To the Members
Your Board of Directors have pleasure in presenting the 52nd Annual Reportand Audited Accounts of the Company for the Financial Year ended 31st March 2020
The summarized financialresultsforthe under: year are as
(Rs. in Crores)
| ||STANDALONE ||CONSOLIDATED |
|PARTICULARS ||2019-20 ||2018-19 ||2019-20 ||2018-19 |
|InCoMe || || || || |
|Revenue From Operations (Net) ||2877.3 ||3077.8 ||2877.3 ||3077.8 |
|Other Income ||171.9 ||121.8 ||91.5 ||81.6 |
|Total ||3049.2 ||3199.6 ||2968.8 ||3159.4 |
|eXPendITURe || || || || |
|Material Costs ||2083.4 ||2264.9 ||2083.4 ||2264.9 |
|Employee Benefit Expenses ||149.5 ||140.7 ||149.5 ||140.7 |
|Finance Costs ||1.6 ||0.9 ||1.6 ||0.9 |
|Depreciation Amortization and impairment ||38.9 ||40.6 ||38.9 ||40.6 |
|Other Expenses ||274.5 ||220.6 ||261.0 ||202.5 |
|Total ||2547.9 ||2667.7 ||2534.4 ||2649.6 |
|Profit Before share of Net Profit of Investments ||501.3 ||531.9 ||434.4 ||509.8 |
|accounted for using equity method and tax || || || || |
|Share of Net Profits of an Associate and Joint - Ventures - 77.6 ||100.4 |
|accounted for using equity Method || || || || |
|Profit Before Tax ||501.3 ||531.9 ||512.0 ||610.2 |
|Tax Expenses: || || || || |
|Current Tax ||123.2 ||165.7 ||123.2 ||165.7 |
|Deferred Tax ||(24.4) ||22.1 ||(2.2) ||37.1 |
|Total Tax ||98.8 ||187.8 ||121.0 ||202.8 |
|Profit After Tax ||402.5 ||344.1 ||391.0 ||407.4 |
|Total Other Comprehensive Income / (Expenses) ||(40.6) ||(24.6) ||(41.4) ||(25.6) |
|for the year || || || || |
|Total Comprehensive Income for the year ||361.9 ||319.5 ||349.6 ||381.9 |
Global economic Scenario
Global economic growth faced challenges with de-growth experienced across majoreconomies in 2019. The world economic output grew at 2.9% in 2019 significantly below the3.6% clocked in 2018. The de-growth was witnessed with Advance Economies grew at 1.7% in2019 as compared to 2.2% the year ago. Emerging Markets and Developing Economies (EMDEs)grew at 3.7% in 2019 as compared to
4.5% in the previous year. Manufacturing and trade faced increased challenges withescalating pressure between the
United States (US) and China and a hung Brexit struggling with a faltering EuropeanUnion (EU). Asian African and Latin American economies continued to remain underunprecedented pressure with many economies facing civil unrests over the falteringeconomic conditions. (Source: IMF
World Economic Outlook April 2020)
The beginning of 2020 marked the global widespread of the novel COVID 19 viruschallenging the healthcare and the emergency response systems across the world. By March2020 even developed nations failed to contain and respond to the virus followed by theWorld Health Organization (WHO) declaring the COVID 19 outbreak a global pandemic. Thiswas followed by Nation-wide lockdowns across the world with manufacturing and tradefacing unprecedented shutdowns world-over. Even as the lockdowns keep extending and theglobal economy keeps slipping in a depression IMF has estimated a global contraction ofthe world economy by a staggering 3% and the World Trade Organization (WTO) expects theworld trade to contract globally in between 13% to 32% during 2020.
Going forward as the lockdowns slowly open up economies around the world have takenmajor steps towards revival with major monetary and fiscal measures bail-out and supportpackages multi-lateral and cross-border co-operation initiatives etc. Although theshort-term scenario remains hazy with the progression of the pandemic global economiesare expected to bounce back in 2021.
