Your Directors are pleased to present the Annual Report on the business and operationsof your Company and the audited Financial Statements of the Company for the year endedMarch 31 2018 in accordance with the Companies (Indian Accounting Standards) Rules 2015(IndAS) prescribed under Section 133 of the Companies Act 2013 and other recognisedaccounting practices and policies to the extent applicable provisions of the Act from FY2017-18.
|Financial Results || || |
| || ||(Rs. Lakhs) |
|Particulars ||Year ended March 31 2018 ||Year ended March 31 2017 |
|Revenue from Operations ||437705.34 ||442590.65 |
|Profit before Depreciation Amortisation and Tax ||113873.38 ||107459.12 |
|Less: - Depreciation and Amortisation ||6437.39 ||6417.54 |
|Profit before tax || || |
|Income Tax Expense : ||107435.99 ||101041.58 |
|- Current Tax ||36190.58 ||37023.47 |
|- Deferred Tax ||1235.19 ||(1649.69) |
| ||37425.77 ||35373.78 |
|Profit after Tax for the Year ||70010.22 ||6566780 |
|Other comprehensive income for the year net of tax ||1666.78 ||2160.47 |
|Total comprehensive income for the year ||71677.00 ||67828.27 |
|Appropriations || || |
|Dividend Paid ||(29438.88) ||(29438.88) |
|Tax on Dividend ||(5993.06) ||(5993.06) |
| ||(35431.94) ||(35431.94) |
|Earnings per Equity Share || || |
|Basic and Diluted Earnings per Equity Share (INR) ||166.47 ||156.15 |
|Dividend per Share (Rs.) ||75.00* ||70.00 |
*Dividend is recommended by the Directors and is subject to the approval of theShareholders.
Performance of the Company
Your Company continued its journey to become a true Fast-Moving Consumer HealthcareCompany and performed well amidst increased competitive intensity and volatile externalenvironment. Net Sales and Profit after Tax for the year ended March 31 2018 were Rs.415754 Lakhs and Rs. 70010.22 Lakhs respectively. Your Company retained its leadershipposition in HFD category with volume and value market share at 64.6% and 55.3%respectively.
Your Company continued its focus on innovation delivering products of value withsuperior science and has taken a step further in the advanced nutrition segment forconsumers who want very high science products.
Your Company has extended the brand Horlicks into a new category of high protein drinksfor active adults with the launch of its new variant Horlicks Protein+. Availablein chocolate and vanilla variants Horlicks Protein + contains a blend of three highquality proteins that provide all essential amino acids to address the issue of optimumquality protein intake amongst the modern-day adults.
Science remains the core of the product portfolio that addresses the nutritional needsof the consumers. The new Horlicks campaign launched in April 2017 focused onnutritional inadequacies in the daily diet of kids. The campaign was further strengthenedby the new brand platform of supporting kids' "hunger for growth" which is inline with the product proposition of making child "Taller Stronger andSharper".
Boost continued robust performance in 2017-18 on the back the successfulcommunication platform of Play A Bigger Game' that was launched a year ago. Theplatform of Play A Bigger Game' was supported with engaging long-form content ondigital & was also extended seamlessly into on-ground activations. Play ThePros': a unique initiative was launched that gave kids a chance to take on Pros like PVSindhu Virat Kohli Sunil Chhetri etc. & thereby giving them an opportunity to"Play A Bigger Game".
From a competitive stand point Boost continued to grow off-takes at 2X of the categorygrowth in the core market of South India. The business performance in 2017-18 was wellcontributed by both sachets (Low Unit Packs) as well as the large packs with both havingequal contribution to growth. Boost achieved highest ever market share and annual gain inhousehold penetration in the 4-decade long history of the brand in the South Indianmarket.
Horlicks Growth+ launched a new campaign focused on fostering growth in youngchildren. Horlicks Growth+ is a breakthrough nutrition formula designed by internationalpaediatric experts and contains high quality protein with essential nutrients that havebeen identified and are known to optimise growth without causing obesity in children. Withthe latest TV campaign featuring a young child Horlicks Growth+ showcases the benefits ofadopting a clinically proven scientific solution to address the rampant growth-relatedissues in children.
Women's Horlicks continued its differentiation through product launch in Feb'2018with "Great New Taste" to penetration by offering new chocolate flavour.Moreover a new campaign featuring film star Taapsee Pannu was launched. Fashioned aroundthe theme of #StandStrong the campaign sought to bring to the fore the issue of bonehealth amongst women in India and envisions to make them #StandStrong in following theirpassions.
