape up in theupcoming years.
The Company is also setting up a plant to manufacture PVC conduit pipes in Goa which isexpected to be operational next year.
Further the Company is on the verge of completing its acquisition of 40 acresof Land in Vadodara which would be used for future expansion needs of the Company.
Joint Ventures Subsidiaries And Associates
Pursuant to Section 129(3) of the Companies Act 2013 read with Rule 5 of the Companies(Accounts) Rules 2014 the statement containing salient features of the financialstatements of the Company's Joint Ventures / Associates (in form AOC-1) is attached tothis Report as Annexure G. The Company does not have any investments in subsidiaries.
Corning Finolex Optical Fibre Private Limited
The Bharat Net and Digital India initiative of the Government saw significant focus onimproving infrastructure for increasing online and internet connectivity. This along-withthe increasing competition in the telecom sector to provide broadband connectivityresulted in increased demand for optical fiber and increased business for the JV. Revenueachieved by the JV during FY 2018-19 was Rs. 327.6 Crores as against Rs. 237.3 Crores inthe previous year resulting in an outstanding 37.9% year-on-year growth. Net Profit AfterTax was recorded at Rs. 14.2 Crores as against Rs. 11.3 Crores during the previousresulting in a rise of 25.7% - a record for the JV. Based on the market demand the JVexpects to grow at double digits during the next few years. Your Company's total equityparticipation in the JV at the end of 2018-19 stood unchanged at Rs. 1.75 Crores.
Finolex J-Power Systems Private Limited
As discussed in the Indian Economic Scenario section the Government's vision forsustained and stable growth of the Indian economy includes a progressive outlook towardsinfrastructural development. Such smart cities economic corridors logistics parkshousing schemes ports metros etc. would require immense power supply and transmission ofpower to such places. The power sector plays a pivotal role in the development ofinfrastructure and the Government has shown keen interest and consequent demand for HighVoltage (HV) and Extra High Voltage (EHV) power transmission lines. This has been evidentfrom the increasing number of tenders floated by many states and state utilities duringthe year.
The year under review had been very positive for the JV in terms of market penetrationreach and visibility in relationship building with customer base and the same was visiblein the JV's ability to participate in tenders across various states. During the year theJV successfully completed its first 220KV order from Delhi Transco its earlier order fromKSEB and successfully won major orders in the 110KV - 230KV voltage grade as well asorders for the Pune Metro project. The JV also successfully participated in 400KV tendersduring the year which was certified during the previous year. Although the JV facedchallenges in participating for large tenders owing to the supplying laying andcommissioning experience criteria for such tenders the JV had been successful inconvincing utilities to accept parent credentials towards qualifications. This was evidentwith the successful participation in tenders worth Rs. 1340 Crores for the year 2018-19which form the basis of good opening order book position for the next year.
Based on its performance and outreach it can be safely said that the JV will be ableto break even as well as become profitable going forward however would need financialsupport through Equity infusion until then. Considering this your Company had infusedEquity worth Rs. 18.9 Crores in the JV during the year taking the Company's totalparticipation in the JV to Rs. 152.6 Crores at the end of FY 2018-19. The JV's long termpotential and outlook indeed seem strong but in the short term it has been facingnet-worth erosion and therefore your Company has recognized a diminution in the value ofits investment of Rs 18.2 Crores during the year under review. This scenario is likely toprevail for at least 18 months more.
Particulars of Employees
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are provided in the Annexure F to thisReport.
In terms of provisions of Section 197(12) of Companies Act 2013 read with Rules 5(2)& 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 a statement showing the names and other particulars of employees drawingremuneration in excess of the limits set out in the said rules are provided in theAnnexure F to this Report.
