Your Directors are pleased to present the 31st Annual Report together with the auditedfinancial statements of your Company for the financial year ended 31st March 2017.
The Company's financial performance for the year ended on 31st March 2017 is summarisedbelow:
(Rs. in crore)
|Particular ||Standalone ||Consolidated |
| ||Year ended ||Year ended ||Year ended ||Year ended |
| ||31st March 2017 ||31st March 2016 ||31st March 2017 ||31st March 2016 |
|Revenue (Net Sales) ||2526 ||2441 ||2546 ||2409 |
|Profit Before Depreciation Interest and taxes ||439 ||384 ||496 ||457 |
|Profit before Tax ||407 ||355 ||396 ||361 |
|Tax Expense ||137 ||118 ||142 ||125 |
|Profit After Tax (before Minority interest) ||270 ||237 ||254 ||236 |
|Minority Interest ||- ||- ||1 ||5 |
|Profit After Tax (after Minority interest) ||270 ||237 ||253 ||231 |
|Transferred to General Reserve ||75 ||60 ||75 ||60 |
Financial highlights & State of Affairs of the Company
(The financial discussion is based on Standalone Financial Statements) Your Companyregistered 3.48% growth in net sales from Rs. 2441 crores in 2015-16 to Rs. 2526 crores in2016-17 despite the subdued sentiment prevailing in the real estate industry and thetemporary disruption in the cash economy due to demonetization. This uptick largely ownedto new product launches during the year under review which were well received by customerpan-India. Earnings before interest depreciation and tax (EBIDTA) increased by 14% fromRs. 384 crore in 2015-16 to Rs. 439 crore in 2016-17 due to increased sales of value-addedtiles cost optimization arising from shopfloor efficiencies. The profit after tax grew by14% from Rs. 237 crore in 2015-16 to Rs. 270 crore in 2016-17. The earnings per share(basic) increased from Rs. 14.87 in 2015-16 to Rs. 16.96 in 2016-17. The State of affairsof the Company is detailed in the "Management Discussion & Analysis" sectionwhich forms part of this report.
Investment-inducing and business-strengthening Government policies coupled with growingaffluence and soaring aspiration are expected to sustain the sectoral growth momentum overthe coming years. Further the promise of industry consolidation arising out of Governmentpolicies raises the hopes for widening growth opportunities over the medium term.
The Indian tile industry is poised to experience significant growth over the comingyear. This optimism stems from the important realities that are expected to catalyse tiledemand pan-India. Rollout of GST: This most significant fiscal policy announcement postIndependence is expected to create a level playing field between the informal players andthe organised segment of the Indian tile industry making branded tiles affordablewhich should enhance consumer pull. Housing sector: According to credible opinion makersthe housing sector is at a tipping point and will be the economy's next big growth driver.According to CLSA India expects to build 60 million new homes to be built between 2018and 2024. In addition declining home finance rates and increasing funding options areexpected to catalyse the demand for housing over the coming years.
Policy driven demand: The number of ambitious programmes launched in the last two yearsby the Centre like Smart Cities Mission Swachh Bharat Abhiyaan (Sanitation for All by2019) Atal Mission for Rejuvenation Urban Transformation (AMRUT) and Housing for all by2022 is expected to provide significant impetus to the demand for tiles. During the yearunder review there are no material changes and commitments affecting the financialposition of the Company and also no change in the nature of business of the Company.
Your Directors have recommended a dividend of Rs. 3 (i.e. 300%) on equity shares(previous year Rs. 5.00 per equity share of a face value of Rs. 2 each fully paid up) of aface value of Re. 1 each fully paid-up for the financial year ended on 31st March 2017. Ifapproved the total payout is expected to be Rs. 57.39 crore (including dividenddistribution tax of Rs. 9.71 crore). The dividend payout for the year under review hasbeen formulated in accordance with the Company's Policy - to pay sustainable dividendkeeping in mind linked to its long-term growth aspiration of the Company.
