To the members
Your Directors have great pleasure in presenting the 26th Annual Report of the Companytogether with the Standalone & Consolidated Audited statement of accounts for theFinancial Year ended March 31 2018.
| ||(Rs In Lakhs) |
|Particulars ||Standalone |
| ||FY 2017-18 ||FY 2016-17 |
|Net Sales ||234385.51 ||183309.59 |
|Revenue from transaction with discontinued operation ||- ||3759.63 |
|Other operating income ||15.59 ||74.35 |
|Total Revenue ||234401.10 ||187143.57 |
|Add: Other Income ||716.95 ||360.68 |
|Fair value gain on FVTPL Equity Shares ||39537.07 ||24681.01 |
|Less: Total Expenditure ||221699.95 ||168635.18 |
|Purchase transaction with discontinued operation ||- ||3913.54 |
|Loss due to change in Fair valuation of derivative transaction ||38703.86 ||3854.87 |
|Profit before Finance Cost Depreciation and Tax ||14251.31 ||35781.67 |
|Less: Finance costs ||1745.45 ||963.24 |
|Depreciation & Amortisation ||3698.54 ||2487.07 |
|Profit / (Loss) before tax ||8807.32 ||32331.36 |
|Less: Provision for current taxation (Incl. tax. earlier yrs) ||2829.39 ||2600.07 |
|Less: Provision for deferred taxation ||(60.23) ||471.15 |
|Profit / (Loss) after tax ||6038.16 ||29260.14 |
PERFORMANCE OF THE COMPANY (STANDALONE)
Your Company during the year under review earned revenue from operations (Gross) of Rs234401 Lakhs achieved an increase of 25.25% over the previous year. The profit beforeFinance Cost depreciation & amortization and tax was of Rs 14251 Lakhs (6.08% ontotal revenue) as against Rs 35782 Lakhs (19.10% on total revenue) in the previous year.The operating profit after depreciation was amounted to Rs 10553 Lakhs (4.50% to revenue)as against Rs 33295 Lakhs (17.79% to revenue) in the previous year.
Your Directors have pleasure in recommending a dividend of Rs 2/- (40%) per equityshare face value of Rs 5/- each for the financial year ended March 31 2018 amounting toRs 928 lakhs. The dividend payout is subject to approval of members at the ensuing AnnualGeneral Meeting.
The Register of Members and Share Transfer Books will remain closed from ThursdayAugust 23 2018 to Thursday August 30 2018 (both days inclusive) for the purpose ofpayment of dividend for the financial year ended March 31 2018. The Annual GeneralMeeting is scheduled to be held on August 30 2018
The dividend payout for the year under review has been finalized in accordance withshareholders' aspirations and the Company's policy to pay sustainable dividend linked tolong term growth objectives of the Company to be met by internal cash accruals.
The paid up Equity Share Capital as at March 31 2018 stood at Rs 231990000/-divided into 46398000 equity shares face value of Rs 5/- each. During the year underreview your Board of Directors recommended for sub-division of Equity Shares of Rs 10/-each into two Equity Shares face value of Rs 5/- each which was approved by theShareholders through postal ballot on September 26 2017. Accordingly the Equity Shares offace value of Rs 10/- each were sub-divided into two Equity Shares of face value of Rs 5/-each by way of corporate action to the shareholders who held the shares as on the RecordDate i.e. October 11 2017.
Your Company has not accepted any deposits from the Directors/Shareholders/Public andas such no amount of principal or interest on public deposits was outstanding as at theBalance Sheet date.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Loans guarantees and investments covered under Section 186 of the Companies Act 2013form part of the notes to the financial statements provided in this Annual Report.
PARTICULARS OF CONTRACT OR ARRANGEMENTS MADE WITH RELATED PARTIES
The particulars of contracts or arrangements with related parties as per the Section188 of the Companies Act 2013 entered by the Company during the financial year endedMarch 31 2018 in prescribed Form AOC-2 is annexed to this Board's Report (Annexure-1).Further there are no materially significant related party transactions during the yearunder review with Promoters Directors Key Managerial Personnel and their relativeswhich may have potential conflict with interest of the company at large.
The related party transactions were placed before the audit committee as also to theBoard for approval. The details of the related party transactions during the year are partof the notes on Accounts forming part of the Annual Report.
MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN THE END OF THEFINANCIAL YEAR AND DATE OF REPORT
There are no material changes and commitments a3 ecting financial position of thecompany between March 31 2018 and the date of Board's Report.
VARIATION IN MARKET CAPITALIZATION
| ||As at March 31 ||Increase / (decrease) |
| ||2018 ||2017 ||in % |
|Market capitalization (Rs in Crore) ||3199.14 ||2497.14 ||28.11 |
|Price earnings ratio ||53.00 ||17.07 ||210.48 |
Note: Data based on share prices quoted on BSE
MANAGEMENT'S DISCUSSION AND ANALYSIS
In terms of the provisions of SEBI (Listing Obligations & Disclosure Requirements)Regulations 2015 the Management's Discussion and Analysis is set out in this AnnualReport.
Your Company has Two Divisions in operation in di3 erent States in India as on March31 2018.