Key Managerial Personnel
The following persons continued as Key Managerial Personnel during the year 2018-19
|Name ||Title |
|Mr. D K Chhabria ||Executive Chairman |
|Mr. Mahesh Viswanathan ||Deputy Managing Director & Chief Financial Officer |
|Mr. R G D'Silva ||Company Secretary & President (Legal) |
Your Company has always considered its human capital a critical factor to its success.In line with the Company's commitment to develop the work environment strengthen itsemployees with their functional managerial and leadership capabilities and preparing itsemployees to adapt to the fast changing external environment the Company is revamping itshuman resource strategy addressing key aspects of human resource development. The Companyis striving to implement a process in line with benchmarked business practices and has putin place process in areas such as:
Standard code of conduct
A challenging and favorable work environment that encourages entrepreneurial behaviorinnovation and the drive towards business excellence.
Skill development of all Blue Collared workforce to enable them to effectivelymeet the productivity and quality deliverables.
Development and delivery of comprehensive training programs to impact andimprove function specific skills as well as managerial competence with the help ofexternal consultants as well as internal training teams.
Standard compensation packages to attract and retain talent across all functions.
The Company engaged approximately 1824 and 1828 permanent employees as at 31st March2019 and 2018 respectively. The number of flexible (contractual trainee and temporary)employees as at 31st March 2019 was 1464.
At the Company we ensure that we evolve and follow the corporate governance guidelinesand best practices sincerely to boost long-term shareholder value and to respect minorityrights. The Company considers it an inherent responsibility to disclose timely andaccurate information regarding its operations and performance as well as the leadershipand governance of the Company. Your Company is in full compliance with the CorporateGovernance guidelines as set out in SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 ("SEBI LODR Regulations") and is committed to good corporategovernance laying a strong emphasis on transparency accountability and integrity.Accordingly all Directors and Senior Management employees confirm in writing theiradherence to the Company's Code of Conduct.
A separate report on Corporate Governance (Annexure B) is provided together with aCertificate from the Statutory/Secretarial Auditors of the Company regarding compliancewith conditions of Corporate Governance as Annexure C as mandated under SEBI LODRRegulations 2015. There are no qualifications reservations or adverse remarks ordisclaimers made by the auditor in his report. A Certificate of the Chief ExecutiveOfficer and Chief Financial Officer of the Company in terms of Regulation 17(8) Part BSchedule II of SEBI LODR Regulations inter alia confirming the correctness of thefinancial statements and cash flow statements adequacy of the internal control measuresand reporting of matters to the Audit Committee is also annexed.
Corporate Social Responsibility
Your Company envisages its vision through its tagline 'Finolex - Behtar ElectriKAL keliye'. This vision not only encompasses the one-step-ahead quality of its products andcustomer satisfaction but also a holistic approach about the well-being of the Companyits employees its customers and the complete society. Your Company commits itself toutmost care and help for sections of the society in need of such a hand and this isvisible through the CSR initiatives undertaken by the Company as well as the 'HopeFoundation' supported by the Company.
During 2018-19 your Company undertook the following CSR activities:
Free Medical care through Multi-speciality Hospitals
Mobile hospital facilities in rural areas along-with improvement of health carefacilities in such areas
Medical facilities for poor and backward class women for their delivery andgynecological problems
Facilities for knee replacement cataract and dialysis for needy people along-withmedical help for needy children suffering from H1B diabetes
Contribution to Medical Research Institutes for Cancer research
Promotion of education youth welfare and related activities along-with expenditure onimprovement of school infrastructure in Maharashtra Uttarakhand and Jammu Contributiontowards relief for flood affected areas in Kerala Contribution towards the NationalMission for Clean Ganga - 'Namami Gange' initiative.
Sewage treatment plants where the Company's plants are located.
For their invaluable service to the society Police Vans were provided to the'Maharashtra Police' as per desired specifications Annexure 'I' - Annual Report on CSRforming part of this Report inter-alia provides the details of all CSR activities duringthe year under review and other related information.
