Your Directors are pleased to present the sixtieth Annual Report andthe Company's audited financial statements for the financial year ended 31 March 2020.
The Company's financial performance for the year ended 31 March 2020is summarised below:
|Particulars ||2019-20 ||2018-19* |
|Revenue from Operations ||185907 ||160476 |
|Add: Other Income ||2030 ||3919 |
|Total Income ||187937 ||164395 |
|Profit before tax ||7500 ||2239 |
|Less: Tax expenses ||2658 ||712 |
|Profit after tax (i) ||4842 ||1527 |
|Other Comprehensive Income (net of tax) ||(749) ||(868) |
|Total Comprehensive Income ||4093 ||659 |
|Add: balance brought forward (ii) ||44406 ||46365 |
|Amount available for appropriation [(i) + (ii)] ||49248 ||47892 |
|APPROPRIATIONS: || || |
|Dividend paid on equity shares (for previous financial year) ||2169 ||2892 |
|Tax on Dividend paid ||447 ||594 |
|Balance carried forward ||46632 ||44406 |
(Figures have been rounded off)
*Note on restated financials: The Board of Directors of the Company inits meeting held on 10 November 2017 had approved a Composite Scheme of Arrangement undersections 230 to 232 read with section 66 and other applicable provisions of the CompaniesAct 2013 and the provisions of other applicable laws amongst the Company Somany HomeInnovation Limited a wholly owned subsidiary of the Company (the "Resulting Company1" or "SHIL") and Brilloca Limited a wholly owned subsidiary of ResultingCompany 1 ("Resulting Company 2") and their respective shareholders andcreditors (the "Scheme"). The Scheme provided for demerger of (i) the ConsumerProducts Distribution and Marketing Undertaking ("CPDM Undertaking") and RetailUndertaking of the Company into Resulting Company 1 and (ii) the Building ProductsDistribution and Marketing Undertaking ("BPDM Undertaking") of the Company intoResulting Company 2. The Scheme was approved by the Hon'ble Kolkata Bench of NationalCompany Law Tribunal vide its order dated 26 June 2019 certified copy of the order dated22 July 2019 was filed with Registrar of Companies West Bengal on 5 August 2019 andaccordingly the Scheme has come into effect. The Scheme is effective from the AppointedDate i.e. 1 April 2018. Accordingly due effect of the Scheme has been incorporated witheffect from the Appointed Date. The Ind AS financial statements of the Company for theyear ended 31 March 2019 were approved by shareholders in its annual general meeting heldon 2 September 2019 and subsequently to give effect of the Scheme the comparativefinancial statements for the quarter and year ended 31 March 2019 have been restated.
Your Company reported a good performance during FY 2019-20 across keybusiness divisions. Your Company ended the year with revenue from operation of Rs 185907lakh over previous year corresponding figure of Rs 160476 lakh representing a growth of16%. This resulted in EBITDA of Rs 29135 lakh in FY 2019-20 representing a growth ofaround 37%.
A. Packaging Products Division (PPD)
The revenue from operations for FY 2019-20 was Rs 124151 lakh higherby 13% over the previous year's revenue from operations of Rs 109715 lakh. EBIT beforeunallocable expenditure increased by 71%. The division posted strong sales growth at theback of various initiatives which are as under:
AGI Glass: Glass containers
Introduced 161 new product designs conducted pilot trials for94 new products and commercialised 57 new products to cater to extensive requirements ofexisting and new customers.
Value savings through import substitution for machine parts.
Garden Polymers: PET Bottles and Products
Developed and commercialised bottles and caps for AdhesiveFlavoured Milk and Mouth Wash bottles to expand our reach.
Developed CRC Cap for HDPE Tablet Bottles which is well receivedby the market.
AGI Clozure: Security Caps and Closures
Business enlisted with Radico Khaitan Diageo United Spirits.
Worked extensively to enhance customer base in India and alsointroduced our products in international markets such as Zambia Kenya Malaysia andMauritius.