As a part of the strategic business restructuring the Retail Bakery Agri & VetCadivisions of the Company were transferred on a going concern basis as a slump sale to M/s.Heritage Foods Retail Limited (HFRL) a wholly owned subsidiary Company. Subsequent tothat the Retail Agri & Bakery verticals of HFRL were transferred to Future RetailLimited (FRL) Mumbai by way of demerger through a Composite Scheme of arrangement as perthe provisions of Sections 391 to 394 and Sections 100 to 103 of the Companies Act 1956and/or Sections 230 to 232 and Section 66 of the Companies Act 2013 (as applicable) andSection 52 of the Companies Act 2013 and other applicable provisions of the CompaniesAct 1956 and Companies Act 2013 (as may be applicable). As per the Composite Scheme ofArrangement the Retail undertaking was taken over by the Future Retail Ltd. by the closinghours of March 31 2017.
The Hon'ble National Company Law Tribunal (NCLT) Benches at Hyderabad & at Mumbaiapproved the Composite Scheme of arrangement amongst Heritage Foods Ltd (HFL) HeritageFoods Retail Limited (HFRL) and Future Retail Ltd (FRL) on 03/05/2017 and 11/05/2017respectively. The order copies have been filed with respective Registrars of Companies(ROC) on 19th May 2017 to give effect to the Composite Scheme.
Your Company acquired the entire dairy business of Reliance Retail Ltd (RRL) in a slumpsale. RRL operates a pan India dairy procurement processing and distribution platformunder two brands Dairy Life' and Dairy Pure' with wide variety of productssuch as packaged milk flavored milk butter ghee curd dairy whitener sweets andskimmed milk powder. This acquisition augurs well for your company as it gives newopportunities in states like Punjab Himachal Pradesh Uttarakhand Uttar Pradesh andRajasthan where your company is not present and strong synergies in markets like Mumbaiand Delhi-NCR where your company already commenced its operations.
With population size of 1.32b growing at 3-4% CAGR rising urbanization healthawareness and higher disposable income there is tremendous potential for growth for dairyplayers. Organized dairy industry is slated to witness higher growth as overall organizedsector share in milk products is less than 30%. In fresh milk product category there ishuge scope for private dairies as organized market share is as low as 5% in Paneer and7-8% in curd. Only 20% of total Indian milk production is procured processed and sold byorganized dairies in India. Overall industry clocked 4.5% volume CAGR during FY10-17 withorganized segment posting 9.5% volume CAGR over same period. In value terms dairy sectorlogged an impressive 16.9% CAGR during this period led by better realization andvalue-added products (VAP) which grew 23% CAGR Vs 15% for liquid milk. Going forward weexpect industry volumes to post 4.8% CAGR and 14-15% CAGR in value terms to Rs 8.2tn overFY17-20E.
Companies having deep rooted distribution network e3 cient procurement systemsoptimum product portfolio and consistent track record of quality will be the winners inthe long run. Companies having transparency in raw milk procurement have developed longlasting relationships with farmers. Dairy sector contributes 27% to the agriculture GDP ofIndia and involve over 70m rural households in dairying. The overall industry is estimatedto record 14-15% CAGR over FY2017-20 to reach Rs 8.2lac crore underpinned by a growth involume and realization. India is the world's largest milk producer and consumeraccounting for 19% of the world's milk production and 21% for global consumption.
India's per capita milk consumption at 97 litres per year is lower than many othermajor milk markets except China. India's per capita milk consumption is estimated to log3%
CAGR versus 1% CAGR globally led by higher population growth and rising yield. Risingpopulation and yield provides further scope for higher per capita consumption aided bygrowth in value-added products. Burgeoning demand for dairy products in India is reflectedin not only per capita consumption but is also apparent from rising expenditure on dairyproducts by householdswhich has grown at a faster rate over the past 10 years. Dairyproducts account for 19% of household expenditure on food on an average.
Indian dairy industry can be classified into Commodity dairy products having low marginbut highest asset turn (Pouch milk Skimmed milk powders Dairy whitener); Milk Productshaving higher margins than pouch milk (viz. curd buttermilk ice cream and paneer) andPremium Value Added Products having highest margins but low asset turn and return ratios(cheese spreads whey). We believe Fresh milk product category is the sweet spot and willsee maximum volume growth. Organized industry is even slated to witness higher growth asoverall organized share in milk products is less than 25%. In fresh milk product categorythere is tremendous scope for private dairies as organised market share is as low as 5% inPaneer and 7-8% in curd.
Your Company also a market leader in the curd segment and is now looking to expand itsproduct basket by entering into the fastest growing product like Yoghurt.
The motto of your company is to empower farmers by doing the following activities
Facilitating loans for the purchase of cattle through commercial banks. NBFCs
Facilitating cattle insurance;
Conducting veterinary camps for animals at frequent intervals;
Supply of high quality cattle feed and fodder seeds;
Helping to source good productive animals;
Supply of milk analyzers for ensuring accurate measurement of milk quality.
And ensuring timely payment to farmers.
In its bid to become a pan India player your Company has expanded its distribution ofproducts to 15 states in India covering South West and North India. It has almost 100%direct procurement network of 3 lakh dairy farmers across nine major milk producing statesnamely Andhra Pradesh Telangana Karnataka Tamil Nadu Maharashtra Gujarat RajasthanHaryana and Punjab. The direct route of milk procurement enables it to maintain quality atlower prices. The company also operates 209 bulk coolers chilling plants and procures1.32m liters of milk per day. It operates 16 own processing plants and 2 leased processingplants with installed milk processing capacity of 2.09mn lpd through own plants and 0.15mnlpd through leased plants.