In accordance with the provisions of the Companies Act 2013 and the relevant Rulesframed thereunder and of the Articles of Association of the Company Mr. MaheshViswanathan (DIN: 02780987) retires by rotation at the ensuing Annual General Meeting andbeing eligible offers himself for re-appointment.
The Board recommends his re-appointment. The requisite details regarding hisre-appointment are set out in the Notice for the ensuing Annual General Meeting.
At its meetings held on 14th November 2018 and 5th December 2018 the Board appointedMr Mohan Lall Jain (DIN: 00148677) aged 71 years and Ms Poornima K Prabhu (DIN: 031 14937)aged 43 years as Additional Director and Woman Director respectively on the Board. MsPoornima K Prabhu ceased upon resignation due to her other commitments. Mr Mohan Lal Jainholds office as such till conclusion of the ensuing Annual General Meeting of the Company.The Board recommends his re-appointment. The requisite details regarding hisre-appointment are set out in the Notice for the ensuing Annual General Meeting.
Pursuant to the recommendation of the Nomination and Remuneration Committee("NRC") in this regard the Board at its meeting held on 14th February 2019appointed Mrs Shruti D Udeshi (DIN: 06900182) aged 35 years as an Independent WomanDirector on the Board for a tenure of five years with effect from 14th February 2019which appointment is subject to approval of the Members at ensuing Annual General Meeting.The Board recommends her appointment as Independent Director by the Members and requisitedetails regarding her appointment are set out in the Notice for the ensuing Annual GeneralMeeting.
Mrs Namita V Thapar (DIN: 05318899) aged 42 years being a Woman Director ceased at thelast Annual General meeting held on 25th September 2018. Dr H S Vachha (DIN: 00016610)aged 77 years being an Independent Director had not been keeping good health since quitesome time and needed help and assistance for his daily living and activities and could notattend any Meeting of the Board and Committees thereof during the year under review andpursuant to the provisions of Section 167(1 )(b) upon elapse of the period prescribed inthis regard he ceased to be a Director of the Company. Mr Sanjay K Asher (DIN: 00008221)aged 55 years who had been appointed as an Independent Director ceased upon resignationdue to his other commitments. The Board places on record its deep appreciation of thevaluable contribution made by these Directors during their tenure on the Board ofDirectors of the Company.
Mr Pratap G Pawar (DIN: 00018985) and Mr Pradeep R Rathi (DIN: 00018577) IndependentDirectors will be completing their five years' term of appointment on 8th September 2019.
Following the recommendation of the NRC in this regard the Board recommends thereappointment of Mr. P. G. Pawar. Pursuant to the provisions of SEBI (LODR) Regulations2015 as amended since Mr P G Pawar will be completing the age of 75 years in Financialyear 2019-20 his reappointment will require approval of the Members to be passed as aspecial resolution. The terms and conditions of reappointment are being put up to theMembers for approval. Accordingly suitable resolution which appears in the Notice ofensuing Annual General Meeting has been proposed for consideration. The Board places onrecord its deep appreciation of the valuable contribution made by Mr. P. R. Rathi duringhis tenure on the Board of the Company.
Compliance Under the Companies Act 2013
Pursuant to Section 134 of the Companies Act 2013 read with the Companies (Accounts)Rules of 2014 your Company complied with the requirements. The details of suchcompliances are enumerated below:
Web link to the Annual Return: The Annual Return of the Company is available at theCompany's website at www.finolex.com
Number of meetings of the Board: The Board met on 7 occasions during the year. Thedetails of the meetings are furnished in the Report on Corporate Governance which isattached as Annexure B to this Report.
Directors' Responsibility Statement: Pursuant to Sections 134(3)(c) and134(5) ofthe Companies Act 2013 (the "Act") the Directors to the best of theirknowledge and belief and according to the information and explanations provided to themconfirm that:
- in the preparation of the annual accounts the applicable accounting standards havebeen followed and no material departures have been made from the same
- 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 and loss of the Company for that period
- the Directors have taken proper and sufficient care 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
- the Directors have prepared the annual accounts on a going concern basis;
- the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and
- the Directors have devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
Remuneration and Nomination Policy: The Board of Directors has framed the policywhich lays down a framework in relation to Appointment and Remuneration of Directors KeyManagerial Personnel and Senior Executives of the Company including the criteria fordetermining qualifications selection and appointment. Further details are provided in theCorporate Governance Report which is attached as Annexure B to this Report.
