|BSE: 532054||Sector: Others|
|NSE: KDDL||ISIN Code: INE291D01011|
|BSE 00:00 | 13 Nov||449.00||
|NSE 00:00 | 14 Nov||454.70||
|Mkt Cap.(Rs cr)||522|
|Mkt Cap.(Rs cr)||522.19|
KDDL Ltd. (KDDL) - Director Report
Company director report
Your Directors present this 38th Annual Report together with the AuditedAccounts of the Company for the financial year ended 31st March 2018.
OPERATIONS AND PROSPECTS
Financial Results (Standalone and Consolidated)
The summary of operating results for the year 2017-18 and appropriation of divisibleprofits is given below:
PERFORMANCE AND PROJECTIONS
During the year under review the Company achieved consolidated sales revenue of Rs.5084 million against Rs. 4630 million in the previous year registering a healthy growthof 9.8%. Profit before tax improved from Rs. 35.8 million to Rs. 252.4 million.
Sales revenue from manufacturing operations on standalone basis grew by 14% to Rs. 1520Million from Rs. 1333 Million in the previous year. The company earned net profit aftertax of Rs. 140.7 million against Rs. 75.2 million in the previous year.
Sales revenue in ETHOS the retail business of the Company improved from Rs. 3270million in the previous year to Rs. 3578 million registering a growth of 9.4%. Retailbusiness segment reported profit before tax of Rs. 52 million against the loss before taxof Rs 84.5 million in previous year.
Manufacturing Business Segments
The main revenue of the manufacturing business is from watch components segment. TheSwiss watch market the main destination for our exports which was declining continuouslyfor last 2 years recovered during the year and witnessed a growth of 2.7% compared toprevious year. On the other hand the domestic watch market has continued to grow.
Due to improved market conditions revenue of the company from watch components improvedby 12.5%; major growth of 29% was contributed by the domestic market whereas exportsrevenue improved by 4.6%. The other major segment of revenue is from the precisionengineering business wherein the company registered a healthy growth of 31% over theprevious year. The revenue growth from domestic and exports market was 39% and 16%respectively. The revenue from ornamental packaging business of the company witnessed agrowth of 8.8%.
As we continue to move up the value chain in the watch component manufacture. We areimplementing multiple initiatives to enhance capabilities to manufacture more complexproducts and improved productivity. We continue to focus on manufacturing excellence withthe goals of world class delivery compliance quality and time to market (TAT).
The revenue from the precision engineering business of the Company is expected tomaintain a healthy growth as we continue to expand our capabilities and capacity. Yourcompany has established its reputation as a quality supplier with the ability to meetsophisticated customer needs. By focusing on the vital levers of operational performancewhile adding key technical capabilities and show-casing our capabilities at leadinginternational trade exhibitions and on digital platforms we are confident of healthygrowth and returns in the ensuing periods.
The expansion project for the precision engineering business was delayed due to heavyrains in Bangalore but now the progress is as per revised schedule. We have alreadycommenced partial operations and the new facility will be fully functional by the secondhalf of FY 2019. As a part of the expansion we are shifting and consolidating ourexisting precision engineering manufacturing facilities also at the new location. TheCompany continues to believe that this business segment will be a major source of growthin the future.
Retail Business Segments:
FY17-18 began on a challenging note for the luxury watch retail business. The aftereffects of many regulatory changes continued to have an impact on the performance of thebusiness in the first half of the year. These regulatory changes included the introductionof PAN requirement for transactions above Rs. 2 lakhs requirement for collecting TCS forall transaction in cash above Rs. 3 lakhs demonetisation in November 2016 and thesubsequent banning of all cash transactions above Rs. 2 lakhs with effect from 1stApril 2017. The initial uncertainties of the implementation of the GST regime also had aless than salutary impact of the business.
The business showed an impressive turnaround in the second half of the year. This cameclose on the heels of the changes in the GST rates on watches from 28% to 18% consequentto which there was a reduction in the prices of watches. This fuelled demand in an alreadyrobust festive and wedding season. The fact that the uptrend of demand continued evenafter the season period is a testimony to the fundamental strategic changes to thebusiness model that have been brought over the past 2 years.
The Company's Swiss subsidiary Pylania SA in Switzerland reports financial performanceas per the expected levels and its financial performance is continuously improving forlast 5 years made possible by calibrated efforts for revenue enhancement and curtailingoverheads. The recently implemented "Swiss Made" regulations and guidelines inSwitzerland is also providing new opportunities for the watch component business of theCompany through Pylania.
During the year the 100% subsidiary company Satva Jewellery and Design Limited (SJDL)merger with the parent company is in progress and the merger of this company will providesupport for greater efficiency in operations and better utilization of resources andassets of SJDL.