B. Building Products Division (BPD)
The Building Products Division revenue from operations for FY 2019-20was Rs 61016 lakh higher by 24% over the previous year's revenue of Rs 49354 lakh. Thekey initiatives undertaken during the year for better operational performance are:
Sanitaryware and Faucets
Developed 53 new SKUs during this financial year.
At Bibinagar plant we undertook partial conversion of energysource in processes from LPG to Natural Gas during FY 2019-20. We expect to fully convertto Natural Gas by the end of FY 2020-21. In addition to it process wastage reduced duringFY 2019-20. All these initiatives undertaken has resulted in improved cost structure.
Plastic Pipes & Fittings
Entire range of CPVC Pipes and Fittings was certified byNational Sanitation Foundation (NSF).
Introduced 43 innovative SKUs.
SCHEME OF ARRANGEMENT
During the year under review the Hon'ble NCLT Kolkata Bench approvedthe Composite Scheme of Arrangement (Demerger) between the Company Somany Home InnovationLimited (SHIL) and Brilloca Limited (Brilloca) and their respective shareholders andcreditors pursuant to the provisions of the Companies Act 2013 on 26 June 2019. The saidScheme was made effective on 5 August 2019 (w.e.f. the Appointed Date i.e. 1 April 2018 asper the said Scheme). The BPDM undertaking (as defined in the Scheme) was transferred toBrilloca and CPDM Undertaking and Retail Undertaking (as defined in the Scheme) wastransferred to SHIL.
MATERIAL CHANGES AND COMMITMENTS
The outbreak of COVID-19 pandemic has caused global widespread economicdisruptions leaving uncertainties with respect to severity and its impact on businesseswhich currently cannot be reasonably ascertained. The Company has up to the date ofapproval of financial results evaluated and factored into the extent possible likelymaterial events and circumstances arising from COVID-19 pandemic and their impact oncarrying value of its Assets and Liabilities as at 31 March 2020.
Based on current indicators of future economic conditions the Companyexpects to recover the carrying amount of its Assets as on 31 March 2020. The impact ofany future events and developments emerging out of COVID-19 pandemic if any andoccurring after the balance sheet date and relating to the Assets and Liabilities of theCompany as on 31 March 2020 will be recognised prospectively.
Considering the current market scenario and Company's quality productportfolio brand image long-standing relationships and goodwill with its customerssuppliers and other stakeholders the Company expects that the business operations cashflows future revenue assets and liabilities will sustain going forward.
SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES
Subsequent upon effectiveness of Composite Scheme of Arrangementbetween the Company SHIL and Brilloca and their respective shareholders and creditorsunder sections 230 to 232 of the Companies Act 2013 the investments of the Company weretransferred to SHIL and Brilloca respectively and resultantly the Company has nosubsidiaries.
However the approved policy for determining material subsidiaries maybe accessed on the Company's website at the link: http://hsilgroup.com/wp-content/themes/hindware /pdf/policies/Material-Subsidiary- Policy- Version-III.pdf
Your Directors have recommended a dividend of Rs 3/- (i.e. 150%) perequity share (last year Rs 3/- (i.e. 150%) per equity share) on equity shares of Rs 2/-each for the financial year ended 31 March 2020 absorbing Rs 2169 lakh. The dividendpayout is subject to approval of members at the ensuing Annual General Meeting of theCompany.
The dividend will be paid to members whose names appear in the Registerof Members as on 11 September 2020 and in respect of shares held in dematerialised formit will be paid to members whose names are furnished by National Securities DepositoryLimited and Central Depository Services (India) Limited as beneficial owners as on 10September 2020.
TRANSFER TO RESERVES
The Board proposes not to transfer any amount out of the profit for theyear under review to the general reserve.
Your Company has not accepted any deposits within the meaning ofSection 73 of the Companies Act 2013 and as such no amount of principal or interest wasoutstanding as on the Balance Sheet date.