Board Evaluation: Pursuant to the relevant provisions of Companies Act2013 the independent directors at their meeting dated 29th May 2019 without theparticipation of the non-independent directors and Management considered and evaluatedthe Board's performance performance of the Chairman and other non-independent directors.The evaluation was performed taking into consideration the various aspects of the Board'sfunctioning composition of the Board and its Committees culture execution andperformance of specific duties obligations and governance. The Board of Directorsexpressed its satisfaction with the evaluation process.
Particulars of loans guarantees or investments under section 186 of The Companies Act2013: During the year an equity investment of Rs. 18.9 Crores in the Company's JV -M/s Finolex J-Power Systems Private Limited.
Contracts or arrangements with related parties: All transactions entered into bythe Company with related parties were in the ordinary course of business and on an arm'slength basis. Each of these transactions was reviewed by the Audit Committee prior tobeing entered into and where necessary was approved by the Board of Directors and theMembers. In respect of transactions of a repetitive nature an omnibus approval wasobtained from the Audit Committee and Members where necessary. At every quarterly meetingthe Audit Committee reviews the transactions that were entered into during the immediatelypreceding period. Details of related party transactions have been disclosed under Note 35to the financial statements. Details of the same are also reproduced in Form AOC 2 whichis attached as Annexure H to this Report. The Company s Policy on transactions withrelated parties as approved by the Board is also available on the website of the Companyat www.finolex.com.
Material changes and commitments affecting the financial position of the Company whichhave occurred between 31st March 2019 and 29th May 2019 (date of this report): Therewere no material changes and commitments affecting the financial position of the Companybetween the end of the financial year (31st March 2019) and date of this Report (28thMay 2019)
Significant and material orders passed by the regulators or Court or Tribunalsimpacting the going concern status of the Company: There are no significant andmaterial orders passed by the Regulators or Courts or Tribunals that would impact thegoing concern status of the Company or the Companys operations in the future.
Adequacy of Internal Financial Controls with reference to the Financial Statements: Havingregard to Rule 8 (5) (viii) of the Companies (Accounts) Rules 2014 the details inrespect of adequacy of internal financial controls with reference to the financialstatements of the Company are as follows:
Your Company maintains appropriate systems of internal control including monitoringprocedures. These internal control systems ensure reliable and accurate financialreporting safeguarding of assets keeping constant check on cost structure and adheringto management policies. The internal controls are commensurate with the size scale andcomplexity of the Company's operations and facilitate timely detection of anyirregularities and early remedial steps against factors such as loss from unauthorized useand disposition. Company policies guidelines and procedures provide for adequate checksand balances which are meant to ensure that all transactions are authorized recorded andreported correctly. The internal controls are continuously assessed and improved /modified to meet changes in business conditions statutory and accounting requirements.
Constant monitoring of the effectiveness of controls is ensured by periodical auditsperformed by an in-house internal audit team as well as assignments entrusted to M/S Ernst& Young. Both these teams in their respective assignments test and review controlschallenge business processes for their robustness and benchmark practices in line withindustry norms.
The Audit Committee regularly meets and reviews the results of the various internalcontrol audits both with the Auditors as well as with the respective Auditees. The AuditCommittee is apprised of the findings as well as the corrective actions that are taken.Periodical meetings between the Audit Committee and the Company Management also ensure thenecessary checks and balances that may need to be built into the control system.