The details of deposits covered under Chapter V of the Companies Act 2013 (the act) isgiven hereunder:
CHANGES IN SHARE CAPITAL
During the Financial Year ended on 31st March 2018 the paid up equityshare capital of the Company has increased from Rs. 108395860 to Rs. 109527920pursuant to the issue and allotment of 113206 equity shares at a price of Rs 265/- pershare (including a premium of Rs. 255/- per share) by way of preferential allotment topromoters by way of conversion of Equity Share warrants into Equity post subscription offull amount as authorized by the shareholders by way of Special Resolution passed at ExtraOrdinary General Meeting held on 8th November 2016.
Further the Company has neither issued any shares with differential voting rights norany Sweat equity shares. SUBSIDIARY COMPANY
During the period under review Cadrafin Sari an associate company was incorporated inSwitzerland in which Kamla International Holding SA a wholly owned subsidiary companyholds 22% ownership. A separate statement containing salient features of the financialstatements of Company's subsidiaries in prescribed format AOC-I is annexed as Annexure 1to this report.
LISTING OF SHARES
The equity shares of the Company are listed at National Stock Exchange of India (NSE)and Bombay Stock Exchange (BSE). The Company has paid the Annual Listing Fees to NSE andBSE for the financial year 2018-19.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated financial statements have been prepared by the Company's Management inaccordance with the requirements of Accounting Standard 21 issued by the Institute ofChartered Accountants of India (ICAI) and as per the provisions of the Companies Act 2013(the act).
As per the provisions of Section 136 of the act the Company has placed separateaudited accounts of its subsidiaries on its website www.kddl.comand a copy of the same will be provided to the shareholders at their requests.
EXTRACT OF ANNUAL RETURN
The extract of Annual Return in Form MGT -9 for the Financial Year 2017-18 is enclosedwith this report as Annexure 2.
NUMBER OF BOARD & COMMITTEE MEETINGS
The details of board and committee meetings held during the financial ended 31stMarch 2018 are set out in the Corporate Governance Report which forms a part of thisreport. The intervening gap between the meetings was within the period prescribed underthe Act Secretarial Standard-I and the Listing Regulations.
DIRECTORS RESPONSIBILITY STATEMENT
In accordance with the provisions of Section 134 (3) (c) read with Section 134(5) ofthe act and the Securities Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 (Listing Obligations) the Board confirm and report that:-
(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
(b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company as at 31st March 2018 and ofthe profit and loss of the company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act2013 forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;
(d) the directors had prepared the annual accounts on a going concern basis; and
(e) the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.
(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
NOMINATION & REMUNERATION POLICY
The Board of Directors has framed a policy which lays down a framework in relation toremuneration of Directors Key Managerial Personnel and Senior Management Personnel of theCompany. This policy also lays down criteria for selection and appointment of BoardMembers. The detail of this policy is explained in the Report on Corporate Governancewhich forms part of this report.
APPOINTMENT OF INDEPENDENT AUDITOR
M/s BSR & Co. LLP Chartered Accountants (Registration No.101248W/W-100022) wereappointed as Statutory Auditors of the Company at the 37th Annual GeneralMeeting (AGM) held on 11th August 2017 for a term of two years to hold officefrom the conclusion of the 37th AGM till the conclusion the 39thAGM. The requirement of placing the matter relating to the ratification of aboveappointment at every AGM has been omitted by the Companies (Amendment) Act 2017 w.e.f. 7thMay 2018.
Information referred in Auditors' Report are self-explanatory and don't call for anyfurther comments. SECRETARIAL AUDIT REPORT
Pursuant to the provisions of Section 204 of the act and rules made there under theCompany appointed M/s A. Arora & Co. a firm of Company Secretaries (C.P. No 993) toundertake the Secretarial Audit of the Company. The Secretarial Audit Report in prescribedformat MR.-3 given by aforesaid Secretarial Auditors is annexed to this Board Report asAnnexure 3 and forms an integral part. The report doesn't contain any reservationqualification or adverse mark.
PARTICULARS OF LOAN GUARANTEES AND INVESTMENTS UNDER SECTION 186
The details of Loans Guarantees and Securities and Investments covered under Section186 of the act are given in the financial statement of the company during the period underreview.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
The particulars of contracts or arrangements with related parties referred to inSection 188(1) of the act for the Financial Year 2017-18 in the prescribed Form AOC 2 hasbeen enclosed with the report as Annexure 4.
The Board of Directors of the Company constituted the following Committees :
a) Audit Committee
b) Nomination & Remuneration Committee
c) Corporate Social Responsibility (CSR) Committee
d) Stakeholders Relationship Committee
The Committees composition charters and meeting held during the year and attendancethereat are given in the Report of Corporate Governance forming part of this AnnualReport.