Your company has launched several value added products since 2007 and has increased itscontribution to dairy revenues from 10.4% in FY11 to 22.43% in FY18. As on FY18 curdcontributes 17 % of total value added products revenue.
Your Company procures 1.32mn litres of milk daily from 3 lakhs farmers across 9 states.90% of milk is directly procured from farmers which ensures greater consistency in milkquality and consistency in supply. The company's installed processing capacity is 2.24mnliters per day and chilling capacity is 2.10mn liters per day. After processing 1.05 mnlitres of milk is sold across 1.50mn households on a daily basis and the remaining isconverted into value added products and products are available across 15 states viz.Andhra Pradesh Telangana Karnataka Kerala Tamil Nadu Maharashtra Odisha NCR DelhiHaryana Rajasthan Gujarat Punjab Uttar Pradesh Himachal Pradesh and Uttarakhand.
During the financial year 2017-18 Dairy Division has increased milk Chilling capacityby 425000 LPD by commissioning of 18 units which includes Bulk chilling units MiniChilling units chilling centres and Franchisee Bulk chilling units to increase the milkprocurement and to maintain the quality.
RENEWABLE ENERGY DIVISION:
Your Company strongly recognizes the responsibility towards protecting the environment.As a forward-looking enterprise it is strongly committed to extending the Green'footprint.
Your Company is taking a lot of initiatives to improve e3 ciencies of the company.Renewable energy is the major focus area in the last ten years. Now your Company has 10.39MW of solar and wind power for captive consumption. Your Company is continuously investingin latest technologies and e3 ciencies to conserve energy. As a result Company savedabout 14.5% and 10% when it comes to electrical units and thermal units respectively.
Renewable Energy Division of your Company had achieved the turnover of Rs 686 Lakhsduring the year under review.
SUBSIDIARY / ASSOCIATE COMPANIES
Your Company as on March 31 2018 is having one Subsidiary Company namely M/s. HeritageNutrivet Limited (Formerly known as Heritage Foods Retail
Limited) (CIN:U15400TG2008PLC062054) one Associate Company M/s SKIL Raigam Power(India) Limited (CIN:U40102TG2009PLC063671) and one Joint Venture Company i.e. M/s.Heritage Novandie Foods Private Limited.
During the year under review the name of the subsidiary Company namely M/s. HeritageFoods Retail Limited has been changed to M/s. Heritage Nutrivet Limited w.e.f. November14 2017.
Your Company had incorporated one Joint Venture Company namely M/s. Heritage NovandieFoods Private Limited on November 28 2017. The joint venture company was incorporatedwith 50:50 Equity Shareholding between Heritage Foods Limited and Novandie SNC Francefor production & marketing of Yoghurts.
One subsidiary Company namely M/s. Heritage Conpro Limited (CIN:U52100TG2011PLC072132)had resolved to voluntarily winding up pursuant to the provisions of Section 484 of theCompanies Act 1956 read with rule made thereunder. The Hon'ble High Court of Judicatureat Hyderabad for the State of Telangana and Andhra Pradesh had approved voluntary windingup the Company and issued the order ref no: CA NO.568/2017 on July 06 2017. Your Companyhad filed the necessary e-forms with the Registrar of Companies Hyderabad on September02 2017.
In accordance with Section 136 of the Companies Act 2013 the audited financialstatements including the consolidated financial statements and related information of theCompany and audited accounts of each of its Subsidiary & Associate are available onour website of the Company www. heritagefoods.in. These documents will also be availablefor inspection during the business hours at our registered off ce in Hyderabad India.
Your Company continues the journey of delivering value to its consumers/customersthrough significant investments in quality programs. While sustaining existing externalbenchmarks and certifications your Company added new certifications and further enhancedthe programs and initiatives to renew the commitment to the culture of quality.
Your Company adheres to international quality standard certifications such as ISO22000:2005 (OHSAS) ISO 18001:2007 ISO 14001:2004 (ENMS) ISO 50001:2011 and HalalCertification Hyderabad HFC 15-101 & 102.
Your Company has also received an independent auditor's assurance report on complianceto ISO 14001 & 18001 (EMS & OHSAS) 2nd Cycle Re-registration and same wassubmitted to certification body (SGS Hyderabad).
The Quality department of your Company handles large change management initiatives todrive quality and productivity improvements across the Company using various techniques.
During the year your Company had launched its new premium range of ice-creams under thebrand name Heritage Alpenvie' as part of its strategy to strengthen existing productrange. In developing the new Heritage Alpenvie' range an e3 ort was made tounderstand the choices of its target group of college-goers & young adults. This newrange of ice creams delivers offerings which celebrate "Little moments ofHappiness" at an a3 ordable price. The new offerings range from absolutely luxuriouschocolate delights to inclusions which have real fruit like Pineapple Mango Strawberryand also traditional offerings like Kulfis and Rajbhog. It has all the diverse formats ofice cream in the form of sticks bars cones and scoopable ice-creams for both out-of-homeand in-home consumption.
AWARDS & RECOGNITIONS
During the financial year 2017-18 the Company has received the following awards andrecognitions.