Risk Management Policy: Your Company has set up a Risk Management Committee of theBoard of Directors which comprises Mr. P. G Pawar Mr D K Chhabria Mr Mahesh Viswanathanand Mr. M L Jain. More details of the risks faced by the Company are available in theManagement Discussion and Analysis (MDA) attached as Annexure 'A' to this Report.
Vigil Mechanism / Whistle Blower Policy: As required under Section 177 (9) of theCompanies Act 2013 read with Rule 7 of the Companies (Meetings of Boards and its Powers)2014 and Regulation 22 of the SEBI LODR Regulations the Company has adopted a policy onvigil mechanism / whistle blower. The policy provides direct access to the Chairman of theAudit Committee in case any employee should choose to report or bring up a complaint. YourCompany affirms that no one has been denied access to the Chairman of the Audit Committeeand also that no complaints were received during the year. Brief details about the policyare provided in the Corporate Governance Report which is attached as Annexure B to thisReport. Also the policy is available at the Company's website at www.finolex.com.
Prevention of Sexual Harassment Policy: The Company has in place a policy onprevention of sexual harassment in line with the requirements of the Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013. An InternalComplaints Committee has been set up to redress complaints received regarding sexualharassment. All employees (permanent contractual temporary trainees) are covered underthis policy.
During the year under review two complaints were received:
One complaint was received about a driver of an employee wherein the InternalComplaints Committee of the Company had conducted an enquiry and on acceptance ofmisconduct by the employee's driver his services were terminated by the concernedemployee.
Another case was received about an employee wherein the Internal Complaints Committeeof the Company had conducted an enquiry and on acceptance of misconduct by the employeehis services were terminated by the company before the date of this report.
M/s Deloitte Haskins & Sells LLP Chartered Accountants (Firm Registration No.117366W / W100018) Auditors of the Company hold office until conclusion of theFifty-Fourth Annual General Meeting of the Company to be held in the financial year2022-23 provided that their appointment shall be subject to ratification at every AnnualGeneral meeting if so required under the Act and being eligible offer themselves forsuch ratification of their appointment. Further as required under the provisions ofSection 139 and Section 141 of the Companies Act 2013 read with the Companies (Accounts)Rules 2014 the said Auditors have confirmed their consent as well as eligibility tocontinue to act as Auditor of the Company.
As per the requirement of the Central Government and pursuant to Section 148 of theCompanies Act 2013 read with Companies (Cost Records and Audit) rules of 2014 as amendedfrom time to time your Company has been carrying out an audit of cost records every year.At the previous Annual General Meeting the members had approved the appointment of M/SJoshi Apte & Associates as Cost Auditors for the financial year 2018-19 at aremuneration of Rs. 5.0 lakhs plus GST as applicable and reimbursement of out of pocketexpenses. Their work will commence shortly and their report would be filed with MCA on orbefore the due date.
The Cost Audit Report for the financial year 2017-18 was filed prior to its due date.
In accordance with the provisions of Section 204 of the Companies Act 2013 and theRules made thereunder M/s Jog Limaye & Associates a firm of Company Secretaries inpractice was appointed by the Board to conduct the Secretarial Audit of the Company.There are no qualifications reservations or adverse remarks or disclaimers made by themin their Report dated 24 May 2019.
Their Report is attached as Annexure D to this Report.
The Institute of Company Secretaries of India had revised the Secretarial Standards onMeetings of the Board of Directors (SS-1) and Secretarial Standards on General Meetings(SS-2) with effect from 1st October 2017. Your Company is in compliance with the saidsecretarial standards.
Listing of Securities
Your Company's equity shares are listed on the two premier stock exchanges of thecountry namely BSE Limited and National Stock Exchange of India Limited. Your Company hadissued Global Depository Receipts which are listed on the Luxembourg Stock Exchange. YourCompany has not issued any Non-Convertible Debentures ("NCDs") in financial year2018-19 and no NCDs were outstanding as on 31st March 2019.