The Directors recommend a total dividend of Rs. 75 per equity share of Rs. 10 each forthe year ended March 312018. If approved by the members at the ensuing Annual GeneralMeeting to be held on August 8 2018 it will be paid on or before September 7 2018 tothose members whose names appear in the Company's Register of Members and to those personswhose names appear as beneficial owners (as per the details to be furnished by thedepositories in respect of the shares held in dematerialised form) as at the close ofbusiness hours on August 1 2018.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Fiscal year 2017-18 was characterised by enhanced global economic growth stabilisingcrude oil prices changing global political landscape shifting attitudes toglobalisation free trade wage stagnation and political uncertainty etc.
In India the past year has been significant with implementation of key economicreforms such as GST. Indian government remains keen on driving economic reforms andinitiatives such as Goods and Service tax (GST) Digitisation Make in IndiaInfrastructure Capital Investments Rural Development and Financial Inclusion etc. Lastyear saw Indian economy growing at 6.6% (projected for F.Y 18). Other major developmentsincluded improvement in Ease of Doing business index Upgradation of India's sovereigncredit rating and other digital inclusion initiatives.
The introduction of GST marked a huge stride towards a single economic union of Indiawith unified tax structure. It is an indirect tax levied on the supply of goods andservices implemented to replace several cascading taxes levied by the central and stategovernments. However your Company was proactive to ensure GST readiness well in advance.To ensure GST readiness and compliance several key processes were reviewed IT systemswere upgraded and stakeholders across the different nodes of the value chain were trained.These dedicated efforts ensured orderly and smooth transition into a new economicenvironment. A uniform taxation system resulted in economic benefits for the business andit was one of the first organizations to pass on the benefits to consumers.
The implementation of uniform tax regime led to a short-term disruption in Trade. FMCGIndustry continued to remain under pressure but picked up growth in the last two quartersof the year owing to stabilizing rural demand rising urban consumption and low-baseeffect (demonetization in Q3 Q4 in F.Y 2017).
Despite challenges it was well placed to deliver consistent performance given theunderstanding of consumer behaviour. It also has robust price value propositionhigh-science based products Go-to-Market Strategy pipeline for innovative productsefficient cost and talent management processes. These it believes fortifies us againstheadwinds.
The rural business has been working with the vision of building a strong connect withthe communities it serves. Over the years your Company has built a strong rural businessthat continues to reach over 21500 villages directly. This has helped the Company buildcategories & brands and create positive social impact by building awareness onnutrition & promoting good health practices.
Two key growth drivers in the Rural Programme are Horlicks Swasthya Abhiyan (HSA) andVillage Level Entrepreneurs (VLE); HSA program aims to improve the standard of hygiene& health in the rural areas engaging with rural medical practitioners and communityworkers thus creating awareness education and relevance for the brands. HSA now reachesover 5900 villages 14000 Rural Medical practitioners and connects with over a millionconsumers. VLE has reached more than 3600 villages by which we are reaching out to bottomof the pyramid (Direct reach of 216000 households) and in this process createlivelihood for underprivileged rural women while enhancing access of the products in smallvillages economically empowering rural women. Mobile Sakhi a mobile based advisoryservice for pregnant mothers delivers vital information pertaining to pregnancy is usedby over 63000 rural women.
Further your Company has continued to address the issue of malnutrition under MissionHealth working with strategic partners as part of CSR initiatives during the year. It hasalso formulated a clear outline on the CS R philosophy and further details are provided inCSR Section.
Your Company brings a strong heritage and years of trust and credibility. It has strongR&D capabilities and the product portfolio continues to be strengthened by acceleratedinnovation and renovation to stay relevant to the emerging and differentiated needs of theconsumers. Your Company continues to invest in brands and connect with the consumersthrough innovative and diversified platforms of online and offline advertising.Recognizing the trend of increasing digitization your Company enhanced its presence inecommerce channels.
Your Company has made significant efforts towards digital advocacy programs includingactivity targeting moms online social media amplification of TVCs Bone Density Tests onWomen's Day popularisation of "Horlicks Brand Store" digital launches forProtein+ etc. All these have helped increase engagement consideration and strengthenbenefit perception amongst customers.
Your Company's focus on cost management working capital optimisation andsimplification program continued to deliver positive results in mitigating inflation andsupporting profitable growth. Improvement in working capital better cash flow and costoptimization have supported sustained investments in Company's brands.
The total reserves as on March 312018 stood at Rs. 344306.34 Lacs representing anincrease of 11.77% from March 312017
Research and Development (R&D)
Your Company's R&D vision is to improve lives of more by creating and sustainingconsumer-led science based innovation. Science remains the core of the product portfoliothat addresses the nutritional needs of consumers. At R&D new product innovationteams have been working on new claims new formats product platforms and scienceplatforms to build Innovation pipeline. There were 2 New products launched in the year.
Horlicks Protein+: Launched in Feb'2018 in 2 flavours i.e. Vanilla andChocolate Protein + extended Horlicks presence in the high protein HFD segment for adults(30- 45 yrs.). Protein+ helps adults in the age group 30+ to support healthy muscles andenergy release. Product has been designed with triple sources of protein and betterquality of proteins with higher levels of essential amino acids.