The Company declared as the Winner of the FTAPCCI Excellence Awards in CorporateSocial Responsibility (Sri Ayyadevara Venkat Radhakrishna Memorial Silver RollingTrophy)" - Instituted by Sri Srinivas Ayyadevara Chartered Accountant Hyderabad.The above award was received by Mrs. N Brahmani Executive Director of the Company fromSri Bandaru Dattatreya Hon'ble Minister of State for Labour & Employment Govt. ofIndia on June 25 2017 at Hyderabad.
The Company has been declared as the Winner of Golden Peacock Award forExcellence in Corporate Governance' for the year 2017 by Institute Of Directors (IOD)India. The above award was presented at London UK during IOD India's "17th LondonGlobal Convention on Corporate Governance & Sustainability" and Global BusinessMeet. It is the Second time the Company got this Prestigious Award.
The Gokul Plant of Dairy Division has received the 2nd Prize in NationalEnergy Conservation Award' in Dairy sector from the Ministry of Power Govt of Indiaduring the year 2017. This is the seventh time that the energy conservation e3 orts of theCompany are recognized by the Ministry. The Company had won such Awards earlier in 20082010 2012 2014 2015 and 2016.
Your Company has won "The Great Indian Ice-cream & Frozen DessertContest" Season-6 held on November 16 2017 conducted by DUPONT at New Delhi in thefollowing three categories:
Silver Award for the Best Chocolate Category
Silver Award for the Standard Vanilla FD Category
Bronze Award for the Sorbet Category
The Company has received the Telangana Best Employer Award 2017 from the WorldCSR Day & World Sustainability during the year 2017.
Mr. K Rajababu IT Head of the Company has been awarded with the "50 MostInnovative CIO of India" by The World CSR day during the year 2017.
Mr. A Prabhakara Naidu CFO of the Company has been awarded as Hyderabad CFOLeadership Award instituted by the World CSR Day & World Sustainability during theyear 2017.
Mr. Dheeraj Tandon Head HR of the Company has been awarded with "100 TopHR Mind in India Award" by the World HRD Congress during the year 2017.
Mr. A. Prabhakara Naidu Chief Financial O3 cer of the Company has beenconferred with "CA-CFO Award in the Agriculture & Allied Services Sector" byThe Institute of Chartered Accountants of India in its 11th ICAI Awards 2017 held inMumbai on January 19 2018.
"India's 50 Best CFO's Awards 2017-18" was conferred to Mr. A.Prabhakara Naidu Chief Financial O3 cer of the Company by White Page International inassociation with UK Asian Business Council. The award was presented at The Asian Brand& Leadership Conclave held in Singapore on March 09 2018.
HUMAN RESOURCES AND INDUSTRIAL RELATIONS
Your Company takes pride in the commitment competence and dedication shown by itsemployees in all areas of business. To ensure good human resources management yourCompany focused on all aspects of the employee lifecycle. This provides a holisticexperience for the employee as well. During their tenure at the Company employees aremotivated through various skill- development engagement and volunteering programs. YourCompany has a structured induction process at all locations and management developmentprograms to upgrade skill of managers. Objective appraisal systems based on Key ResultAreas are in place for senior management members.
Your Company is committed to nurturing enhancing and retaining talent through superiorLearning & Organizational Development. This is a part of Corporate HR function and isa critical pillar to support the organization's growth and its sustainability in long run.
The total strength of your Company employees at the end of financial year 2017-18 was2551.
PARTICULARS OF EMPLOYEES
The table containing the names and other particulars of employees in accordance withthe provisions of Section 197(12) of the Companies Act 2013 read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is providedin Annexure-2A to the Board's report.
A statement containing the names of every employee employed throughout the financialyear and in receipt of remuneration of Rs 102 lakh or more PA or employed for part of theyear and in receipt of Rs 8.5 lakh or more in a month under Rule 5(2) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 as amended from time totime is enclosed as Annexure-2B to the Board's report.
Corporate governance is an ethically driven business process that is committed tovalues aimed at enhancing an organization's brand and reputation. This is ensured bytaking ethical business decisions and conducting business with a firm commitment tovalues while meeting stakeholders' expectations. It is imperative that your company'saffairs are managed in a fair and transparent manner. This is vital to gain and retain thetrust of the stakeholders.
Your Company complies with the Securities and Exchange Board of India (SEBI)'sRegulations on corporate governance. YourCompanyhasdocumentedinternalpoliciesoncorporategovernance. During the year your Company continued to comply with the Companies Act2013. Company Corporate governance report for financial year 2017-18 forms part of thisAnnual Report. All Corporate policies are available in Company website i.e.www.heritagefoods.in Corporate Policies.
AUDITORS' CERTIFICATE ON CORPORATE GOVERNANCE
As required by SEBI (Listing Obligations & Disclosure Requirements) Regulations2015 the auditors' certificate on corporate governance is forming part of the AnnualReport.
Your Company recognizes and embraces the importance of a diverse board for its success.Your Company believe that a truly diverse board will leverage di3 erences in thoughtperspective knowledge skill and industry experience cultural and geographicalbackground age and gender which will help the Company retain its competitive advantage.The Board has adopted the Board Diversity Policy which sets out the approach to diversityof the Board of Directors. The Policy is available in the Company websitewww.heritagefoods.in>corporate>policies>BD
MEETINGS OF THE BOARD
The Board met Seven times during the financial year the details of which are given inthe Corporate Governance Report that forms part of this Annual Report. The intervening gapbetween any two meetings was within the period prescribed by the Companies Act 2013 andSEBI (Listing Obligations & Disclosure Requirements) Regulations 2015.