Energy Technology and Foreign Exchange
Information on conservation of energy technology absorption foreign exchange earningsand outgo required to be given pursuant to Section 134(3)(m) of the Companies Act 2013read with Rule 8 of the Companies (Accounts) Rules 2014 is attached to this Report asAnnexure E.
Statements in this Boards' Report and Annexures may contain forward looking statementswithin the meaning of applicable Securities laws and regulations. Actual results coulddiffer materially from those expressed or implied. Various factors including commodityprices cyclical demand changes in Government regulations tax laws general economicdevelopment could all have a bearing on the Company's operations and would impact eventualresults.
Your Directors are grateful to the Central and State Governments StatutoryAuthorities Local Bodies Banks and Financial institutions for their continued supportand cooperation. Your Directors warmly acknowledge the trust and confidence reposed inyour Company by its channel partners dealers customers and construction organizations insupporting its business activities and growth. Your Directors express their gratitude tothe other business associates for their unstinting support. Your Directors value thecommitment and contribution of the employees towards the Company. Last but not the leastyour Directors are thankful to the Members for extending their constant trust and for theconfidence shown in the Company.
| ||For and on behalf of the Board of Directors |
|Pune ||D.K. Chhabria |
|Dated: 29th May 2019 ||Executive Chairman |
Companies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988
A. Conservation of Energy:
Steps taken or impact on conservation of energy utilizing alternate sources of energyand capital investments on energy conservation equipments:
(i) Relevant Street and Shed lights are replaced with 70W/250W sodium vapour lightingfixtures of low power factor by 50W/120W LED fixtures.
(ii) Imported motorized valve of combustion-system was replaced by suitable Indianmodel which is standardized for future requirements.
(iii) Imported process control instruments of HONEYWELL are replaced by Indian modeland same is now standardized.
(iv) Foreign brand burners of the tundish and launder are replaced by locallymanufactured units and standardized.
(v) Combustion sequence control units are replaced with Indian alternatives andstandardized.
(vi) Energy efficient VFD motor and drives installed to reduce power consumption inlocations like LDC 16 wire MWD line and JFTC Group Twinner lines.
(vii) STP Plant treated water is utilized for gardening to reduce water consumption.
(viii) Improved preventive maintenance of machines to reduce energy loss.
(ix) Regular monitoring and rectification of air leakage is done to reduce airconsumption.
B. Technology Absorption:
Efforts made in technology absorption as per Form B are as follows:
Form for disclosure of particulars with respect to Absorption Research and Development(R&D)
1. Specific areas in which the Company is pursuing R&D efforts:
(a) Following new cables have been designed developed and type approvalsobtained/successfully launched in the market:
(i) Developed CAT6 Cable with CCA conductor meeting EIA/TIA specifications.
(ii) Continuous efforts are going on for developing new types of cables to meet nichemarket demand.
(b) Configured and installed one single line capable of producing multiple number ofOFC products like Tight buffer FTTH Simple/Duplex Drop cable etc.
2. Benefits derived as a result of the above R&D:
The aforesaid newly developed products have been introduced in the market and givesignificant benefits in terms of quality better performance of the end-user applicationand import substitution.
3. Future plan of action:
- To develop FR XLPE for auto wires conforming TXL/GXL requirement
- To develop TPE Type D compound for Electrical Commercial Vehicles
- To develop new type of Auto Cable i.e. CAVUS Type
- To develop cables with thermo plastic rubber insulation for welding application
- To develop Rubber based cables for windmill application
- To develop CAT7 LAN cables with higher bandwidth
- To develop Insulation and Sheathing compound suitable for solar cable application -Both ambient and E-Beam curing
- To develop compound for HFFR application
- To develop welding cable compound having cross linking properties
|4. Expenditure on R & D: || |
|(a) Capital ||The development work is carried on by the concerned departments on an ongoing basis. The expenses and the costs of assets are grouped under the respective heads. |
|(b) Recurring || |
|(c) Total || |
|(d) Total R & D expenditure as a percentage of total turnover || |
Technology Absorption Adaptation and Innovation:
1. Efforts in brief made towards technology absorption adaptation and innovation:
(a) Developed FR-XLPE compound for automotive wires AEX as per JASO specification.