Indian Economic Scenario
The Indian Economy grew at a sluggish pace during 2019 mostly due to the globalslowdown. Despite the overwhelming majority with which the new Central
Government was formed the Indian Economy grew at 4.2% during 2019 as against 6.1%during 2018. (Source: IMF). This challenges significant faced by manufacturing and tradeacross the world. Within India challenges were faced due to the widespread distress facedin the Banking and Non-Banking Finance Companies (NBFCs) sector with MSMEs and theunorganized sector relying heavily on such NBFCs struggling with liquidity and workingcapital issues. Further India experienced a late but prolonged monsoon in 2019 withmajor parts of the country being affected by floods which in-turn affected agriculturecycle/output and created challenges for almost all industries. This reflected in theSeptember and December quarterly performances of the Agricultural and Industrial sectorsacross the increase of the Renewable Energycountry. However to boost the liquidity in theEconomy the Reserve Bank of India exercised repo rate cuts by a total of 135 basispoints. The year 2019-20
Final also experienced a significant Consumption. The Union Budget 2020-21 madesignificant allocations to the infrastructure sector in addition to the Rs. 102 lakh croreNational Infrastructure Pipeline budget
These measures along-with an amendment of the Insolvency and Bankruptcy Code (IBC) toease pressure on the real estate sector came in as growth boosters for the economy
India jumped to 63rd rank in the World Bank's ease of doing business thereby making ita further attractive Foreign Direct Investment (FDI) destination. The current tax regimealso favors Foreign Direct Investment (FDI) since profit from new investments wouldattract tax at a lower rate of 15%.
The March quarter witnessed the outbreak and widespread of the COVID 19 pandemic inIndia. This impacted the performance of the March quarter historically known to be thehighest performing quarter of every fiscal for both
Industrial as well as the Agricultural sectors. The Government declared a nation-widelockdown starting with March 24 2020 which resulted in complete suspension of operationsacross the economy. With exceptions of a few essential products the lockdown witnessed nomanufacturing output as the organized as well as the un-organized manufacturing sectorshad to shut their operations. Service industry could adopt a work-from-home culturealbeit with its own struggles could only avert total shutdown. While majority of theGovernment machinery was diverted and deployed to contain the COVID 19 pandemic and savelives India witnessed an exodus of migrant labor moving back to their villages withunforeseen challenges.
Despite the adversities the IMF expects India to be among the best performingeconomies in 2021 with only India and China expected to grow in the period. While the
Government continues to focus on containing the pandemic it has also taken steps tocontain the loss of livelihoods and the downturn in the economy. The Government declared astimulus package of Rs. 20 lakh crore to support the industries MSMEs and the poorsections of the economy. With the global sentiment favoring India to be a viablealternative to China for cost-effective manufacturing/ outsourcing the Governmentdeclared the Atmanirbhar
Bharat' initiative to make India a self-sufficient economy and an attractiveinvestment destination. These steps along-with the previously announced policy reformssuch as Pradhan
Mantri Awas Yojana (PMAY) Housing for all by 2022 Bharat
Net Digital India Make in India Minimum Selling Price for Agriculture 100 Smartcities 50 Economic corridors 35 multimodal logistics park allocations for theinfrastructure railways roadways shipping and aviation along-with significant are setto pave way for economic revival and growth in the medium and long term.
Performance of the Company
The year 2019-20 was challenging due to challenging macroeconomic factors thestruggling real-estate market the liquidity issues and halting projects with telecomPSUs. This along-with challenges on the micro factors such as dim consumer sentiment inthe market socio-political struggle with the Citizenship Amendment Act2019 (CAA)stretched and heavy monsoons also contributed to the overall challenges. Despite all theseadversities your Company on the back of its strong brand recognition continued to showresilience and recorded a modest performance. The COVID 19 pandemic impacted the Company'sbusiness for the better half of the March quarter which other-wise would have resulted inthe Company recording an at-par or slightly better performance as compared to the previousyear.
In wake of weak macros right since the beginning of the year the Company had furtherworked on its cost rationalization/ reduction methods which successfully bore fruit.In-line with the previous year's theme and Company vision enhance engage and expand theCompany expanded its total retail touchpoints from 30000+ retailers to around 50000+retailers during the year as it continuously strives to reach the targeted milestone of150000+ retailers. Your Company has always stood as the most sought after brand in thewires and cables market. To enhance this perception further and engage its customers theCompany increased its advertisement expenditure outlay during the year and its presencewas felt even more on different media platforms. The Company had begun work on theexpansions at Urse but due to the onset of COVID these projects have been delayed. Thenew conduit pipe manufacturing line at Goa should become operational soon commissioning isexpected as soon as travel possibilities open up and the overseas technicians can travelto the site for this purpose.