AUDITORS AND AUDITORS' REPORTS Statutory Auditors
At the 57th Annual General Meeting (AGM) of the Company held on 3August 2017 the Shareholders approved the appointment of M/s. Lodha and Co CharteredAccountants as Statutory Auditors of the Company having Firm's Registration No. 301051Eto hold the office till the conclusion of the 62nd Annual General
Meeting subject to ratification of the appointment by the Shareholdersat every AGM. As per the notification issued by Ministry of Corporate Affairs (MCA) dated7 May 2018 for The Companies (Amendment) Act 2017 and Companies (Audit and Auditors)Amendment Rules 2018 the appointment of Statutory Auditors is not required to beratified at every AGM therefore no resolution for such ratification is taken in theNotice of the ensuing AGM.
The Notes on Financial Statement referred to in the Auditors' Reportare self-explanatory and therefore do not require any further comments.
There was no instance of fraud during the year under review whichrequired the Statutory Auditors to report to the Audit Committee and/or Board underSection 143(12) of the Companies Act 2013 and the rules made thereunder.
The Board had appointed M/s. DMK Associates Company Secretaries NewDelhi (Ms. Monika Kohli Practicing Company Secretary CP No.4936) to conduct SecretarialAudit for the FY 2019-20 pursuant to the provisions of Section 204 of the Companies Act2013 and Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014. TheSecretarial Audit Report in Form No. MR - 3 for the FY 2019-20 is enclosed as Annexure Ato this Report. The Secretarial Audit Report does not contain any observation or adverseremark.
CONSERVATION OF ENERGY RESEARCH AND DEVELOPMENTTECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
The particulars as prescribed in sub section (3)(m) of Section 134 ofthe Companies Act 2013 read with Companies (Accounts) Rules 2014 are enclosed asAnnexure B to this Report.
During the year under review the Company did not issue equity shares.The paid-up Equity Share Capital as on 31 March 2020 was Rs 1445.97 lakh.
EXTRACT OF ANNUAL RETURN
In accordance with Section 134(3)(a) of the Companies Act 2013 theextract of the Annual Return in Form No. MGT - 9 is enclosed as Annexure C to this Report.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report for the year under review asstipulated under Regulation 34(2)(e) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 is presented in a separate section forming part of theAnnual Report.
DIRECTORS' RESPONSIBILITY STATEMENT
Your Directors in terms of Section 134(3)(c) of the Companies Act 2013("Act") state that:
a) i n the preparation of the annual accounts for the year ended 31March 2020 the applicable accounting standards read with requirements set out underSchedule III to the Act had been followed and there are no material departures from thesame;
b) the Directors had selected such accounting policies and applied themconsistently and made judgements and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as at 31 March 2020 andof the profit of the Company for the year ended on that date;
c) the Directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;
d) the Directors had prepared the annual accounts on a 'going concern'basis;
e) the Directors had laid down internal financial controls to befollowed by the Company and that such internal financial controls are adequate and wereoperating effectively; and
f) the Directors had devised proper systems to ensure compliance withthe provisions of all applicable laws and that such systems are adequate and operatingeffectively.
The report on Corporate Governance as stipulated under SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 forms an integral part of thisReport. The requisite certificate from the Practicing Company Secretary confirmingcompliance with the conditions of corporate governance is attached to the report onCorporate Governance.
CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES
All contracts/arrangements/transactions entered by the Company duringthe financial year with related parties were in the ordinary course of business and on anarm's length basis. The disclosure in Form No. AOC-2 is enclosed as Annexure D to thisReport.
During the year the Company entered into Related Party Transactionswith Brilloca Limited (a related party) which exceeded the amount prescribed under theprovisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 andwas considered material in accordance with the policy of the Company on Materiality ofRelated Party Transactions. The aforesaid transaction was approved by Shareholders of theCompany through Postal Ballot by way of an ordinary resolution on 19 December 2019.
The Policy on Materiality of Related Party Transactions and dealingwith related party transactions as approved by the Board may be accessed on the Company'swebsite at the link: http://hsilgroup.com/wp-content/themes/hindware/pdf/policies/Related-Party-Transactions-Policy-Version-IV.pdf.