Women's Horlicks relaunch: Women Horlicks continued its differentiationthrough product launch in Feb'2018 with "Great New Taste" to Increasepenetration by offering new chocolate flavour.
GSK Consumer Health advisory Board 2017-2019 is a category led initiative. The firstmeeting was conducted in Dec'201 7 for Nutrition category wherein various aspects of"Childhood Growth and Development in Indian Children" were discussed. Renownedscientists and physicians in the field of nutrition and paediatrics attended this meetingto discuss about the current & future nutrition status challenges and opportunitiesfor growth and development in Indian children.
The R&D function continues to focus on the regulatory compliance with local foodlaws and proactively engages with the regulatory authorities and industry associations toshape the regulatory environment for science based innovation in food and nutrition. FSSAIreleased Food Safety & Standards Amendment Regulations 2016 (notification) statingchanges in permitted levels/or removal of specific ingredient/actives from food items. Ithas successfully complied with the FSSR regulations including technical feasibility ofregulatory initiatives on proposed Codex changes on Food Safety & Standards Amendment(Ingredients & Additives) & Proprietary food products meeting ONE RDA (ICMR) forall vitamins & minerals meeting July'17 timelines.
Also a high science packaging lab has been established to drive science basedpackaging innovation program. This high science lab will help conducting the productpackage interactions at early stage of project to enhance speed of execution. It receivedmany packaging excellence awards and recognitions for the efforts.
Printed electronics Point of Sale (POS) for Horlicks growth Plus: Printed electronicstechnology was developed on commercial scale in India as a part of Horlicks Growth+ POS toenable "Go for More Strategy" in the market. Moreover CLS (Core Lab Systems)has been implemented as improvement in R&D Product development process to enhance thecompliance and data integrity.
You will be pleased to know your Company's R&D function has adopted best practicesas mentioned below:
As part of the initiative to build future innovation pipeline ideationworkshops and consumer insights developments have been made during the year by consumerInsight group and commercial category teams with active participation from R&D. Theideas and concepts generated through this workshop are under validation and scoping tobuild the medium and long-term pipeline. It also adopted best practices in consumerinsights and have a strong network with GSK's global capabilities on scientificexploration clinical science sensory and product understanding packaging expertnetworks to access best information to deliver product of best quality science andrelevance.
Profitable growth ambitions are actively supported by R&D through astructured Value Engineering Program which also helps to mitigate the increasing cost ofraw materials. Design to value remains an integral part of R&D product developmentprocess to provide most efficient cost advantage to end consumer.
R&D is working towards the environment sustainability initiatives. In thearea Packaging (Material science) it moved into more sustainable foil less primarylaminate pack structure.
You will be glad to know that your Company's R&D is significantly involved inbuilding and defining new science and benefits through modern technology that would givecutting edge advantage to the offerings along with scientific research to drivedifferentiated claims enabling us to sustain our category leadership. Some of the highscience differentiated products are in advance stage of development for launches in shortmedium and long term and thus making it innovation pipeline robust.
Your Company's manufacturing facilities at Nabha Rajahmundry and Sonepat continue tobe certified to ISO 9001: 2008 ISO 22000: 2005 ISO 14001: 2004 and OHSAS 18001: 2007 bySGS a leading International Certification Company. These certifications indicate itscommitment in meeting in a sustainable manner Global Quality Environment Health andSafety Standards.
Your Company strengthened its efforts in integration of Information Technology forbusiness efficiencies.
The Information Technology function has been a key business enabler across allfunctions of the Company.
During the year the Company has kicked off simplification projects like creation ofE-forms for streamlining the requisition process. CH tech roadshow was organized toincrease the Tech Quotient of employees by showcasing the technologies readily availableand future innovations which will enhance their productivity.
Internal Control System and Adequacy
Your Company has established and maintained adequate internal control framework in linewith the Internal Financial Controls ("IFC") requirement within the meaning ofthe explanation to Section 134(5)(e) of the Companies Act 2013 including financialcontrols based on the internal control over financial reporting criteria established bythe Company considering the essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting issued bythe Institute of Chartered Accountants of India (ICAI). The Company has evaluated theoperating effectiveness of internal control systems which are supplemented by:
Well-documented standard operating procedures policies risk and controlmatrices for all material processes and fraud risk mitigation. Further these documentsare tested for operating effectiveness regularly reviewed and updated to align withglobal best practices.
Any material variances from the budget are reviewed on a monthly basis andrequire approval of the Management Team. All major policy changes are approved by theManaging Director.
The self-assessment by process/ control owner is also used as the basis ofCEO/CFO certification as required under SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 with the Stock Exchange. Further the self-certificationis reviewed by the Audit Committee on a half yearly basis.