The COVID 19 pandemic is an unprecedented catastrophe during our lifetimes anduncertainties in the short-term future are rife. However your Company on the back of itsstrong net-worth and liquidity position debt-free nature cost rationalization abilitiesdecentralized operations widespread dealer and retailers network and a loyal core teamof professionals and employees is confident of tackling tough times with flying colors.The Company during lockdown with its core team and dealer-retailer network worked onstrategically planning the near future and prepared for life post lockdown. Thiscontributed significantly as the lockdown is being unwound and the operations of theCompany are getting back to normal.
Revenue achieved during the current year was Rs. 2877.3 Crores as against Rs. 3077.8Crores reduction in the previous year resulting in a 6.5% de-growth. The reduction waswitnessed across major product segments with Electrical
Cables registering 5.3% and Communication Cables registering 16.4% reduction. ConsumerProducts segment achieved a 24.2% year-on-year growth. Total Income for the year stood atRs. 3049.2 Crores as against Rs. 3199.6 Crores in the previous year.
Profit Before Tax was recorded at Rs. 501.3 Crores as against Rs. 531.9 Crores duringthe previous resulting in a decrease of 5.8%. Although the Company clocked sales volumesat par with the previous year fall in commodity (raw material) prices and subsequentadjustment of selling prices led to the overall decrease in the total sales and profitbefore tax.
Profit After Tax was recorded at Rs. 402.5 Crores as against Rs. 344.1 Crores in theprevious year. In September 2019 the Government of India promulgated the Taxation Laws(Amendment) Ordinance 2019 announcing major slashes to the corporate tax rates in theIncome Tax Act 1961. The existing Companies were provided an option to pay tax at aconcessional rate of 22% (plus Surcharge/Cess) with consequential surrender of specifieddeductions/incentives.
The Company opted for the new scheme which resulted in the reduction of total taxoutgo and an increased Profit After Tax.
The Management Discussion and Analysis (MDA) forming part of this Report in Annexure A- I inter-alia deals adequately with the operations as well as the current and futureoutlook of the Company.
The SEBI LODR COVID 19 report forming part of this Report in Annexure A IIinter-alia deals with the impact of COVID
19 on the operations of the Company and the short-term future outlook.
The sluggish demand in the global economic activity continued to reflecton theCompany's exports which stood at a modest Rs. 25.7 Crores as against Rs. 30.4 Croresduring 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 no debt papers were issued. As on the date of this report your Companycontinues 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. 5.5 per equity share i.e. 275 % 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.
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
In the previous year your Company launched the firstof its exclusive retail storechains Finolex House' and opened four Finolex House Stores at Chennai VadodaraBhopal and
Ghaziabad. During the current year the Company opened four more Finolex House Storesat Secunderabad Jamshedpur
Bengaluru and Raipur. Your Company plans to open 50 such
Finolex House' stores across the country very soon.
The Company also increased its footprint in the Fast Moving Electrical Goods (FMEG)market during the current year led by the fans and water heaters along-with the low-dutyswitch gears and lamps. Owing to the nature of this market where newness and designelements play a key role the Company offered newer products along-with its existingportfolio. The current Socio-Political scenario and Atmanirbhar Bharat' initiativeand sentiment is expected to bear fruit and the Company expects higher volumes of revenuesfrom these products.
The Capex plans announced earlier of upto Rs. 200 Cr will be completed over the next 12to 15 months subject to more activities opening up post lockdown easing.
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 Fiber Private Limited
While the Government's vision to connect the whole of India with The Bharat Net andDigital India initiative should have seen further progress during the year multipleevents came in the way of realizing that goal a) substantial financial strain on the PSUtelecom companies such as BSNL and MTNL b) ruling on AGR impacting private sector telecomunits such as Idea/Vodafone Bharti etc all meant that the entire sector witnessed meagerinvestment in asset creation. Additionally fiber prices were in a free fall globallyfollowing reduced demand in China. Overall demand scenario was quite sluggish with verylittle traction. Revenue achieved by the JV during FY 2019-20 was Rs. 150.0 Crores asagainst Rs. 327.6 Crores in the previous year. With prices being extremely low the JVrecorded a break-even year as against a net profit after taxes Rs. 14.2 Crores during theprevious period.