Your Directors draw attention of the members to Note No. 50 to thefinancial statements which set out related party disclosures.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Company has a Corporate Social Responsibility Committee in place asper the provisions of Section 135 of the Companies Act 2013. As on 31 March 2020 theCommittee consisted of Mr. Salil Kumar Bhandari Chairman Dr. Rajendra Kumar Somany Mr.Sandip Somany and Ms. Sumita Somany as other members of the Committee.
Subsequent upon resignation of Mr. Salil Kumar Bhandari on 1 April 2020as Director of the Company the CSR Committee was re-constituted on 31 May 2020 with Dr.Rajendra Kumar Somany as its Chairman and Mr. Sandip Somany Ms. Sumita Somany and Mr.Anil Wadhwa as its other members.
The Company's Corporate Social Responsibility Policy (CSR Policy) dulyapproved by the Board indicates the activities to be undertaken by the Company to fulfilthe expectation of our Stakeholders and to continuously improve our social environmentaland economical performance while ensuring sustainability and operational success of ourCompany. The Company would also undertake other need based initiatives in compliance withSchedule VII to the Companies Act 2013.
The guiding principles for all CSR initiatives of the Company are asfollows:
Establishing a guideline for compliance with the provisions ofRegulations to dedicate a percentage of Company's profits for social projects;
Ensuring the implementation of CSR initiatives in letter andspirit through appropriate procedures and reporting; and
Creating opportunities for employees to participate in sociallyresponsible initiatives.
The CSR Policy may be accessed on the Company's website at the link:http://hsilgroup.com/wp-content/themes/hindware/pdf/investor-relations/corporate-social-responsibility/ CSR_Policy_HSIL.pdf.
The Annual Report on CSR activities for the FY 2019-20 is enclosed asAnnexure E to this Report.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
In accordance with the provisions of the Companies Act 2013 and theArticles of Association of the Company
Mr. Girdhari Lal Sultania Director of the Company retires by rotationat the ensuing Annual General Meeting and being eligible offered himself forre-appointment.
As Mr. Sultania will attain the age of 75 years in the month ofOctober 2020 it is proposed to continue to avail services of Mr. Sultania asNon-executive Non-Independent Director of the Company by way of Special Resolutionpursuant to Regulation 17 (1A) of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.
The present term of Dr. Rajendra Kumar Somany as Chairman and ManagingDirector of the Company will expire by efflux of time on 8 January 2021. The Board isseeking Shareholders' approval at ensuing Annual General Meeting (AGM) for re-appointmentof Dr. Rajendra Kumar Somany as Chairman and Managing Director of the Company for afurther period of 3 consecutive years commencing from 9 January 2021 upto 8 January 2024.
The Board of Directors by way of passing resolutions by circulationappointed Mr. Anil Wadhwa Ms. Himalyani Gupta and Mr. Rakesh Sarin as AdditionalDirectors designated as Independent Directors in terms provisions of the Companies Act2013 on Board of the Company w.e.f. 18 March 2020. The notice of the ensuing AGM proposesOrdinary Resolutions for appointment of aforesaid Directors to be appointed as IndependentDirectors of the Company for term of five consecutive years and forms part of the AnnualReport.
Profiles of aforesaid Directors are given in the Statement underSection 102 of the Companies Act 2013 to the Notice of the ensuing AGM of the Company.
Mr. Sandeep Sikka and Ms. Payal M. Puri resigned from their offices ofChief Financial Officer and Company Secretary of the Company respectively on 16 September2019. The Board of Directors in their meeting held on 17 September 2019 appointed Mr. O.P.Pandey as Chief Financial Officer and Mr. Pulkit Bhasin as Company Secretary andCompliance Officer of the Company.
During the year Dr. Rainer S. Simon tendered his resignation asIndependent Director of the Company with effect from 17 December 2019. Mr. Salil KumarBhandari and Mr. Ashok Jaipuria tendered their resignation as Independent Directors of theCompany with effect from 1 April 2020 and 27 May 2020 respectively.