(b) Several grades of PVC compounds were reformulated to suit higher line speeds andalso made environmentally friendly complying with ROHS requirements.
(c) Continuous efforts are going on for further developing improving and upgrading alltypes of cables.
2. Benefits derived as a result of the efforts e.g. product improvement costreduction product development import substitution etc:
Several tangible and intangible benefits from new technology are derived such as costreduction productivity development of better and new products import substitution andbetter customer services. Development and manufacture of new products with enhancedfeatures will extend the product range of the Company enabling it to cater to differentniche markets and customer needs.
3. Imported technology (imported during the last 5 years reckoned from the beginning ofthe financial year):
|a) Technology Imported ||Nil |
|b) Year of Import ||Not applicable |
|c) Has technology been fully absorbed? ||Not applicable |
|d) If not fully absorbed areas where this has not taken place reasons therefore and future plans of action ||Not applicable |
C. Foreign Exchange Earnings and Outgo:
The market conditions overseas continue to be difficult and reflect the subdued pace inglobal economic activity. FOB value of exports for the year grew by a modest 10% year onyear and stood at Rs.30.44 Crores. Your Company is continuing its sustained efforts toretain old customers and add new customers in various export markets and to address theneeds of niche markets.
|i) Earnings by way of Exports : ||Rs. 30.44 Crores |
|ii) Outgo by way of Imports : ||Rs. 344.19 Crores |
| ||For and on behalf of the Board of Directors |
|Pune ||D.K. Chhabria |
|Dated: 29th May 2019 ||Executive Chairman |
Disclosure in Directors' Report Pursuant to Section 197(12) of the Companies Act 2013Read with Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014
|Sr. No. ||Requirements ||Disclosure || |
|1 ||The ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year ||Name of the Director ||Ratio |
| || ||Mr. D. K. Chhabria ||262.5X |
| || ||Mr. Mahesh Viswanathan ||95.7X |
| || ||Mr. Sanjay K Asher ||1.4X |
| || ||Mr. Pratap G Pawar ||8.2X |
| || ||Mr. P R Rathi ||3.4X |
| || ||Mrs. Namita V Thapar ||1.4X |
| || ||Mr. Shishir Lall ||6.5X |
| || ||Ms. Poornima K Prabhu ||0.7X |
| || ||Mr. M L Jain ||1.4X |
| || ||For this purpose Sitting fees paid to the Directors and Company's contribution to Provident Fund and Superannuation funds have not been considered as remuneration. |
|2 ||The percentage increase in remuneration of each ||Mr. D. K. Chhabria ||-32.39% |
| ||director Chief Financial Officer and Company ||Mr. M. Viswanathan ||14.26% |
| ||Secretary in the financial year ||Mr. R. G. D'silva ||15.51% |
|3 ||The percentage increase in the median remuneration of employees in the financial year: ||During FY 2018-19 the percentage increase in the median remuneration of employees as compared to previous year was approximately 2.38% |
|4 ||The number of permanent employees on the rolls of company ||1824 (including whole time directors) |
|5 ||Average percentage increase already made in the salaries of the employees other than the managerial personnel in the last last financial year and its comparison with the percentage increase in the managerial remuneration. ||Average increase in the remuneration is 5.87% for the employees other than Managerial Personnel and (22.43) % for Managerial Personel. |
|6 ||The key parameters for any variable component of remuneration availed by the directors ||Both Mr. D.K. Chhabria Executive Chairman and Mr. M. Viswanathan Deputy Managing Director and Chief Financial Officer are paid variable pay as per their agreement provisions. |
| || ||Non-Executive Directors of the Company are paid commission as approved by Shareholders in the General Meeting. |
|7 ||Affirmation that the remuneration is as per the remuneration policy of the Company ||Yes |