The COVID 19 pandemic and the resultant nationwide lockdown pushed the entire Indianpopulation of approximately 130 Crore people indoors. This resulted in increased demandand consumption of Internet/Data and the importance of broadband connectivity was realizedin an unparalleled fashion. The closure also demonstrated the need and accuracy of theGovernment's vision for pan-India connectivity and the Company expects a rise in demand of
Optical Fiber in the future.
Your Company's total equity participation in the JV at the end of 2019-20 stoodunchanged at Rs. 1.75 Crores.
Finolex J-Power Systems Private Limited
As discussed in the Indian Economic Scenario section the
Government's vision for sustained and stable growth of the Indian economy includes aprogressive outlook towards infrastructural development. Such smart cities economiccorridors logistics parks housing schemes ports metros etc. would require immensepower supply and transmission of power to such places. The power sector plays a pivotalrole in the development of infrastructure and the Government has shown keen interest andconsequent demand for
High Voltage (HV) and Extra High Voltage (EHV) power transmission lines. This has beenevident from the increasing number of tenders floated by many states and state utilitiesduring the year.
The year under review had been somewhat positive for the JV in terms of marketpenetration reach and visibility in relationship building with customer base and the samewas visible in the JV's ability to participate in tenders across various states. Duringthe year the JV successfully completed its first 220KV order from Delhi Transco itsearlier order from KSEB and successfully won major orders in the 110KV 230KV voltage gradeas well as orders for the Pune Metro project.
The JV also successfully participated in 400KV tenders during the year which wascertified during the previous year. Although the JV faced challenges in participating forlarge tenders owing to the supplying laying and commissioning experience criteria forsuch tenders the JV had been successful in convincing utilities to accept parentcredentials towards qualifications. factor to the success it achieved ithasThiswasevident withthe successful participation in tenders.
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. 43.4 Crores in the JV during the year taking the Company's totalparticipation in the JV to Rs. 196.0 Crores at the end of FY 2019-20. 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. 35.1 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.
InformationasrequiredundertheprovisionsoftheCompanies Act 2013 (the "Act")read with Rule 5 sub rules (2 and 3) of Companies (Appointment and Remuneration ofManagerial Rules 2014 (the "Rules") forms part of this Report. However as perthe provisions of Section 136(1) of the Act the Report and Accounts are being sent to themembers excluding the statement of particulars of employees under the Rules of the Act.Any shareholder desirous of obtaining a copy of the said statement may write to theCompany Secretary & President
(Legal) at the Registered office of the Company.
Key Managerial Personnel
The following persons are Key Managerial Personnel during the year 2019-20
|name ||Title |
|Mr. D K Chhabria ||Executive Chairman |
|Mr. Yatin Y Redkar ||Executive Director - Operations |
|Mr. Mahesh Viswanathan ||Chief Financial Officer |
|Mr. R G D'Silva ||Company Secretary & |
| ||President (Legal) |
Tough times bring people closer. But tougher times also test one's ability to stayclose over a long period. Now with the world facing the COVID 19 pandemic is such a timeand your
Company stands and commits to stay close to its employees. While your Company hasalways regarded its employees significant been committed to develop and strengthen itsemployees with the best employment practices work environment ability to learn and growand also prepare them to swiftly adapt to the ever-changing business environment. With the
COVID 19 pandemic the Company now demonstrates utmost care towards its employees byimplementing strict procedures and processes at the work-places Offices Plants
Branches or Depots. As part of its comprehensive approach to tackle the pandemic theCompany has implemented a four-pronged COVID 19 strategy viz.
Screening and Monitoring Prevention and Awareness Disinfection and Sanitization SocialDistancing
A COVID Response Team actively on a daily basis monitors the employees and situationand have been provided a manual to initiate appropriate actions.
The Company has also implemented in place processes with benchmarked businesspractices and the Company finds immense pride to state that none of its employees werelaid-off during the COVID 19 pandemic as at the date of this report.
The Company engaged approximately 1762 and 1824 permanent employees as at 31st March2020 and 2019 respectively. The number of flexible (contractual trainee and temporary)employees as at 31st March 2020 was 1256.