AMOUNTS TRANSFERRED TO RESERVES
The Board of Directors of the Company has decided to transfer Rs. 40 million to itsGeneral Reserves.
Your Directors have recommended a dividend of 25% i.e. Rs. 2.5 per equity share of facevalue of Rs. 10 each. The dividend shall be paid after the approval of the shareholders atthe ensuing Annual General Meeting.
The total financial outgo of the dividend to be paid to shareholders will be Rs. 33.01million (inclusive of Corporate Dividend Tax).
The dividend payout for the year under review has been formulated in accordance withthe Company's policy to
pay sustainable dividend linked to long term growth objectives of the Company.
TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND
In terms of Section 125 of the act the company has duly transferred the UnclaimedDividend up to the financial years 2007-08 to the Investor Education and Protection Fundestablished by the Central Government . As no dividend was declared during the financialyear 2008-09 and 2009-10 hence no amount was required to be transferred to the said fundduring the year.
MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION OF THE COMPANY
There are no material changes and commitments in the business operations of the Companyfrom the financial year ended 31st March 2018 to the date of signing of theDirector's Report.
RISK MANAGEMENT POLICY
The risk management framework defines the risk management approach of the Company andincludes periodic review of such risks and also documentation mitigating controls andreporting mechanism of such risks.
Some of the risks that the Company is exposed to are:
Risks of Specific Nature
The Company as a part of normal business monitoring review and development plansidentifies the specific risks for each business segment and develops necessary action planto minimise the impact of same on business performance. Based on the present operationsand areas of interest for the company following specific nature risks are identified:
Risks due to decline in overall demand for watches and over dependence on watchsegment;
Risks pertaining to over dependence on few customers;
Foreign Exchange Risks;
Risk related to availability of Skilled manpower;
Risks related to compliance and statutory requirements Risk Strategy
The Company recognizes that risk is an integral and unavoidable component of businessand is committed to managing the risk in a proactive and effective manner. The Companybelieves that the Risk cannot be eliminated but it can be better managed by
Transferred to another party who is willing to take risk say by buying aninsurance policy or entering into a forward contract in case of business involving use ofForeign exchange;
Reduced by adopting good internal controls;
Avoided by not entering into risky businesses;
Retained to either avoid the cost of trying to reduce risk or in anticipation ofhigher profits by taking on more risk and;
Shared by following a middle path between retaining and transferring risk.
Risk Management Framework
The Company adopts systematic approach to mitigate risks associated with accomplishmentof objectives operations revenues and compliance with the regulations. The Companybelieves that this would ensure mitigating steps proactively and help to achieve the riskmanagement effectively.
The Company has constituted a Risk Management Committee of Chief Executive OfficerChief Operating Officer Chief Financial Officer Chief Marketing Officer and BusinessHeads as its regular members and other senior functional heads on invitation basis. TheCommittee is committed to review periodically the various risks associated with theCompany and report the same to the Board.
Focus of the Company is on the three key elements viz. Risk Assessment /Identification Risk Management and Risk Monitoring.
Potential Risks are identified and analyzed considering likelihood and its impactas a basis for determining how they should be managed.
Risk Assessment consists of a detailed study of threats and vulnerability andresultant exposure to various risks. Based on the assessment and identification of therisks the committee decided the proactive steps for managing and monitoring these risks.
CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY
The Company is committed to discharge its social responsibility as a good corporatecitizen. As part of its social responsibility the Company has contributed to KDDL-Ethosfoundation and the projects are undertaken by the trust formed for this purpose. Theseprojects have been undertaken in compliance with the provision of the Section 135 of theact read with Schedule VII and rules made there under and in accordance with Company's CSRPolicy. The Annual Report on CSR activities required under the Companies (Corporate SocialResponsibility Policy) Rules 2014 is set out as Annexure 5 forming part of this report.
MECHANISM FOR EVALUATION OF BOARD
Pursuant to the provisions of the Companies Act 2013 and the Listing Regulations astructured procedure was adopted after taking into consideration the various aspects ofthe Board's functioning composition of the Board and its various Committees executionand performance of specific duties obligations and governance.
The performance evaluation of the Board Committees there of and Independent Directorswas completed on time. The performance evaluation of the Board as a whole Chairman andthe Non-Independent Directors was carried out by the Independent Directors at theirmeeting.
There was no change in the composition of Board of Directors during the year. Mr.Sanjeev Kumar Masown Whole time Director who retires by rotation at ensuing AnnualGeneral Meeting of the Company and being eligible offers himself for re-appointment.
MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION OF THE COMPANY
There are no significant and material orders passed by the Regulators and Courts thatwould impact the going concern status of the Company and its future operations.