Consolidated Financial Statements
The Company adopted Indian Accounting Standard (Ind-AS) from April 1 2016 andaccordingly the Consolidated Financial Statements have been prepared in accordance withthe Accounting Standard notified under Section 133 of the Companies Act 2013 and therelevant rules issued thereunder read with the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 (SEBI (LODR) Regulations 2015') and the otheraccounting principles generally accepted in India. The Consolidated Financial Statementsform part of the Annual Report.
Holding Subsidiaries Associate Joint Venture Companies and their performance
During the year under review no new company has become subsidiary of the Company.Kajaria Ceramics Kazakhstan LLP (UIN: KAWAZ20140481) has ceased to be the subsidiary ofthe Company.
A report on performance and financial position (Form AOC-1) of each of the subsidiariesas per the Companies Act 2013 is provided as Annexure-1.
The Authorised Share Capital of the Company is Rs. 35.00 Crores comprising of 25.00Crores of equity shares of Re. 1 each and 10 Lakh preference shares of Rs. 100 each. Thepaid up equity share capital of the Company as on 31st March 2017 was Rs. 15.89 Croresdivided into 158938000 equity shares of Re. 1 each.
During the year under review the equity shares of the Company have been sub-dividedfrom Rs. 2 per share to Re. 1 per share (w.e.f. October 4 2016). Accordingly the fullypaid equity shares of Re. 1 each is 158938000 equity shares.
During the year under review the Company has not issued shares with differentialvoting rights. As on 31st March 2017 none of the Directors of the Company holdinstruments convertible into equity shares of the Company.
Employee Stock Option Scheme (ESOP 2015)
The ESOP 2015 was approved by the Board of Directors and the shareholders on 7thSeptember 2015 for issue and allotment of options exercisable into not more than1062000* of Re. 1 each (Originally ESOP Plan was for 531000 shares of Rs. 2 each) toeligible employees of the Company and its subsidiaries. The ESOP 2015 is administered bythe Nomination and Remuneration Committee of the Board of Directors of the Company. On20th October 2015 the Nomination and Remuneration Committee of the Company had granted458000* of Re. 1 each (Originally granted shares were 229000 of Rs. 2 each) stockoptions to the employees of the Company. During the year 2016-17 40000 shares of Re. 1each have been forfeited due to resignation of ESOP holders. Details regarding ESOP 2015are given at Note No. 38 to the financial statements.
There is no material change in the scheme and the scheme is in compliance with the SEBI(SBEB) Regulations 2014. Further the details required under SEBI (SBEB) Regulations 2014are disclosed on the website of the Company and the same can be accessed atwww.kajariaceramics.com
* During the year under 2016-17 the equity shares of the Company have been sub-dividedfrom Rs. 2 per share to Re. 1 per share (w.e.f. October 4 2016).
Transfer to Reserves
A sum of Rs. 75.00 Crores has been transferred to the Company's General Reserve accountand the balance has been carried to surplus in statement of profit and loss.
Directors' Responsibility Statement
In terms of the provisions of the Companies Act 2013 the Directors confirm that: i)In the preparation of the annual accounts for the year ended on 31st March 2017 theapplicable accounting standards have been followed and that no material departures havebeen made from the same; ii) Appropriate accounting policies have been selected andapplied consistently and judgments and estimates made are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as on 31st March 2017 andthe profit and cash flow of the Company for the period 31st March 2017; iii) Proper andsufficient care has been taken for the maintenance of adequate accounting records inaccordance with the provisions of the Companies Act 2013 for safeguarding the assets ofthe Company and for preventing and detecting fraud and other irregularities; iv) Theannual accounts have been prepared on a going concern basis; v) The Company is followingup the proper Internal financial controls and such internal financial controls areadequate and are operating effectively; and vi) The Company has devised proper system toensure the Compliance with the provisions of all the applicable laws and that such systemsare adequate and operating effectively.
The Company has complied with the Corporate Governance requirements as stipulated underthe SEBI (LODR) Regulations 2015. A separate section on corporate governance along with acertificate from the Practicing Company Secretary confirming the compliance is annexedand forms part of the Annual Report.