POLICY ON DIRECTOR'S APPOINTMENT AND REMUNERATION
The current policy is to have an appropriate mix of Executive and Non-executive &Independent and Women Directors to maintain the independence of the Board and separateits functions of governance and management. As on March 31 2018 the Board consists of 6members two of whom are Executive/Whole-time directors and four are Non-Executivedirectors. The Board periodically evaluates the need for change in its composition andsize.
The policy of your Company on directors' appointment andremunerationincludingcriteriafordeterminingqualifications positive attributesindependence of a director and other matters provided under Sub-section (3) of Section 178of the Companies Act 2013 and SEBI (Listing Obligations & Disclosure Requirements)Regulations 2015 was adopted by the Board. It is a3 rmed that the remuneration paid tothe directors is as per the terms laid out in the nomination and remuneration policy ofthe Company.
DECLARATION BY INDEPENDENT DIRECTORS
Your Company has received necessary declaration from each independent director underSection 149 of the Companies Act 2013 confirming that he meets the criteria ofindependence laid down in Section 149 of the Companies Act 2013 and Regulation 25 of SEBI(Listing Obligations & Disclosure Requirements) Regulations 2015.
As per the provisions of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Nomination and Remuneration Committee laiddown criteria for performance evaluation of individual directors the board and itscommittees. Accordingly an annual evaluation was carried out for the Board's performanceits Committees and individual directors.
Board performance evaluation is carried out through a structured questionnaire whichprovides a clear and valuable feedback for improving Board e3 ectiveness and highlightingareas for further development.
The following are some of the broad issues that are considered in performanceevaluation:
Criteria for evaluation of Board and its Committees:
Ability to act on a fully informed basis in good faith with due diligence andin the best interest of the company and the stakeholders.
Optimum combination of knowledge skill experience and diversity on the Boardas well its Committees.
Relationships and effective communication among the Board members.
E3 ectiveness of individual non-executive and executive directors and Committeesof Board.
Quality of the discussions general information provided on the company and itsperformance papers and presentations to the Board.
Risk management as well as processes for identifying and reviewing risks.
Well- defined mandate and terms of reference of Committee.
Criteria for evaluation of Individual Directors:
Attendance at Board as well as Committee Meetings
Procurement of Information preparation for Board Meetings and value ofcontribution at meetings
Relationships with fellow Board members the company secretary and seniormanagement and mutual trust and respect they stimulated within the Board.
Keeping update with the latest developments in the areas of governance andfinancial reporting
Willingness to devote time and e3 ort to understand the company and its business
Providing necessary guidance using their knowledge and experience indevelopment of corporate strategy major plans of action risk policy and settingperformance objectives.
Independence exercised in taking decisions listening to views of others andmaintaining their views with resolute attitude
Ability in assisting the Company in implementing the best corporate governancepractices.
Capability in exercising independent judgement to tasks where there is potentialconflict of interest
Commitment in fulfilling the director's obligations fiduciary responsibilities.
None of the independent directors are due for reappointment.
TRAINING OF INDEPENDENT DIRECTORS
Every new independent director of the Board attends an orientation program. Tofamiliarize the new inductees with the strategy operations and functions of your Companythe executive directors / senior managerial personnel make presentations to the inducteesabout the Company's strategy operations product and service offerings marketsorganization structure quality and risk management etc.
Dr. V Nagaraja Naidu (DIN: 00003730) Non-Executive Director of the Company retire byrotation and being eligible offers himself for re-appointment at the ensuing AnnualGeneral Meeting as per the provisions of Section 152 of the Companies Act 2013 and rulesmade thereof and SEBI (Listing Obligations & Disclosure Requirements) Regulations2015.
RETIREMENTS AND RESIGNATIONS
During the year none of the Directors resigned from the Board.
KEY MANAGERIAL PERSONNEL
During the year under review the Company is having the following persons as KeyManagerial Personnel.
|Name of the O3 cial ||DIN/M. No ||Designation |
|Mrs. N. Bhuvaneswari ||00003741 ||Vice Chairperson & Managing Director |
|Mrs. N. Brahmani ||02338940 ||Executive Director |
|Mr. A Prabhakara Naidu ||FCA 200974 ||Chief Financial Officer |
|Mr. Umakanta Barik ||FCS 6317 ||Company Secretary |
|Dr. M Sambasiva Rao || ||President |
COMMITTEES OF THE BOARD
Currently the Board has Six committees: the Audit Committee Nomination andRemuneration Committee Corporate Social Responsibility Committee StakeholdersRelationship Committee Management Committee and Risk Management Committee.