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
A separate report on Corporate Governance (Annexure B) Secretarial isprovided togetherwith a Certificate
Auditors of the Company regarding compliance with conditions of Corporate Governance asAnnexure C as mandated under SEBI LODR Regulations 2015. There are nosignificant/material qualifications reservations or adverse remarks or disclaimers madeby the auditor in his report. A
Officer of the Company in terms of Regulation 17(8) Schedule II of SEBI LODRRegulations inter alia confirming the correctness of the financial statements and cashflow statements adequacy of the internal control measures and reporting of matters to theAudit Committee is also annexed.
Corporate Social Responsibility
Your Company envisages its vision through its tagline Finolex Behtar ElectriKALke liye'. 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.
During 2019-20 your Company undertook the following CSR activities:
Free Medical care through Multi-speciality Hospitals Mobile hospital facilities inrural areas along-with improvement of health care facilities in such areas Facilities forknee replacement cataract and dialysis for needy people along-with medical help for needychildren suffering from H1B diabetes
Promotion of education youth welfare and related activities along-with expenditure onimprovement of school infrastructure in Maharashtra Uttarakhand and
Sewage treatment plants where the Company's plants are located
For their invaluable service to the society Police Vans were provided to theMaharashtra Police' as per desired specifications
Contribution made to PM CARES Fund for helping the Government deal with the currentpandemic Food and provisions provided to remote villagers in times of COVID
Contribution to an orphanage to care for the underprivileged children
Annexure I' Annual Report on CSR forming part of this
Report inter-alia provides the details of all CSR activities during the year underreview 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. Shishir Lall
(DIN: 00078316) Non-Executive Director of the Company Bretires by rotation at theensuing Annual General Meeting and being eligible offers himself for re-appointment. The
Board recommends his re-appointment. The requisite details regarding his re-appointmentare set out in the Notice for the ensuing Annual General meeting.
Mr Pradeep R Rathi (DIN: 00018577) Independent Director completed his five (5) yearsterm of appointment on 8th
September 2019. The Board places on record its deep appreciation of the valuablecontribution made by Mr. P. R. Rathi during his tenure on the Board of the Company.
*Mr. P G Pawar Mr. Mahesh Viswanathan Mr. M.L Jain and Mrs. Shruti Udeshi Directorshad offered reappointment at the last AGM held on 18th September 2019.All the resolutionsproposed at that AGM were passed by requisite majority. However two major corporateshareholders namely: Orbit Electricals Private Limited holding 30.7% and FinolexIndustries Limited holding
14.5% aggregating to 45.2% of the paid up share capital of the Company voted againsteach of the resolutions for their respective re-appointments. Both the aforesaid majorcorporate shareholders are under the management control of Mr. Prakash Chhabria one of thepromoters of the Company who is currently in dispute with Mr. D K Chhabria anotherpromoter who is in management control of the Company which explains the reasons for suchnegative votes being cast by those companies. A contention has been raised that thesevotes were cast contrary to the mandate under their constitutional documents/ contractualcommitments and these are the subject matter of challenge before the Court(s) and thematter is thus sub judice.
At its meeting held on 18th September 2019 on the recommendation of the Nominationand Remuneration Committee ("NRC") in this regard the Board appointed
Mr. D. K. Vasal and Mr. J. R. S. Reddy as Independent Directors and Mr Yatin Y Redkaras an Executive Director- Operations of the Company w.e.f 19th September 2019. TheseDirectors hold officeas such till date of the ensuing Annual General
Meeting of the Company. The Board recommends their re-appointment. The requisitedetails regarding their reappointment are set out in the Notice for the ensuing AnnualGeneral Meeting.
At its meeting held on 18th September 2019 on the recommendation of the Nominationand Remuneration Committee ("NRC") in this regard the Board had also appointedMr. J. R. Samuel as an additional Non-Executive
Non Independent Director w.e.f 19th September 2019. He has ceased upon resignationw.e.f 14th August 2020. The Board places on record its deep appreciation for the valuablecontribution and active participation of Mr. J R Samuel at
Board and Committee meetings during his tenure on the Board.
Pursuant to the recommendation of the Nomination and Remuneration Committee("NRC") in this regard the Board at its meeting held on 14th February 2020appointed Mrs.
Kavita Upadhyay as an Independent Woman Director on the Board with immediate effect.Her appointment is required to be confirmed by the shareholders at the ensuing AnnualGeneral Meeting; details regarding the same are set out in the Notice for the ensuingAnnual General Meeting.