Your Company has a Risk Management and Compliance Board (RMCB) now called theRisk Management Committee' (RMC) comprising of the Managing Director FinanceDirector Operations Director Executive Vice President - Legal and Executive VicePresident -Human Resource. Risk maps stating the significant business risks potentialconsequences along with mitigation plans are prepared by each function and reviewed by RMCon a regular basis.
Your Company has a robust internal audit function that reports into the AuditCommittee and carries out review of operations systems and functions basis the planapproved by Audit Committee.
All significant Audit observations and follow-up actions thereon are reported to theAudit Committee. The Committee reviews the adequacy and effectiveness of your Company'sinternal control framework and monitors the implementation of audit recommendationsincluding those relating to strengthening your Company's risk management policies andsystems.
Human Resource Development
Your Company has set a new goal to be one of the most innovative best performing andtrusted healthcare companies in the world. The Company has also defined a new set of GSKExpectations to realize this goal - Courage Accountability Development and Teamwork. Thenew GSK expectations alongside the values will be the foundation of the culture; it wantsto establish at GSK.
A large part of embedding this culture in the organization is linked to providingrewarding careers to the people. Building on the 2017 integrated approach to CareerFrameworks (My Winning Career) the focus this year was on employee experience - enablingpeople to chart their long-term careers have conversations with senior leaders and buildplans to develop skills for their next career move.
Various initiatives around My Winning Career' enabled employees in theorganization to come together take a step back and spend time dedicated to conversationsaround careers & development.
The focus has resulted in improved engagement scores in 2017 The latest engagementsurvey scores have increased across the themes of the Values Expectations and Prioritiesof Innovation Performance & Trust.
Your Company continued to invest significantly in developing talent across levelsleveraging processes such as integrated talent management to ensure sustainability oftalent role changes and robust succession pipelines for all key roles. It started theIndia Leadership Program' - an initiative to develop engage and retain emergingleaders in the organization to strengthen succession pipeline at leadership level.
In 2017 it has focused on Employee Experience' - to enable employees experiencekey people processes/offerings in the Company. It set-up Kiosks in the annual conferencesto enable employees understand & experience Learning on-the-go' (online learningresources) Workday (HR management system) Employee Referral Program GSK Values &Expectations Career Frameworks Employee Safety and Partnership for Prevention (Health& Wellbeing initiative).
The focus on Differentiated Development ensured that employees can leverage a varietyof opportunities to develop and take on greater responsibilities in line with their careeraspirations. It also continued to build the early talent pipeline by hiring from the bestB-schools in the country as well as sending the high potential talent on global talentacceleration programs.
Your Company is strongly committed to principles of inclusion and diversity (I&D)which is a critical element of the global HR strategy as well. In 2017 it planned andexecuted the second "Inclusion and Diversity Week" which included a set ofevents conducted across locations designed to help our employees value and draw ondiverse knowledge and experiences. In 2017 it also launched the first Inclusion &Diversity Council. The council created a roadmap for themselves and identified the areasthat they will work on such as awareness & training around I&D new mothersrelated initiatives talent acquisition & talent management. It focussed itself inensuring 100% coverage of all employees in the Prevention of Sexual Harassment (POSH)training. It also participated in external I&D forums to share and understand bestpractices as well as to build future plans around this agenda. Your Company also initiateddiscussions with external agencies around child care centres for the benefit of its womenemployees.
Building a healthy engaged workforce remains one of the key priorities thus itfocussed on embedding the Partnership for Prevention (P4P) program further in India. Theprogram was launched in India in 2016 offering a host of preventive healthcare servicesfor employees and their dependents. 2017 saw multiple on ground activations around P4Plike awareness sessions health and vaccine camps organised across locations to driveawareness and increase uptake.
Awards and Recognition
Your Company efforts to deliver the best quality products backed up by science basedinnovation strong talent base and brands have been recognised during the year. Some ofthe key recognitions are:
Mission Health won the best award in category of Food and Nutrition EducationProgram of the Year at Nutrition and Food Security Awards 201 7 by ASSOCHAM (AssociatedChambers of Commerce and Industry of India).
Horlicks won a Gold at DBA Design Effectiveness Awards 2017 for the productdesign in the beverage category.
Sensodyne won a Bronze at Big Bang Awards 2017 under the social media categoryfor the Whitening launch Facebook campaign.
Boost has won a Silver @ EMVIEs'17 for the Best Media Strategy for the campaignPlay A Bigger Game.
Boost won the Gold for Best Video Content & Silver for Best In-App Strategyfor the digital video campaign #playabiggergame at The Maddies'17.
Boost won the Silver for Best Work in Mobile Analytics for its digital videocampaign #playabiggergame at The Big Bang Awards'17
GSK Consumer Health Care was awarded at the prestigious India Star 2017 forBoost restage and Horlicks growth Plus for the packaging design in consumer category.