Management Discussion and Analysis Report
Management Discussion and Analysis on matters related to the business performance asstipulated in the SEBI (LODR) Regulations 2015 is given as a separate section in theAnnual Report.
Related Party Transactions
For all related party transactions prior omnibus approval of the Audit Committee isobtained on a yearly basis for the transactions which are of a foreseen and repetitivenature and such approval is in the interest of the Company. The transactions entered intopursuant to the omnibus approval so granted are audited and a statement giving details ofall related party transactions is placed before the Audit Committee and the Board ofDirectors for their approval. All related party transactions are disclosed in Note No. 35to the financial statements. Material related party transactions with subsidiaries whichare at arm's length price are disclosed in Form AOC-2 annexed as Annexure- 2.
The Related Party Transactions Policy as approved by the Board is uploaded on theCompany's website i.e. https://www.kajariaceramics.com/pdf/relatedpartytransactionpolicy.pdf
Corporate Social Responsibility Initiatives
In terms of provisions of Section 135 of the Companies Act 2013 and the Companies(Corporate Social Responsibility Policy) Rules 2014 the Corporate Social ResponsibilityCommittee (CSR Committee') has formulated a CSR Policy indicating the activities tobe undertaken by the Company. The constitution of CSR Committee is disclosed in CorporateGovernance Report. The CSR policy may be accessed on the Company's website i.e.https://www.kajariaceramics.com/pdf/csr_policy.pdf Your Company strives to make adifference in the lives of people with a special focus on neighbouring and local areas ofthe Company's manufacturing locations. Your Company has implemented various CSR programmes/ projects which made positive impacts mainly in the areas of health sanitationconservation of natural resources sports and promoting education. The CSR programmesinitiated by the Company includes taking steps for Swatch Bharat preventive health careconstructing sanitation facilities in the schools near the manufacturing facilitiescontributing to the education and social economic development of under privileged childrenand for slum area / rural area development. These CSR initiatives are implemented directlyand through various trusts / societies / NGOs.
These projects are in accordance with Schedule VII of the Companies Act 2013.
The Annual report on CSR activities as required under the Companies (Corporate SocialResponsibility Policy) Rules 2014 is set out as Annexure-3 forming part of this Report.The Company has incurred CSR expenditure of Rs. 3.37 Crores during the current financialyear. The Company has spent about 65% of the proposed CSR Budget. The shortfall of 35% onCSR was due to non-identification of appropriate projects / activities in line with theCSR policy of the Company.
Scheme of Arrangement
During the year under review the Board of Directors has adopted a Scheme ofArrangement which provides for inter-alia the amalgamation of Kajaria SecuritiesPrivate Limited with the Company with appointed date as closing hours of business on March31 2017 ("Scheme"). The Company has filed the Scheme for approval underSections 230-232 and 66 read with other applicable provisions of the Companies Act 2013and the Companies (Compromises Arrangements and Amalgamations) Rules 2016 before theChandigarh Bench of the National Company Law Tribunal ("NCLT") vide applicationdated March 16 2017.
Your Company understands the importance of various risks faced by it and has adopted aRisk Management Policy which establishes various levels of accountability within theCompany. The Company had also constituted a Risk Management Committee which ensures thatthe Company has appropriate and effective risk management systems which carries out riskidentification assessment and ensures that risk mitigation plans are in place. The RiskManagement Committee has identified various risk to which the Company is subject to andhas accordingly aligned the concerned departments to take the necessary mitigating steps.Risk management has been interlinked with the annual planning exercise where each functionand business carries out a fresh risk identification assessment and draws up treatmentplans.