A detailed note on the Board and its committees is provided under the CorporateGovernance Report section in this Annual Report. The composition of the committees andcompliances as per the applicable provisions of the Act and Rules are as follows:
|Name of the Committee ||Composition of the Committee ||Highlights of duties responsibilities and activities |
|Audit committee ||Mr. D Seetharamaiah Chairperson || All recommendations made by the audit committee during the year were accepted by the Board. |
| ||Mr. N Sri Vishnu Raju || Reviewing with the management the quarterly financial statements before submission to the Board for approval. |
| ||Dr V Nagaraja Naidu || |
| ||Mr. Rajesh Thakur Ahuja || Approval or any subsequent modification of transactions of the Company with related parties. |
| || || Reviewing with the management the performance of statutory auditors and internal auditors adequacy of internal control systems etc. |
|Nomination and Remuneration Committee ||Mr. N Sri Vishnu Raju Chairperson || The committee oversees and administers executive compensation operating under a written charter adopted by our Board of Directors. |
| ||Mr. D Seetharamaiah || The nomination and remuneration committee has framed the nomination and remuneration policy. |
| ||Mr. Rajesh Thakur Ahuja || |
|Corporate Social Responsibility Committee ||Mr. D Seetharamaiah Chairperson || To formulate and recommend to the Board a Corporate Social Responsibility (CSR) Policy indicating activities to be undertaken by the |
| ||Mr. N Sri Vishnu Raju ||Company in compliance with provisions of the Companies Act 2013 and rules made there under. |
| ||Mrs. N Bhuvaneswari || To monitor the implementation of the CSR Policy of the Company from time to time |
|Stakeholders Relationship Committee ||Dr V Nagaraja Naidu || The committee reviews and ensures redressal of investor grievances. |
| ||Chairperson || |
| ||Mr. D Seetharamaiah || The committee noted that all the grievances of the investors have been resolved during the year. |
| ||Mr. N Sri Vishnu Raju || |
| ||Mrs. N Bhuvaneswari || |
|Risk Management Committee ||Mr. Rajesh Thakur Ahuja Chairperson || The purpose of the committee is to assist the Board in fulfilling its corporate governance with regard to the identification evaluation & mitigation of operational strategic and environmental risks eficiently and e3 ectively. |
| ||Mr. D Seetharamaiah || |
| ||Mr. N Sri Vishnu Raju || |
| ||Mrs. N Bhuvaneswari || The Company has developed and implemented a risk management framework that includes identification of elements of risk if any which in the opinion of the Board may threaten the existence of the Company. |
|Management Committee ||Mr. D Seetharamaiah Chairperson || Setting the strategic direction to guide and direct the activities of the organization; |
| ||Mr. N Sri Vishnu Raju || Ensuring the effective management of the organization and its activities; and |
| ||Mrs. N Bhuvaneswari || |
| || || Monitoring the activities of the organization to ensure they are in keeping with the founding principles objects and values. |
The SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 mandatedthe formulation of certain policies for all listed companies. All the corporate policiesare available in the Company website (www.heritagefoods.in/Corportate/ policies). Thepolicies are reviewed periodically by the Board and updated based on need and newcompliance requirement.
In addition to its Code of Conduct and Ethics key policies that have been adopted bythe Company are as follows:
|Name of the policy ||Brief description ||Web link |
|Whistleblower Policy (Policy on vigil mechanism) ||The Company has adopted the whistleblower mechanism for directors and employees to report concerns about unethical behaviour actual or suspected fraud or violation of the Company's code of conduct and ethics. It also provides for adequate safeguards against victimization of employees who avail of the mechanism and also provide for direct access to the Chairperson of the Audit Committee. There has been no change to the Whistleblower Policy adopted by the Company during fiscal 2016. ||http: //heritagefoods. in/ images/HFLWhistle BlowerPolicy.pdf |
|Insider Trading Policy and Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information ||The Company has adopted a Code of Conduct to Regulate Monitor & Report Trading by Insiders and Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information as per the SEBI (Prohibition of Insider Trading) Regulation 2015 with a view to regulate trading in securities by the Directors and designated employees of the Company. The Code requires pre- clearance for dealing in the Company's shares and prohibits the purchase or sale of Company shares by the Promoters Directors and the designated employees while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed and other certain situations. All Board Directors and the designated employees have confirmed compliance with the Code. ||http://heritagefoods.in/ images/COC.pdf http://heritagefoods.in/ images/COFD.pdf |
AUDITORS & AUDITORS REPORT
M/s. Walker Chandiok & Co. LLP Chartered Accountants (FRN 001076N/500013) wasappointed as Statutory Auditors of the Company at the 25th Annual General Meeting held onAugust 23 2017 to hold off ce till the conclusion of the 30th Annual General Meeting ofthe Company to be held in the year 2022.
Pursuant to notification no: G.S.R. 432 (E) issued by the Ministry of Corporate A3 airson May 7 2018 amending section 139 of the Companies Act 2013 and the Rules framedthereunder the mandatory requirement for ratification of appointment of StatutoryAuditors by the Members at every Annual General Meeting (AGM) has been omitted and hencethe Board is not proposing to the members for ratification of appointment of StatutoryAuditors at this AGM. The Board of Directors are empowered to fix the remuneration of theStatutory Auditor on yearly basis.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directorshas appointed M/s. Savita Jyoti Associates Practicing Company Secretary (CP No:1796)Hyderabad as Secretarial Auditor to conduct the Secretarial Audit of the Company for theFinancial Year ended 31st March 2018. The Secretarial Audit Report for the Financial Yearended 31st March 2018 is appended to this Report as Annexure-3.
The Secretarial Auditor's Report is self-explanatory and do not call for any comments.
The Board has appointed M/s. Savita Jyoti Associates Practicing Company Secretariesas Secretarial Auditor of the Company for the financial year 2018-19 as per the provisionsof the Companies Act 2013 and Rules made thereof and SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015.
The Company has devised proper systems to ensure compliance with the provisions of allapplicable Secretarial Standards issued by he Institute of Company Secretaries of Indiaand that such systems are adequate and operating e3 ectively.