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 Returns of the Company are availableat the Company's website at www.finolex.com
Number of meetings of the Board: The Board met on 5 occasions during the year.The details 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 haveselected such accounting policies and applied them consistently and made judgments andestimates that are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company at the end of the financial year and of the profit and loss ofthe Company for that period - the Directors sufficient have taken proper and care for themaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities - the Directors have prepared the annual accounts on a going concernbasis; - 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 Key Managerial Personnel and Senior Executives of theCompany including the criteria for determining qualifications selection and appointment.Further details are provided in the Corporate Governance Report which is attached as
Annexure B to this Report.
Board Evaluation: Due to COVID 19 pandemic the
Independent Director meeting though scheduled for
30th March 2020 could not be held within the financial year 2019-20. Pursuant togeneral circular no 11/2020 dated 24th March 2020 issued by Ministry of Corporate
Affairs the holding of such meeting for financial year 2019-20 is exempted due to theunprecedented situation created by the Covid-19 Pandemic. However the independentdirectors at their meeting dated 27th June
2020 without the participation of the non-independent directors and Managementconsidered and evaluated the performance of the Board performance of the Chairman andother non-independent directors. The evaluation was performed taking into considerationthe various aspects of the Board's functioning composition of the Board and itsCommittees culture execution and performance of specific duties obligations andgovernance. The Board of Directors expressed its satisfaction with the evaluation process.
Particulars of loans guarantees or investments under section 186 of The CompaniesAct 2013: During the year an equity investment of Rs. 43.4 Crores was made in theCompany's JV - M/s Finolex J-Power Systems
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 35 to the financial statements. Details of the same are also reproduced in FormAOC 2 which is attached as Annexure H to this Report. The Company's Policy on transactionswith related parties as approved by the Board is also available on the website of theCompany at www.finolex.com.
Material changes and commitments affecting financial position of the Company whichhave occurred between 31st March 2020 and 14th August 2020: There were no materialchanges and commitments affecting the financial position of the Company between the end ofthe financial year (31st March 2020) and date of this Report (14th August 2020)
THE SIGNIFICANT REGULATORS OR COURT OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS OFTHE Company: There are no significant and material orders passed by the Regulators orCourts or Tribunals that would impact the going concern status of the Company or theCompany's operations in the future.
Adequacy of Internal Financial Controls with reference to the Financial Statements:Having regard to Rule
8 (5) (viii) of the Companies (Accounts) Rules 2014 the details in respect ofadequacy of internal financial controls with reference to the financial statements of theCompany 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 Audit Committee is apprised of the findings as well as the corrective actions thatare taken. Periodical meetings between the Audit Committee and the Company Management alsoensure the necessary checks and balances that may need to be built into the controlsystem.
Risk Management Policy: Your Company has set up a Risk Management Committee ofthe Board of Directors which comprises Mr. Shishir Lall Mr. D. K. Chhabria Mr. MaheshViswanathan and Mr. J. R. S. Reddy. More details of the risks faced by the Company areavailable in the Management Discussion and Analysis (MDA) attached as Annexure A'to this Report.
Vigil Mechanism / Whistle Blower Policy: As required under Section 177 (9) ofthe Companies Act 2013 read with Rule 7 of the Companies (Meetings of Boards and itsPowers) 2014 and Regulation 22 of the SEBI LODR Regulations the Company has adopted apolicy on vigil mechanism / whistle blower. The policy provides direct access to theChairman of the Audit Committee in case any employee should choose to report or bring up acomplaint. Your Company affirms that no one has been denied access to the Chairman of theAudit Committee and also that no complaints were received during the year. Brief detailsabout the policy are provided in the Corporate Governance Report which is attached as
Annexure B to this Report. Also the policy is available at the Company's website atwww.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 no complaints were received.
M/s Deloitte Haskins & Sells LLP Chartered Accountants (Firm RegistrationNo.117366W / W100018) Auditors of the
Company hold office until conclusion of the Fifty-Fourth
Annual General Meeting of the Company to be held in the financial year 2022-23provided that they continue to remain eligible to continue as Auditors of the Company. Asrequired under the provisions of Section 139 and Section 141 of the Companies Act 2013read with the Companies (Accounts)
Rules 2014 the said Auditors have confirmed their eligibility to continue to act asAuditor of the Company.
The Audit Committee and the Board of Directors have noted the aforesaid.