A Risk Management Policy in terms of provisions of Section 134(3)(n) of the CompaniesAct 2013 is in place and is uploaded on the website of the Company i.e. www.kajariaceramics.com
Internal Control Systems and their adequacy
The Company believes that a strong internal control framework is necessary for businessefficiency management effectiveness and safeguarding assets. The Company has awell-defined internal control system in place which is designed to provide reasonableassurance related to operation and financial control. The Management of the Company isresponsible for ensuring that Internal Financial Control has been laid down in the Companyand that controls are adequate and operating adequately. Internal Audit is carried out byexternal auditors and periodically covers all areas of business. The audit scopemythology to be used reporting framework is defined in charter of the Internal Auditwhich is approved by the Audit Committee of the Board of Directors. The Internal Auditorsevaluates the efficacy and adequacy of internal control system its compliance withoperating systems and policies of the Company and accounting procedures at all thelocations of the Company. Based on the report of the Internal Auditors process ownersundertake corrective action in their respective areas and thereby strengthen the controls.Significant audit observations and corrective actions thereon are placed before the AuditCommittee of the Board. The Internal Audit also continuously evaluates the variousprocesses being followed by the Company and suggests value addition to strengthen suchprocesses and make them more effective.
Internal Controls with respect to financial statements
The Company has an adequate system of internal financial control in place withreference to financial statements. The Company has policies and procedures in place forensuring proper and efficient conduct of its business the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information.
Directors and Key Managerial Personnel
Mr. Dev Datt Rishi (DIN: 00312882) is liable to retire by rotation and being eligibleoffered himself for re-appointment at the ensuing Annual General Meeting.
The Board recommends for his re-appointment in the forthcoming Annual General Meeting.All Independent directors have given declarations that they meet the criteria ofindependence as laid down under section 149(6) of the Companies Act 2013 and the SEBI(LODR) Regulations 2015.
During the financial year under 2016-17 Mr. Sandeep Singhal (DIN: 00040491) hasresigned from the Directorship of the Company w.e.f. 7th February 2017. Further there isno change in the composition of Key Managerial Personnel of the Company.
The Board has carried out an annual performance evaluation of its own performance itsCommittees and the Directors including Chairman.
The manner in which the evaluation has been carried out has been explained in theCorporate Governance Report.
Nomination and Remuneration Policy
On the recommendation of the Nomination and Remuneration Committee the Board hasframed a policy for selection and appointment of Directors Senior Management and theirremuneration. Nomination and Remuneration Policy including the criteria for determiningqualification positive attributes & independence is placed on the website of theCompany i.e. https://www.kajariaceramics.com/pdf/nomination_ remuneration_ policy.pdfDetails of remuneration under Section 197 of the Companies Act
2013 and read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is stated in Annexure- 4 which forms part of thisreport.
The report given by M/s O.P. Bagla & Co. Chartered Accountants the StatutoryAuditors of the Company on the financial statements of the Company for the financial yearended March 31 2017 is a part of the Annual Report. There has been no qualificationreservation adverse remark comments observations or disclaimer given by the Auditors intheir report. There were no frauds reported by the Statutory Auditors under sub-section 12of Section 143 of the Companies Act 2013. M/s O.P. Bagla & Co. Chartered Accountantswere appointed as the Statutory Auditors of the Company and they have completed more thanten years and also additional period of 3 years as stipulated under Section 139 of theCompanies Act 2013 read with the rules made thereunder. M/s O.P. Bagla & Co.Chartered Accountants will thus be holding the office of the Statutory Auditors up to theconclusion of the ensuing Annual General Meeting.
The Board places on record its appreciation for the contribution of M/s O.P. Bagla& Co. Chartered Accountants during their tenure as the Statutory Auditors of theCompany.
Thus pursuant to the provisions of the Companies Act 2013 read with the rules madethereunder the Board has recommended M/s Walker Chandiok & Co LLP (Firm RegistrationNumber 001076N/N500013) to be appointed as the Statutory Auditors of the Company in placeof M/s O. P. Bagla & Co. Chartered Accountants to hold the office for a period offive years commencing from the conclusion of the ensuing Annual General Meeting till theconclusion of the Annual General Meeting for the financial year 2021-22.