DISCLOSURE UNDER SECRETARIAL STANDARDS
The Directors state that the Company is complying with all theapplicable Secretarial Standards on meetings of the Board of Directors.
NUMBER OF BOARD MEETINGS
During the year under review five Board Meetings were convened andheld. For further details please refer to the Report on Corporate Governance which isforming part of this Annual Report.
As on 31 March 2020 the Audit Committee consisted of IndependentDirectors namely Mr. V.K. Bhandari Chairman Mr. N.G. Khaitan Mr. Salil Kumar Bhandariand Mr. Ashok Jaipuria as other members of the Committee.
Subsequent upon resignations of Mr. Salil Kumar Bhandari on 1 April2020 and Mr. Ashok Jaipuria on 27 May 2020 as Directors of the Company the AuditCommittee was re-constituted on 31 May 2020 with Mr. V.K. Bhandari as its Chairman and Mr.N.G. Khaitan Mr. Anil Wadhwa Ms. Himalyani Gupta and Mr. Rakesh Sarin as its othermembers.
For further details please refer to the Report on Corporate Governancewhich is forming part of this Annual Report.
All the recommendations made by the Audit Committee were accepted bythe Board.
VIGIL MECHANISM (WHISTLE BLOWER)
The Company has in place a Whistle Blower Policy to establish a vigilmechanism for Directors/Employees and other stakeholders of the Company to report concernsaffecting the smooth and efficient running of operations of the Company. This Policydocuments the Company's commitment to maintain an open work environment in whichemployees consultants and contractors are able to report instances of unethical orundesirable conduct actual suspected fraud or violation of the Company's Code ofConduct.
The Vigil Mechanism (Whistle Blower) Policy is available on Company'swebsite at the link: http://hsilgroup.com/wp-content/ themes/hindware/pdf/Vigil-Mechanism-Policy-Version-IV.pdf.
NOMINATION AND REMUNERATION POLICY
The Company has in place a Nomination and Remuneration Policy forappointment of Directors Key Managerial Personnel Senior Management and fixation oftheir remuneration as per the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015.
The Remuneration Policy is available on Company's website at the link:http://hsilgroup.com/wp-content/themes/ hindware/pdf/policies/Nomination-and-Remuneration-Policy-Version-III.pdf.
DIVIDEND DISTRIBUTION POLICY
The Company has in place a Dividend Distribution Policy as perRegulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015. The Policy was adopted to set out the parameters that will be taken into account bythe Board in determining the distribution of dividend to its Shareholders and/or retainingprofit earned by the Company. The Policy is available on Company's website athttp://hsilgroup.com/wp-content/themes/hindware/pdf/policies/Dividend_Distribution_Policy.pdf.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
Particulars of loans guarantees and investments covered under Section186 of the Companies Act 2013 forms part of the notes to the Financial Statements (Pleaserefer Note Nos. 7 8 and 16).
PARTICULARS OF EMPLOYEES
Information required as per Section 197(12) of the Companies Act 2013("Act") read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is enclosed as Annexure F to this Report.
Disclosures relating to remuneration and other details as requiredunder Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 a statement showingthe names and other particulars of the employees drawing remuneration in excess of thelimits set out in the said rules is provided in the Annual Report which forms part ofthis Report. Having regard to the provisions of the first proviso to Section 136(1) of theAct the Annual Report excluding the aforesaid information is being sent to the members ofthe Company. Any member interested in obtaining such information may write to the CompanySecretary and the same will be furnished on request.
The internal control systems commensurate with the size scale andcomplexity of the operations of the Company. These have been designed to providereasonable assurance with regard to recording and providing reliable financial andoperational information complying with the applicable statutes safeguarding assets fromunauthorised use executing transactions with proper authorisation and ensuringcompliance with corporate policies. The Company uses SAP - a well-accepted enterpriseresource planning (ERP) system to record data for accounting consolidation andmanagement information purposes and connects to different locations for efficient exchangeof information.