The "Sustainable sourcing of Horlicks raw materials' project won firstplace in Environmental sustainability' category in this year's CET EnvironmentHealth Safety and Sustainability Awards.
Mr. Navneet Saluja was nominated as Director by Horlicks Limited under Article 97A ofthe Articles of Association of the Company w.e.f. January 1 2018 in place of Mr. ManojKumar. The change was noted and resolution for appointment of Mr. Navneet Saluja as theManaging Director of the Company for a period of 3 years and 10 months was passed in themeeting held on December 6 2017 The Board of Directors wishes to place on record itssincere appreciation for the valuable advice and guidance rendered by Mr. Manoj Kumar.
Mr. Subodh Bhargava ceased to be the Chairman of the Board from the close of businesshours on March 312018 consequent to withdrawal of his nomination by Horlicks Limited.The Board of Directors wishes to place on record its sincere appreciation for the valuableadvice and guidance rendered by Mr. Subodh Bhargava during his tenure as the Chairman.
Mr. Zubair Ahmed was nominated as Director by Horlicks Limited under Article 97A of theArticles of Association of the Company w.e.f. April 1 2018. The change was noted andresolution for appointment of Mr. Zubair Ahmed as the Nominee Director w.e.f. April 12018was passed and noted in the meeting held on December 6 2017
Mr. Mukesh Butani has resigned from the Board of Directors w.e.f. March 31 2018. TheBoard of Directors wishes to place on record its sincere appreciation for the valuableadvice and guidance rendered by Mr. Mukesh Butani during his tenure.
Performance Evaluation of Board
A regular process of evaluating the Board's performance can help the Board invalidating the relevance of its processes and provide insights for strengthening itsoverall efficiency and effectiveness. It evaluate the Board the Directors the Committeesand the Chairman of the Board through a survey that takes place annually and the mechanismfollowed is mentioned below:
1. In February 2018 multiple surveys were sent to all Directors through a securedonline survey portal.
2. The evaluation was based on Board's effectiveness processes adopted by the Boardcontribution by the Board Members value addition by the Board and effectiveness &contribution of the Committees.
3. Once the Directors completed the survey the third party appointed compiled theresults and shared the analysis with the NRC Chairman and Chairman of the Board.
4. The Chairman of the Board then individually discussed the results and sharedfeedback with all Directors.
5. Based on the report of performance evaluation it was determined whether to extendor continue the term of appointment of the Independent Directors.
It continued to use the same surveys for Board Evaluation which were revised & usedin February 2017. Your Company is compliant to all guidelines circulated by SEBI on theBoard Evaluation process.
Criteria for Appointment of Directors
The success of the Board of Directors depends on the composition structure resourcesdiligence and authority of the entire Board as well as their working relationships withother participants of corporate governance including management. Your Company iscommitted to corporate governance best practices and is vigilant at the time ofappointment of its Directors.
The Board of Directors is ultimately responsible for the Company's business affairs andgovernance. To that goal a Director would be expected to:
Represent organization's shareholders' interests and create value for them.
Align the interests of management with those of shareholders while protectingthe interests of other stakeholders (customers creditors suppliers).
Oversee the Company's performance by setting objectives establishing short-termand long-term strategies to achieve these objectives.
Provide counsel to the Company's senior executives on material strategicdecisions and risk management. Establish or approve strategic plans and decisions toachieve these goals.
Oversee the sustainability of the Company in creating long-term shareholdervalue and protecting interests of other stakeholders.
Pre-requisites for consideration:
The candidate to acknowledge that she/he has sufficient time to effectivelydischarge her/his duties.
The candidate should have skill sets and expertise area which is complementaryto the current Board. The Board assesses the needs of the current Board to ensure thatthere is a range of skills experience and diversity represented including anunderstanding of:
- The industry and markets in which the Company operates.
- Accounting finance and legal matters
- Other key areas of business operations
The candidate should have experience and depth of knowledge in her/ his area ofwork to contribute meaningfully to the operations of the Board
There should be no conflict of interest between the candidate and the Company.The individual should not be in relation to any current employee of the Company and shouldnot be holding more than 2% of the Company's shares at the time or during the appointment
The candidate should not be employed or related to another organization/bodywhich can directly/indirectly influence the operations of the Company or is in directcompetition with the Company.
The Candidate has not been convicted of any offence whether involving moralturpitude or otherwise and sentenced to imprisonment for not less than six months and aperiod of five years has not elapsed from the date of expiry of sentence.
Remuneration Policy for Non-Executive Directors
Your Company believes that its Board Members bring immense value in their independentevaluation and oversight of the operations of the Company. It is therefore expected thatthey will devote significant time and provide unbiased point of view to their Boardduties.
The remuneration paid to each Non-Executive Director is as per the structure determinedby the Nomination & Remuneration Committee and the Board. This is reviewedperiodically and compared to other peer organizations. It is ensured that the remunerationpaid to them is in accordance with the provisions of the Companies Act and any otherapplicable law.