1. Profit of the company is calculated as per Section 198 of the Companies Act2013
2. Managerial Personnel includes Executive Chairman and wholetime Director.
Form AOC 1
(Pursuant to first proviso to sub-section 3 of the Section 129 of the CompaniesAct2013 read with Rule 5 of the Companies (Accounts) Rules2014 )
Statement containing salient features of the financial statements ofSubsidiaries/Associates/JV Companies
Part A - Subsidiaries: The Company has no subsidiaries Part B - Associates and JointVentures
| || || ||(Rs. In Crores) |
|Name of Associates or Joint Ventures ||Finolex Industries Ltd (FIL) ||Finolex J-Power Systems Pvt. ||Corning Finolex Optical Fibre Pvt. |
| ||Associate ||Joint Venture ||Joint Venture |
|1. Latest audited Balance Sheet Date ||31st March 2019 ||31st March 2019 ||31st March 2019 |
|2. Date on which the Associate or Joint Venture was associated or acquired ||31st Mar 1989 ||15th May 2008 ||17th Sep 2014 |
|3. Shares of Associates or Joint Ventures held by the company on the year end || || || |
|No. of shares ||40192597 ||152635000 ||1750000 |
|Amounted on Investment in Associates or Joint Ventures ||151.8 ||152.6 ||1.7 |
|Extend of Holding % ||32.39% ||49% ||50% |
|4. Description of how there is significant influence ||There is significant influence due to || |
There is significant influence due to joint control over the economic activities
| ||shareholding || || |
|5. Reason why the Associate or Joint Venture is not consolidated ||NA ||NA ||NA |
|6. Net-worth attributable to shareholding as per audited Balance Sheet ||834.4 ||52.0 ||14.2 |
|7. Profit /(Loss) for the Year || || || |
|Total Profit ||367.3 ||(35.80) ||14.2 |
|i. Considered in Consolidation ||119.0 ||(17.5) ||7.1 |
|ii. Not Considered in Consolidation ||248.3 ||(18.3) ||7.1 |
Form No. AOC-2
(Pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) ofthe Companies (Accounts) Rules 2014) Form for disclosure of particulars ofcontracts/arrangements entered into by the Company with related parties referred to insub-section (1) of Section 188 of the Companies Act 2013 including certain arm's lengthtransactions under third proviso thereto:
1. Details of contracts or arrangements or transactions not at arm's length basis: NA -All transactions of the Company Including the transactions with related parties which arealso included in the Financial Statements of the Company are at Arm's length pricing.
a) Name(s) of the related party and nature of relationship: NA
b) Nature of contracts/arrangements/transactions: NA
c) Duration of the contracts / arrangements/transactions: NA
d) Salient terms of the contracts or arrangements or transactions including the valueif any: NA
e) Justification for entering into such contracts or arrangements or transactions: NA
f) Date(s) of approval by the Board: NA
g) Amount paid as advances if any: NA
h) Date on which the special resolution was passed in general meeting as required underfirst proviso to Section 188: NA
2. Details of material contracts or arrangements or transactions at arm's length basis:
a) Name of the related party and nature of relationship: Refer to Note 35 Related PartyDisclosures to the Standalone Financial Statements
b) Nature of transaction: Refer to Note 35 Related Party Disclosures to the StandaloneFinancial Statements
c) Duration of transaction: The Transaction is entered into in the ordinary course ofbusiness.
d) Salient terms of the transaction including the value if any: Refer to Note 35Related Party Disclosures to the Standalone Financial Statements
e) Date of approval by Members if any: Approved on various dates.
f) Amount paid as advances if any: Refer to Note 35 Related Party Disclosures to theStandalone Financial Statements
| ||For and on behalf of the Board of Directors |
|Pune ||D.K. Chhabria |
|Dated: 29th May 2019 ||Executive Chairman |