The Audit Committee of the Board of Directors comprising ofIndependent Directors reviews the effectiveness of the internal control system across theCompany including annual plan significant audit findings and recommendations adequacy ofinternal controls and compliance with accounting policies and regulations.
INTERNAL FINANCIAL CONTROLS
The Company has in place an adequate Internal Financial Controlsframework. The Company has documented Risk and Control Matrices (RACM) covering allactivities and all controls are tested for design and operating effectiveness as part ofits Internal Financial Control reporting framework. The financial controls are evaluatedfor both design and operating effectiveness by an external consulting firm of repute.
In our view the Internal Financial Controls are adequate and are inline with best practices applicable to organisations of a similar size nature andcomplexity.
The Company has a robust Risk Management framework which identifies andassesses strategic operational financial and compliance risks and monitors theeffectiveness and efficiency of risk mitigation and control measures. The major risksidentified by the businesses and functions are systematically addressed through mitigatingactions on a continual basis.
DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN ATWORKPLACE (PREVENTION PROHIBITION AND REDRESSAL) ACT 2013
The Company has in place a Sexual Harassment Policy in compliance withthe requirements of the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013. The Company always endeavours to create and provide anenvironment that is free from discrimination and harassment including sexual harassment.The Internal Complaints Committee (ICC) has been set up to redress complaints regardingsexual harassment if any.
The Directors further state that during the year under review therewere no complaints filed pursuant to the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013.
DECLARATION BY INDEPENDENT DIRECTORS
The Company has received necessary declarations from all theIndependent Directors confirming that they meet the criteria of independence as prescribedunder Section 149(6) of the Companies Act 2013 ("Act") and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 ("ListingRegulations"). In the opinion of the Board they fulfil the conditions ofindependence as specified in the Act and the Listing Regulations and are independent ofthe Management.
The Board and the Nomination and Remuneration Committee reviewed theperformance of the individual Directors on the basis of the criteria and framework adoptedby the Board. In addition the performance of Board as a whole and Committees wereevaluated by the Board after seeking inputs from all the Directors on the basis of variouscriteria.
In a separate meeting of Independent Directors performance ofNon-Independent Directors performance of Board as a whole and performance of the Chairmanwas evaluated taking into account the views of the Executive
Directors and Non-executive Directors. The evaluation process has beenexplained in the Corporate Governance Report section of the Annual Report.
TRAINING OF INDEPENDENT DIRECTORS
The details of programmes conducted for familiarisation of IndependentDirectors with the Company nature of the industry in which the Company operates businessmodel of the Company etc. has been uploaded on the Company's website at the web link:https://www.hsilgroup.com/training-of-directors/.
For further details please refer to the Report on Corporate Governancewhich is forming part of this Annual Report.
Your Directors state that no disclosure or reporting is required inrespect of the following items as there were no transactions on these items during theyear under review:
1. Details relating to deposits covered under Chapter V of theCompanies Act 2013.
2. Issue of equity shares with differential rights as to dividendvoting or otherwise.
3. Issue of shares (including sweat equity shares) to employees of theCompany under any scheme.
4. Issue of Employees Stock Option to employees of the Company underany scheme.
5. No significant or material orders were passed by the Regulators orCourts or Tribunals which impact the going concern status and Company's operations infuture other than the order passed by Hon'ble NCLT Kolkata Bench for approving theComposite Scheme of Arrangement between the Company Somany Home Innovation Limited andBrilloca Limited and their respective shareholders and creditors.
Your Directors would like to express their appreciation for assistanceand co-operation received from the financial institutions banks government authoritiescustomers vendors and members during the year under review. Your Directors also wish toplace on record their deep sense of appreciation for the committed services by allemployees of the Company.
| ||For and on behalf of the Board of Directors |
|Place: Gurugram ||Dr. Rajendra Kumar Somany |
|Date: 10 June 2020 ||Chairman and Managing Director |