The remuneration structure for the Non-Executive Directors comprises of annualCommission and sitting fee per meeting attended.
Remuneration Policy for Employees Philosophy
Your Company recognizes that reward is important in engaging employees and motivatingthem to do their best work to deliver the strategic priorities and mission. It rewardshigh performance and recognize outstanding achievements of employees in a way that isconsistent with the values and behaviours.
Competitive - Your Company provides competitive rewards in line with GSK globalbest practices.
Differentiated - Your Company differentiates reward to attract and retainskilled employees; reward the greatest contributors and recognize employees who evolvetheir skills to enhance their individual contribution to GSK's success
Alignment - Your Company's reward programs and practices are transparent andfocus on ensuring alignment at several levels
Business alignment - Your Company's reward program considers the common andbusiness-specific skill/ performance requirements across the various business units
Country alignment - Reward aims at meeting the needs of the diverse workforceand enabling them to live the mission - to do more feel better and live longer
Individual alignment - Individual objectives are set and reviewed annually toensure employees have a clear understanding of the link between the business value theydeliver and their own performance based reward
Your Company believes its employees are its biggest assets and aligns its compensationand benefits towards rewarding employees in line with its Rewards policy. Your Companyfocuses on being market aligned as well as differentiate basis performance to drive ahigh-performance culture.
Your Company has 3983 permanent workers including workmen. The remuneration for theworkmen at two of the factories is governed by Long Term Wage Settlement (LTWS) which isdone in consultation with the unions. For the remaining employees the targeted salaryincrease was 10% for all employees including KMP.
When it compare the remuneration of these to that of median employee it observed thefollowing ratio:
|Name ||Designation ||Remuneration for the year ended March 31 2018 (Rs.)* ||Remuneration for the year ended March 312017 (Rs.)* ||Salary Change ||Ratio of Salary to Median Employee Salary |
|Navneet Saluja1 ||Managing Director ||33747105 ||NA*** ||NC** ||51 |
|Manoj Kumar2 ||Managing Director ||58456062 ||59826057 ||NC** ||81 |
|Vivek Anand3 ||Director - Finance ||30361631 ||31479632 ||-4% ||41 |
|Anup Dhingra4 ||Director - Operations ||48326878 ||30657970 ||NC** ||65 |
|Shanu Saksena5 ||Company Secretary & Area Ethics and Compliance Officer ||11174000 ||6374617 ||NC** ||15 |
'Remuneration is calculated on accrual basis.
1. Appointed in the role with effect from January 012018 salary increase & ratioto median salary not comparable.
2. Ceased to be in the role with effect from December 31 2017 salary increase &ratio to median salary not comparable.
3. Salary change is negative due to reduced variable payment as per his terms ofappointment.
4. Appointed in the role with effect from September 01 2016 salary increase &ratio to median salary not comparable.
5. Appointed in the role with effect from August 05 2016 salary increase & ratioto median salary not comparable.
Your Company believes that by means of the variable pay plan the Company can link aportion of compensation to the individual and business performance which creates a strongpositive reinforcement. It also ensures that the employees of the Company are rewardedonly when the Shareholders' goals are met. Your Company's variable pay plan thereforelinks the variable pay to both - individual performance and business results such as salesgrowth and operating profits.
The ratio of the remuneration of the highest paid director to that of the employees whoare not Directors but receive remuneration in excess of the highest paid Director duringthe fiscal year is not applicable. It is also affirmed that the remuneration is as perthe Remuneration Policy of your Company
|Name ||Designation ||Remuneration of KMP as percentage of Revenue ||Remuneration of KMP as percentage of PBT |
|Navneet Saluja1 ||Managing Director ||0.08% ||0.31% |
|Manoj Kumar2 ||Managing Director ||0.13% ||0.54% |
|Vivek Anand ||Director - Finance ||0.07% ||0.28% |
|Anup Dhingra ||Director - Operation ||0.11% ||0.45% |
|Shanu Saksena ||Company Secretary & Area Ethics and Compliance Officer ||0.03% ||0.10% |
| || ||0.42% ||1.69% |
1. Appointed in the role with effect from January 012018
2. Ceased to be in the role with effect from December 31 2017
Total KMP Remuneration as a percentage of Revenue: 0.42% Total KMP Remuneration as apercentage of PBT: 1.69%
Your Company believes in balancing the competitiveness of pay as well as sustainabilityof the associated costs for the organization. The salary increases for this year wereaimed at maintaining the pay competitiveness with market as well as performance of theCompany.
Policy on Board Diversity
As stated in the policy for appointment of Directors your Company recognizes that thesuccess of the Board of Directors depends on the composition structure resourcesdiligence and authority of the entire Board as well as their working relationships withother participants of corporate governance including management. GSK is committed tobuild a truly diverse Board which brings with it diversity of expertise skills regionaland industry experience gender and demographics. GSK believes that such a Board willenhance the quality of decisions by utilizing the diversity of its members.