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 2019-20 at aremuneration of Rs. 5.5 lacs 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 2018-19 was filed within the permissibletime for the same.
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 in practice wasappointed by the Board to conduct the Secretarial Audit of the Company.
Their Report dated 14th August 2020 is attached as Annexure
D to this report.
The Secretarial Auditors in their report have made three obervations which emanate as aresult of the situation as clarified under Item no. 2.1 of the report on CorporateGovernance
(Annexure B) to this report. Following are the observations in brief and the Company'sreply for each of them.
Obervations 1 and 3: Non Compliance of Sec 149 of the Companies Act 2013 regardingAppointment of Woman Director and Non-Compliance of Regulation 17 of SEBI (LODR) 2015regarding appointment of Woman Director.
Company's Response: "During the year under reviewCompanyhascompliedwithregulation17ofSEBI(LODR)2015 However position of Mrs. ShrutiUdeshi as an Independent
Women Director became sub judice only because two major corporate shareholders holdingin aggregate 45.2% of the Paid up Share Capital of the Company voted against theresolution which was proposed in Annual General Meeting held on 18th September 2019. Bothof the aforesaid major corporate shareholders are under the management control of one ofthe promoters of the Company who is currently in dispute with the person who is inmanagement control of the Company which explains the reason for such negative votes beingcast by them. A contention has been raised that these votes were cast contrary to themandate under their constitutional documents/ contractual commitments and these are thesubject matter of challenge before the Court(s)/
NCLT and thus after 18th September 2019 her position as an
Independent Women Director is sub judice. In view of the sub judice position continuingdue to Orders from the respective authorities/courts/legal forums not being receivedquickly the Company immediately as an abundant precaution has appointed Mr. KavitaUpadhyay as an Independent Women Director on its Board with effect from the meeting ofthe
Board held on 14th February 2020."
Observation 2: Non-filing of certain forms with ROC Pune.
Company's Response: The forms left to be filed were related to the followingsub-judice matter which has been included as a note under the Directors section of thisreport.
"Mr. P G Pawar Independent Director Mr. Mahesh
Viswanathan Deputy Managing Director Mr. M.L Jain Non- Executive Director and Mrs.Shruti Udeshi Independent Director had offered themselves for reappointment at the lastAGM held on 18th September 2019. However two major corporate shareholders holding inaggregate 45.2% of the paid up share capital of the Company voted against each of theresolutions for their respective re-appointments. A contention has been raised that thesevotes were cast contrary to the mandate under their constitutional documents/ contractualcommitments and these are the subject matter of challenge before the Court(s)/ NCLT andthe matter is thus sub judice."
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 NSE of India Limited. Your Company had issued GlobalDepository
Receipts which are listed on the Luxembourg Stock Exchange. Your Company has not issuedany Non-Convertible Debentures ("NCDs") in financial year 2019-20 and no NCDswere outstanding as on 31st March 2020.
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 as Annexure E.
Investor Education and Protection Fund (IEPF)
Pursuant to the applicable provisions of the Companies Act 2013 read with the IEPFAuthority (Accounting Audit Transfer and Refund) Rules 2016 ("the IEPFRules") all unpaid or unclaimed dividends are required to be transferred by theCompany to the IEPF established by the Government of India after the completion of sevenyears. Further according to the
IEPF Rules the shares on which dividend which are not subject to any legalrequirements has not been paid or claimed by the shareholders for seven consecutive yearsor more shall also be transferred to the demat account of the IEPF Authority.
During the year the Company has transferred 307205 shares on which dividends wereunclaimed for seven consecutive years as per the requirements of the IEPF Rules. Themembers who have a claim on above dividends and shares may claim the same from IEPFAuthority by submitting an online application in web Form No. IEPF-5 available on thewebsite www.iepf.gov.in and sending a physical copy of the same duly signed to theCompany along with requisite documents enumerated in the Form No. IEPF-5. No claims shalllie against the Company in respect of the dividend / shares so transferred.
Statements in this Boards' Report and Annexures may contain forward looking statementswithin the meaning of applicable
Securities laws and regulations. Actual results could differ materially from thoseexpressed or implied. Various factors including commodity prices cyclical demand changesin Government regulations tax laws general economic development could all have a bearingon the Company's operations and would impact eventual results.
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 |
|Place: Pune ||d. K. Chhabria |
|Date: August 14 2020 ||Executive Chairman |