SIGNIFICANT MATERIAL ORDERS PASSED BY THE REGULATORS
There is no significant order passed by the regulators or Courts during the year underreview. However the Hon'ble NCLT Bench at Hyderabad & Mumbai approved the CompositeScheme of arrangement amongst Heritage Foods Ltd (HFL) Heritage Foods Retail Limited(HFRL) and Future Retail Ltd (FRL) on May 03 2017 and May 11 2017 respectively.
EXTRACTS OF ANNUAL RETURN
An Extract of Annual Return in Form MGT-9 as per the provisions of Section 92 of theCompanies Act 2013 and Rule 12 of Companies (Management and Administration) Rules 2014is provided in Annexure-4 to this report. It is also made available in the website of theCompany i.e. www.heritagefoods.in.
INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY
Your Company has in place adequate internal financial controls with reference tofinancial statements. It has adopted necessary policies and procedures for ensuring theorderly and e3 cient conduct of its business including adherence to company's policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information. During the year such controls were tested and noreportable material weakness in the design or operation was observed. During the year nofraud by the Company or on the Company by its offcers or employees has been notices andreported.
INTERNAL AUDIT & CONTROL SYSTEMS
Your Company has a well-defined and documented internal audit & control systemwhich is adequately monitored. Checks & balances and control systems have beenestablished to ensure that assets are safe guarded utilized with proper authorization andrecorded in the books of account. The Internal control systems are improved and modifiedcontinuously to meet the changes in business conditions statutory and accountingrequirements.
These are supplemented by internal audit of your Company carried out by reputed firmsof Chartered Accountants across India. Your Company has an Audit Committee consisting ofFour Directors in whom all are Non Executive and three are independent Directors. TheAudit Committee of the Board of Directors and Statutory Auditors are periodically apprisedof the internal audit findings and corrective actions taken. The Audit Committee of theBoard of Directors reviews the adequacy and e3 ectiveness of internal control system andsuggests improvements if any for strengthening them. Your Company has a robust ManagementInformation System which is an integral part of the control mechanism.
The Board of Directors on the recommendation of the Audit Committee has appointedInternal Auditors for the financial year 2018-19 as per the provision of Section 138 ofthe Companies Act 2013 and Rules made thereof and as per the SEBI (LO&DR) Regulation2015.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Company has been an early adopter of corporate social responsibility (CSR)initiatives. Along with sustained economic performance environmental and socialstewardship is a key factor for holistic business growth.
CSR activities as per the provisions of the Companies Act 2013 and rules madethereof may be undertaken by the Company or through a registered trust or a registeredsociety. The CSR Committee of the Board evaluated various options to implement the CSRactivities and decided to contribute the mandated CSR amount to the NTR Memorial TrustHyderabad to carry out the activities such as promoting education enhancing thevocational skill & supply of clean drinking water etc. as part of the CSR activitiesof the Company. As the NTR Memorial Trust is operating since 1997 towards the improvementof health and health outcomes of the needy groups meeting the educational needs ofunderprivileged students advancing the concept of entrepreneurship and self-employmentand offering support and relief during disasters and lot more other initiatives for theup-liftment of the backward and needy population in the society.
These projects are in accordance with Schedule VII of the Companies Act 2013 and theCompany's CSR Policy. During the last three years the Company has spent Rs 4 Crores on CSRactivities. The Report on CSR activities as required under Companies (Corporate SocialResponsibility Policy)
Rules 2014 is set out as Annexure-5 forming part of the Board's Report.
HERITAGE FARMER WELFARE TRUST (HFWT)
Apart from the mandatory CSR activities under the Companies Act 2013 your Companycontinues to voluntarily support the following social initiatives through Heritage FarmersWelfare Trust (HFWT).
Veterinary care and cattle management practices through Heritage MobileVeterinary Clinics (equipped with necessary tools and trained human resources) forproviding door-step veterinary services to the Milch Animals and empowering cattle ownerswith advanced technology and knowledge on best cattle management and feeding practices.The Mobile veterinary vans conduct free health camps in the needy villages.
Extending Insurance coverage for accidental death of farmer members Incentivefor fodder development & reward for Meritorious Students from farmer's families.
The HFWT impact during the year for Mobile Veterinary clinic as follows:
BUSINESS RESPONSIBILITY REPORT (BRR)
Pursuant to regulation 34(2)(f) of SEBI (Listing Obligation and DisclosureRequirements) Regulations 2015 the Annual Report shall contain a Business ResponsibilityReport (BRR) describing the initiatives taken by the Company from an environmental socialand governance perspective. BRR has been designed as a tool to help companies understandthe principles and core elements of responsible business practices and start implementingimprovements which reflect their adoption in the manner the company undertakes itsbusiness. In compliance with the regulation the Business Responsibility Report is annexedin Annexure-6 to the board report.
ENERGY CONSERVATION TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE EARNINGS & OUTGO
The particulars as prescribed under Sub-section (3)(m) of Section 134 of theCompanies Act 2013 read with the Companies (Accounts) Rules 2014 are provided in theAnnexure-7 to the Board Report.
TRANSFER OF UN-CLAIMED DIVIDENDS
Pursuant to Section 124(5) of the Companies Act 2013 [Section 205C (2) of theCompanies Act 1956] read with the Investor Education and Protection Fund (awareness andprotection of Investors) Rules 2001 as amended from time to time the unclaimed/unpaiddividend amount of Rs 668044/- (Rupees Six Lakhs Sixty Eight Thousand Forty Four Only)for the year 2009-10 was transferred to the Investor Education and Protection Fund duringthe financial year 2017-18.