The Nomination and Remuneration Committee (NRC) is responsible for reviewing andassessing the composition and performance of the Board as well as identifyingappropriately qualified persons to occupy Board positions. At the time of appointment thecandidate must bring with him/ her skill sets and expertise area which is complementary tothe current Board composition. The Board will have an optimum combination of ExecutiveNon-executive and Independent Directors with at least one women Director in compliancewith all statutory provisions. The Board of Directors shall maintain an appropriate mix ofdiversity skill experience and expertise on the Board.
The NRC and the Board of Directors shall refer to this Policy on Board Diversity at thetime of appointment of persons as a Board Member.
Particulars of Employees
The information required pursuant to Section 197 of the Companies Act 2013 read withRules 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 in respect of employees of the Company will be provided to membersupon request in writing made before the Annual General Meeting where in FinancialStatements for the relevant fiscal year are proposed to be adopted. In terms of Section136 of the Act the copy of the Annual Report is being sent to the Members and othersentitled thereto and is also available for inspection by the Members at the RegisteredOffice of the Company during business hours on working days of the Company up to the dateof the ensuing Annual General Meeting. If any Member is interested in obtaining a copythereof such Member may write to the Company Secretary in this regard.
The Annual Report of the Company is also available on the Company's website-www.gsk-ch.in.
Particulars of Loans Guarantee Investment U/S 186
There are no Loans guarantees Investments to be reported u/s 186 of Companies Act2013.
Details of Board Meetings
A calendar of Meetings is prepared and circulated in advance to the Directors.
During the year six Board Meetings and five Audit Committee Meetings were convened andheld the details of which are given in the Corporate Governance Report. The interveninggap between the Meetings was within the period prescribed under the Companies Act 2013.
Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo
Information required as per the Companies Accounts Rules 2014 is given in the AnnexureI to this Report.
Messrs Deloitte Haskins & Sells LLP who are appointed till the conclusion of the63rd Annual General Meeting being eligible are being ratified at the forthcoming AnnualGeneral Meeting.
Pursuant to provisions of Section 204 of the Companies Act 2013 the Secretarial AuditReport is annexed herewith as Annexure II to this Report duly certified by S.N.Ananthasubramanian & Co. a firm of Company Secretaries in practice to undertake theSecretarial Audit of the Company.
Composition of Audit Committee
Please refer corporate governance report for composition of audit committee.
Risk Management Policy
The Company has a Risk Management policy and an internal control framework which isused to manage risks.
Vigil Mechanism for Directors and Employees of Company
The detailed policy for Vigil Mechanism and Whistle blower is available atwww.gsk-ch.in.
Extract of Annual Report
Information required under this clause is given in the Annexure III to this report.
Related Party Transaction
Disclosures as required under Form AOC 2 are contained in Note 28 (FinancialStatements). There are no transactions which are not at arm's length and all the RelatedParty transactions are at arm's length basis.
The detailed policy for Related Party Transactions is available athttp://www.gsk-ch.in/Policies.aspx
The Company has not accepted any deposits within the meaning of Section 73 of theCompanies Act 2013 and the Companies (Acceptance of Deposits) Rules 2014.
Information on Company's Share Performance
The market capitalisation of the Company increased by 18% (Rs 2563327 lacs) Vs March312017 (Rs 2169982 lacs). The EPS stands at Rs.166.47 vs Rs.156.15 as on closing dateof last fiscal year. The PE ratio as on March 28 2018 (last trading day) stands at 36.6vs 33 as on last trading day of fiscal year 2017-18.
Environment and Social Commitment
Your Company is on a mission "to help people to do more feel better livelonger". Your Company has revamped its CSR programme and launched its "MissionHealth" programme which is in aligned with United Nations' (UN) SustainableDevelopment Goals (SDG) and Government of India's National Health Policy. Mission Healthis a national movement of your Company which is in line with its philosophy and goals toaddress the need of the country engaging with key stakeholders and linking brands withpurpose cause and focus.
Mission Health programme is implemented in 7 states viz Bihar UP MP Karnataka APHaryana and Punjab where micro-nutrient programme is being implemented in 1000 governmentschools and reaching out to 150000 children. Mission Health is implemented in the statesof UP MP and Karnataka. The NITI (National Institution for Transforming India) Aayog hasannounced partnership with these three states each to radically transform their Health andEducation sector under its Sustainable Action for Transforming Human Capital (SATH)initiative.
The Mission Health programme is planned to focus on thematic areas of micronutrientdeficiency tackling dengue and eradicating lymphatic Filariasis (elephantiasis).
Your Company has spent 2% of its average net profit of last three fiscal years as partof your CSR in the reporting period.