STATEMENT IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROL WITH REFERENCE TO THEFINANCIAL STATEMENTS
A strong internal control culture is an important focus and thrust area in the Company.The Company has comprehensive internal systems controls and policies for all the majorprocesses to ensure the reliability of financial reporting timely feedback on achievementof operational and strategic goals compliance with policies procedures laws andregulations safeguarding of assets and economical and efficient use of resources.
The formalized systems of control facilitate effective compliance as per the ListingRegulations. The company also has well documented Standard Operating Procedures (SOPs) forvarious processes which are periodically reviewed for changes warranted due to businessneeds.
The Internal Auditors of the company continuously monitor the efficacy of internalcontrols/ compliance with SOPs with the objective of providing to the Audit Committee andthe Board of Directors an independent objective and reasonable assurance on the adequacyand effectiveness of the organization's risk management control and governance processes.
The scope and authority of the Internal Audit activity are well defined in the InternalAudit scope and guidelines approved by the Audit Committee. Internal Auditors develop arisk based annual audit plan with inputs from major stake holders and the major focusareas as per previous audit reports.
All significant audit observations are reviewed periodically and follow-up actionsthereon are reported to the Audit Committee. The Audit Committee also meet the Company'sStatutory Auditors and Internal Auditors to ascertain their views on the financialstatements including the financial reporting system compliance to accounting policiesand procedures the adequacy and effectiveness of the internal controls and systemsfollowed by the Company.
The top and senior management of the Company also assesses opportunities forimprovement in business processes systems and controls provides recommendationsdesigned to add value to the organization and follows up on the implementation ofcorrective actions and improvements in business processes.
The senior management of the Company meets periodically to assess the performance ofthe each business segment and key functions of the Company and areas for improvement ofperformance / controls are identified and reviewed on continuous basis.
DISCLOSURE REGARDING ISSUE OF EMPLOYEE STOCK OPTIONS
The disclosure pertaining to Employee Stock Option Plan of the Company is enclosed as aAnnexure-6 DECLARATION BY INDEPENDENT DIRECTOR
All Independent Directors of the Company have given declarations that they meet thecriteria of independence as laid down under Section 149(6) of the act and the regulations16 (1) (b) of the Listing Regulations.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
The information required under section 134(3)(m) of the Companies Act 2013 read withCompanies (Accounts) Rules 2014 relating to "Conservation of Energy TechnologyAbsorption and Foreign Exchange Earnings and Outgo" is given in the Annexure - 7forming an integral part of this Report.
CHANGE IN THE NATURE OF BUSINESS
There is no change in the nature of business of the Company MANAGERIAL REMUNERATION
Statistical Disclosures pursuant to Rule 5 of Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 is enclosed with this report as Annexure --8.
VIGIL MECHANISM/WHISTLE BLOWER POLICY
The Board of Directors of the Company has adopted Whistle Blower Policy effective from2nd February 2015. The Whistle Blower Policy aims for conducting the affairsin a fair and transparent manner by adopting highest standards of professionalismhonesty integrity and ethical behavior. All permanent employees of the Company arecovered under the Whistle Blower Policy.
A mechanism has been established for employees to report concerns about unethicalbehavior actual or suspected fraud or violation of Code of Conduct and Ethics. It alsoprovides for adequate safeguards against the victimization of employees who avail of themechanism and allows direct access to the Chairperson of the Audit Committee inexceptional cases. The Whistle Blower Policy of the Company is available at the link
DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION& REDRESSAL) ACT 2013
The Company had about 271 women employees both permanent as well as contractual invarious fields within the factory premises and offices. The Company has in place an policyin line with the requirement of the Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013. There was no complaint received from any employeeduring the financial year 2017-18 and hence no complaint is outstanding as on 31st March2018.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
A detailed Report on Management Discussion and Analysis pursuant to ListingRegulations is annexed to this report as Annexure - 9.
The Company has complied with all the requirements of Corporate Governance asstipulated in Listing Regulations during the year ended on 31st March 2018 asper Report on Corporate Governance annexed as Annexure -10 and a Certificate from thePracticing Company Secretary to this effect for the year ended on 31st March2018 is also enclosed with this report.
CASH FLOW ANALYSIS
In conformity with the provisions of Clause 34(2) of Listing Regulations the Cash FlowStatement for the financial year ended on 31st March 2018 forms an integralpart of the Financial Statements.
Your Directors place on record their appreciation for the significant contribution madeby all the employees who through their competence hard work solidarity andco-operation have enabled the Company to perform better.
The Board wishes to place on record its appreciation for the support and co-operationthat the Company received from its suppliers distributors retailers and otherassociates. The Company has always looked upon them as partners in its progress and hashappily shared with them rewards of growth. It will be Company's endeavor to build andnurture strong links based on mutuality respect and co-operation with each other andconsistent with customer interest.
Your Directors take this opportunity to thank all the investors clients vendorsbanks regulatory and government authorities for their continued support.