In compliance with the provisions of Section 124 of the Companies Act 2013 theCompany has transferred 697687 no's of equity shares belongs to 726 shareholders toInvestor Education and Protection fund Authority (IEPF) on December 7 2017 of thoseshareholders who have not claimed the dividends for a continuous period of 7 years.
Your Company have constituted a Risk Management Committee pursuant to Section 134 (3)(n) of the Companies Act 2013 & Regulation 21 of SEBI (Listing Obligations& Disclosure Requirements) Regulations 2015 which has been entrusted with theresponsibility to assist the Board in (a) Overseeing and approving the Company'senterprise wide risk management framework; and (b) Overseeing that all the risks that theorganization faces such as strategic financial credit market liquidity securityproperty IT legal regulatory reputational and other risks have been identified andassessed and there is an adequate risk management infrastructure in place capable ofaddressing those risks.
The Committee had formulated a Risk Management Policy for dealing with di3 erent kindsof risks which it faces in day to day operations of the Company. Risk Management Policy ofthe Company outlines di3 erent kinds of risks and risk mitigating measures to be adoptedby the Board. The Risk Management Procedure will be reviewed by the Risk ManagementCommittee and Board of Directors on a half-yearly basis at the time of review of FinancialResults of the Company. The policy is available in the Company website: www.heritagefoods.in>corporate>policies>RMPolicy
POLICY ON SEXUAL HARASSMENT
Your Company has in place an Anti Sexual Harassment Policy in line with therequirements of The Sexual Harassment of Women at the Workplace (Prevention Prohibition& Redressal) Act 2013. Internal Complaints Committee (ICC) has been set up to redresscomplaints received regarding sexual harassment. All employees (permanent contractualtemporary trainees) are covered under this policy.
The following is a summary of sexual harassment complaints received and disposed offduring the year 2017-18
|No of complaints received ||: Nil |
|No of complaints disposed o3 ||: Nil |
DIVIDEND DISTRIBUTION POLICY
Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 requires that the top 500 listed companies based on the marketcapitalization to formulate Dividend Distribution Policy. In compliance with the saidrequirement the Company has formulated its Dividend Distribution Policy the said policyis available on the Company's website at: www.heritagefoods.in.
INDIAN ACCOUNTING STANDARDS (IND AS)
The Company has adopted Indian Accounting Standards (Ind AS) with effect from April 12017 pursuant to Ministry of Corporate A3 airs' notification of the Companies (IndianAccounting Standards) Rules 2015. The financials for the financial year 2017-18 werepresented as per the Ind As format.
PREVENTION OF INSIDER TRADING CODE
As per SEBI (Prohibition of Insider Trading) Regulation 2015 the Company hasadopted a Code of Conduct for Prevention of Insider Trading. The Company hasappointed Mr. Umakant Barik Company Secretary of the Company as Compliance O3 cer who isresponsible for setting forth procedures and implementation of the code for trading inCompany's securities. During the year under review there has been due compliance with thesaid code.
DIRECTOR'S RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 134 (3)(C) OF THECOMPANIES ACT 2013
The financial statements are prepared in accordance with the Generally AcceptedAccounting Principles (GAAP) under the historical cost convention on accrual basis exceptthe sale proceeds received under REC Mechanism of the Renewable Energy. GAAP comprisesmandatory accounting standards as prescribed under Section 133 of the Companies Act 2013(the Act') read with Rule 7 of the Companies (Accounts) Rules 2014 the provisionsof the Act and guidelines issued by the Securities and Exchange Board of India (SEBI).There are no material departures from prescribed accounting standards in the adoption ofthese standards.
The Directors confirm that:
In the preparation of the annual accounts (Standalone & Consolidated) forthe financial year 2017-18 applicable accounting standards have been followed along withproper explanation relating to material departures.
They have selected such accounting policies and applied them consistently andmade 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 2017-18and of the profit and loss of the Company for that period.
They have taken Proper and su3 cient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities
They have prepared the annual accounts of the company on a going concern basis.
They have laid down internal financial controls to be followed by the companyand that such internal financial controls are adequate and were operating e3 ectively; and
They have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating e3 ectively.
The Company started a sustainability initiative with the aim of going green.
Electronic copies of the Annual Report 2017-18 including the Notice of the 26th AnnualGeneral Meeting will be sent to all members whose email addresses are registered with theCompany/Depository Participant(s).
The Board takes this opportunity to thank all customers farmers vendors investorsbankers and Statutory Authorities for their continued support during the year. The Boardalso wishes to place on record its sincere appreciation of the e3 ort/ contribution madeby its employees at all levels. The Company's consistent growth was made possible by theirhard work solidarity cooperation and support and look forward to their continued supportin the future.
| ||For and on behalf of |
| ||HERITAGE FOODS LIMITED |
|Registered Office: || |
|6-3-541/C Punjagutta || |
|Hyderabad 500 082 || |
|CIN: L15209TG1992PLC014332 ||D. SEETHARAMAIAH |
|Ph : 04023391221/2 ||Chairperson |
|E-mail : firstname.lastname@example.org ||(DIN: 00005016) |
|Place : Hyderabad || |
|Date :May 24 2018 || |