Your Company undertakes these activities in the following different ways:
a) Nutrition: Your Company has started three key programs to address thenation's issue of malnutrition with strategic partners. Following are the programsinitiated during the reporting period:
Holistic nutrition program for 50000 kids with The Akshaya Patra Foundation inKarnataka
Mass Outreach Through Schools with SHARP for 150000 in Karnataka; MadhyaPradesh; Uttar Pradesh; and Bihar
Improve awareness about malnutrition with NGO Sakshi for 200 kids in Haryana
b) Skill development: It has started a program with Confederation of IndianIndustry focussing on Capacity building of FBOs including MidDay Meal Organisers SelfHelp Groups Mass and Railways Catering Food Storage Locations on how to prepare produceand serve Safe Food.
c) Water Sanitation & Hygiene programme (WASH): In partnership with Save theChildren JSI R&T India foundation and Sakshi it is implementing WASH programme inHaryana Punjab and AP to create awareness on sanitation and hygiene among communities.This programme will link with Government of India's Swachh Bharat Mission.
d) Healthcare: It supports its Global program for eradicating LymphaticFilariasis (elephantiasis) through Albendazole contribution to World Health Organization(WHO).
Allied against Dengue: This programme is implemented in 5 districts of UP by WISHFoundation. Programme is in line with National Vector Control Programme and focuses oncontinuous medical education for Doctors & Pharmacists and community awareness onprevention and management of Dengue.
For other details regarding CS R please refer Annexure IV to Directors' Report.
Significant Material Orders Passed by the Court/ Regulator/ Tribunal Impacting GoingConcern Status and Company's Operations in Future
Your Company has not received any material Show cause under the Companies Act/SEBIRegulations. Notices received from other regulatory/ statutory authorities are beingsuitably dealt with.
There are no significant legal /arbitral proceedings against the Company. All suchmatters are being brought to the notice of the Audit Committee/Board.
Director's Responsibility Statement
To the best of their knowledge and belief and according to the information andexplanation obtained your Directors make the following statement in terms of Section 134(3) (c) and 134(5) of the Companies Act 2013 for the year ended March 31 2018:
a. The Financial Statements of the Company for the period ended March 31 2018 havebeen prepared in accordance with Indian Accounting Standards (Ind AS) notified underSection 133 of the Companies Act 2013 (the Act) [Companies (Indian Accounting Standard)Rules 2015 (as amended)] and other relevant provisions of the Act. There have been nomaterial departures in the adoption and application of accounting standards.
b) All Financial Statements have been prepared on historical cost convention as agoing concern and on the accrual basis.
c) The estimates and judgments relating to Financial Statements have been made on aprudent and reasonable basis to ensure that Financial Statements reflect in a true andfair manner the form and substance of the transactions and reasonably present theCompany's state of affair and profit for the year.
d) The Directors of the Company have taken adequate care for the maintenance ofadequate accounting records in accordance with the provisions of Companies Act 2013 forsafeguarding of assets of the Company and for preventing and detecting fraud and otherirregularities.
e) The Company has established and maintained adequate internal control framework inline with the Internal Financial Controls ("IFC") requirement within the meaningof the explanation to Section 134(5) (e) of the Companies Act 2013 including financialcontrols based on the internal control over financial reporting criteria established bythe Company considering the essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting issued bythe Institute of Chartered Accountants of India (ICAI). The internal financial controlsare adequate and operating effectively and the internal auditors have conducted periodicaudits to provide reasonable assurances on the same.
f) The systems to ensure compliance with the provisions of all applicable laws are inplace and were adequate and operating effectively.
Declaration of Independent Directors
Pursuant to Sections 149(6) & 149(7) of Companies Act 2013 the IndependentDirectors of your Company have given a declaration that they have complied with thecriteria of independence as set out under sub section (6) of Section 149 of the CompaniesAct 2013.
Statements in this report particularly that pertains to Management Discussion andAnalysis may contain certain statements that might be considered forward looking. Thesestatements are subject to certain risks and uncertainties. Actual results may differmaterially from those expressed in the statement as important factors could influence theCompany's operations such as Government policies local political and economicdevelopment risks inherent to the Company's growth and such other factors.
The Directors wish to extend their thanks and appreciation to all the employees of theCompany at all levels agents and other business associates for their commitmentdedication and respective contributions to the Company's operations during the year underreview.
The Directors would also like to acknowledge the valuable guidance technicalassistance and advice being received from the Associate Company in the U.K. Your Directorslook forward to the future with confidence.
| ||For and on behalf of the Board |
|Zubair Ahmed ||Navneet Saluja |
|(DIN: 00182990) ||(DIN: 002183350) |
|Chairman ||Managing Director |
|Vivek Anand ||Kunal Kashyap |
|(DIN: 06891864) ||(DIN: 00231891) |
|Director ||Director |
|Place : Gurugram || |
|Dated : May 11 2018 || |