They have consented for the said appointment and confirmed their eligibility underSections 139 & 141 of the Companies Act 2013 read with the Companies (Audit andAuditors) Rules 2014.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 M/s ChandrasekaranAssociates a firm of Company Secretaries in Practice were appointed to undertake theSecretarial Audit of the Company for the year ended on 31st March 2017. The Report of theSecretarial Audit Report is annexed herewith as Annexure 5. There are no qualificationsreservations adverse remarks comments observations or disclaimer made by theSecretarial Auditors in their report.
Disclosures under the Companies Act 2013 and rules thereunder:
Extract of Annual Return
The extract of the Annual Return in form MGT 9 is annexed herewith as Annexure- 6.
Meetings of the Board
The Board of Directors met 7 (seven) times during the year 2016-17. Details of thenumber of Meetings of Board held during the financial year 2016-17 forms part of theReport on Corporate Governance.
Particulars of Loans Guarantee and Investments
Particulars of Loans Guarantees and Investments covered under the provisions ofSection 186 of the Companies Act 2013 are given in the Notes Nos. 5 6 11 31 and 34 tothe Financial Statements.
Conservation of energy technology absorption and foreign exchange earnings/outgo
The particulars relating to conservation of energy technology absorption foreignexchange earnings and outgo as required to be disclosed under the Companies Act 2013 areprovided in Annexure - 7 to this report.
The Composition of Audit Committee is disclosed in the Corporate Governance Report. Allthe recommendations made by the Audit Committee were accepted by the Board.
The Company has established a Vigil Mechanism for directors and employees by adoptingthe Whistle Blower Policy to report genuine concerns or grievances. The Whistle BlowerPolicy may be accessed on the website of the Company i.e. https://www.kajariaceramics.com/pdf/whistle_blowing_policy.pdf
Sexual Harassment of Women at Workplace (Prevention Prohibition & Redressal) Act2013
The Company has in place a Prevention of Sexual Harassment Policy in line with therequirements of the Sexual Harassment of Women at Workplace (Prevention Prohibition &Redressal) Act 2013. This policy may be accessed on the Company's website i.e.https://www.kajariaceramics.com/pdf/prevention_ of_sexual_harassment_at_workplace.pdfInternal Complaints Committee has been set up to redress complaints received regardingsexual harassment. All employees (permanent Contractual temporary trainees) are coveredunder this policy. The Company has not received any sexual harassment complaints duringthe year 2016-17.
Particulars of Employees
The information required pursuant to Section 197 read with Rule 5(2) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of employeesof the Company is attached as Annexure- 8 to the Directors Report.
The Company did not invite/accept any deposit within the meaning of Section 73 of theCompanies Act 2013 and the rules made thereunder.
Significant the regulators or courts
There is no significant and material order passed by the regulators or courts ortribunals impacting the going concern status and the Company's operations in future.
Statements in this "Director's Report"&" Management Discussion andAnalysis" describing the Company's objectives projections estimates expectationsor predictions may be forward looking statements within the meaning of applicablesecurities laws and regulations. Actual results could differ materially from thoseexpressed or implied. Important factors that could make difference to the Company'soperations including raw material/ fuel availability and its prices cyclical demand andpricing in the Company's principle markets changes in the Government regulations taxregimes economic developments within India and the Countries in which the Companyconducts business and other ancillary factors.
Appreciation and Acknowledgement
The directors take this opportunity to express their deep sense of gratitude to thebanks Central and State Governments and their departments and the local authorities fortheir continued guidance and support.
Your directors would also like to record its appreciation for the support andcooperation your Company has been receiving from its suppliers dealers business andmaterial orders passed partners and other associated with the Company.
Your directors place on record their sincere appreciation to the employees at alllevels for their hard work dedication and commitment. The enthusiasm and unstintingefforts of the employees have enabled the Company to remain as industry leader.
And to you our shareholders we are deeply grateful for the confidence and faith thatyou have always reposed in us.
| ||For and on behalf of the Board |
| ||Ashok Kajaria |
|Place: New Delhi ||Chairman & Managing Director |
|Date: 15th May 2017 ||DIN: 00273877 |