|BSE: 531882||Sector: Agri and agri inputs|
|NSE: KWALITY||ISIN Code: INE775B01025|
|BSE 00:00 | 20 Sep||1.73||
|NSE 00:00 | 20 Sep||1.70||
|Mkt Cap.(Rs cr)||42|
|Mkt Cap.(Rs cr)||41.76|
Kwality Ltd. (KWALITY) - Director Report
Company director report
Your Directors have pleasure in presenting theTwenty Sixth Annual Report of the Companytogether with Audited Accounts of the Company for the financial year ended March 312018.
1. FINANCIAL HIGHLIGHTS
2. COMPANY PERFORMANCE
The Company's Standalone net revenue for the current year is Rs 6724.88 crores ascompared to Rs 6131.27 crores in previous financial year. Profit before Tax is Rs. 144.11crores as compared to that of last year of Rs. 233.71 Crores. Profit after Tax for theFinancial Year 2017-2018 stood at Rs. 71.11 crores as compared to Rs. 164.30 crores in theprevious financial year.
The Company's Consolidated net revenue for the year is Rs 7319.36 crores as compared toRs 6871.83 crores. Profit before Tax is Rs. 165.35 crores as compared to that of last yearof Rs. 263.55 Crores.
Profit after Tax for the Financial Year 2017-2018 stood at Rs. 92.35 crores compared toRs. 194.15 crores in the previous financial year.
3. CONSOLIDATED FINANCIAL STATEMENTS
As per Regulation 33 of the Securities and Exchange Board of India (Listing Obligationsand Disclosure Requirements) Regulations 2015 (hereinafter referred to as "ListingRegulations") and applicable provisions of the Companies Act 2013 read with theRules issued thereunder the Consolidated Financial Statements of the Company for thefinancial year 2017-18 have been prepared in compliance with applicable AccountingStandards and on the basis of Audited Financial Statements of the Company and itssubsidiary.
The Consolidated Financial Statements together with the Auditors' Report form part ofthis Annual Report.
A separate statement containing the salient features of financial statements of allsubsidiaries of the Company forms a part of consolidated financial statements incompliance with Section 129 and other applicable provisions if any of the Companies Act2013. In accordance with Section 136 of the Companies Act 2013 the financial statementsof the subsidiary and associate companies are available for inspection by the members atthe Registered Office of the Company during business hours on all days except SaturdaysSundays and public holidays upto the date of the Annual General Meeting ('AGM'). Anymember desirous of obtaining a copy of the said financial statements may write to theCompany Secretary at the Registered Office of the Company. The financial statementsincluding the consolidated financial statements financial statements of subsidiaries andall other documents required to be attached to this report have been uploaded on thewebsite of the Company (www.kwality.com ).
The Company has formulated a policy for determining material subsidiaries. The policymay be accessed on the website of the Company (www.kwality.com )
Your Company has a wholly owned subsidiary under the name and style of"KwalityDairy Products - FZE" in free trade zone of United Arab Emirates to increase itsglobal foot print and to develop and cater to the new markets. Your Company has preparedConsolidated Financial Statements in accordance with Section 129(3) of the Companies Act2013 Regulation 33 of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 and Accounting Standard as specified under Section 133 of Companies Act 2013 readwith Rule 7 of Companies (Accounts) Rules 2014.
The Board unanimously decided to close business operations of Kwality Dairy ProductsFZE Dubai- UAE (A wholly owned Subsidiary of the Company) in phased manner w.e.f 11thJuly 2018 due to the issues connected with recession in Global Market specificallyslowdown of Dairy Product business in UAE.
Based on the performance of your Company the Directors are pleased to recommend afinal dividend of Rs. 0.10 per equity share of Rs. 1 each i.e @ 10% which will be paidafter your approval at the ensuing Annual General Meeting.
The dividend will be paid to members whose names appear on the company's register ofmembers after giving effect to all valid share transfers in physical form lodged with theRegistrar and Transfer Agents (RTA) of the company on or before and in respect of sharesheld in electronic form (demat mode) dividend will be paid to those"deemedmembers" whose names appear in the statement of beneficial ownership furnished byNational Securities Depository Limited (NSDL) and Central Depository Services (India)Limited (CDSL) at the close of business hours on September 22 2018.
6. CHANGE IN NATURE OF BUSINESS
There has been no change in the nature of business of the Company.
7. 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 the Annual Report.
8. TRANSFER TO RESERVE
Pursuant to section 123 of the Companies Act 2013 the company is not mandatorilyrequired to transfer any amount to the reserves. Accordingly the company has nottransferred any amount to the reserves during the year.
9. PREFERENTIAL ISSUE AND PRIVATE PLACEMENT
The Board of Directors of your Company had during the financial year i.e 2017-18allotted on preferential basis 2169762 Equity Shares at the price of Rs 115.22/- pershare on conversion of 1 (One) Compulsorily Convertible Warrants aggregating to Rs 25Crore to Bennett Coleman & Co Ltd (Non Promoter) and 1215066 Equity Shares at theprice of Rs 115.22/- per share on conversion of 1 (One) Compulsorily ConvertibleDebentures aggregating to Rs 14 Crore to HT Media Limited (Non Promotor) on 19thFebruary 2018 as approved by the shareholders on 09th August 2016 via postalballot. Further the Equity shares allotted have received listing and trading approval fromboth the Stock Exchanges i.e. BSE Limited & National Stock Exchange of India Limitedand are under the Lock-in period of 1 year from the date of trading approval.
10. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND AUTHORITY
Pursuant to the applicable provisions of the Companies Act 2013 read with the InvestorEducation and Protection Fund Authority (Accounting Audit Transfer and Refund) Rules2016 ("IEPF Authority") all unpaid or unclaimed dividends are required to betransferred by the company to the IEPF established by the Government of India aftercompletion of seven years. Further according to the rules the shares on which dividendhas not been paid or claimed by the shareholders for seven consecutive years or more shallbe transferred to the demat account of the IEPF Authority.
During the year 2017-18 unclaimed Dividend for financial year 2009-10 of Rs.829952/- were transferred to the Investor Education and Protection Fund("IEPF") as required under the Investor Education and Protection Fund Authority(Accounting Audit Transfer and Refund) Rules 2016 ("IEPF Authority"). Furthercorresponding equity shares in respect of which dividend has not been claimed for thefinal dividend declared in financial year 2009-10 were transferred to the IEPF Authoritypursuant to the provisions of Section 124(6) of the Companies Act 2013 and the rulesthereunder.
11. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES
Particulars of contracts or arrangements with related parties referred to in Section188(1) of the Companies Act 2013 in the prescribed Form AOC-2 is appended as Annexure 1to the Board's report.
12. MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN THE END OFTHE FINANCIAL YEAR AND DATE OF REPORT.
During the Financial year 2017-18 the Company made huge investments in modernisationof its Softa Plant at Palwal (Haryana) to increase its milk processing capacity andenriching Research & Development works. However a few of the Consortium Member Banksthough assured did not release the enhanced working Capital facility. The FinancialPosition of the Company had been impacted for the said reason after March 2018 whichresulted in delay in fulfilling financial obligations of its Bankers and Financers.
Globally due to heavy crash in international price of SMP and AMF the Company's fullyowned Subsidiary at Dubai (UAE) could not perform well forcing Company to close itsbusiness operations in phased manner.
13. CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Board of Directors formulated the Corporate Social Responsibility (CSR) Policy foryour Company pursuant to the provisions of Section 135 of the Companies Act 2013 readwith the Companies (Corporate Social Responsibility Policy) Rules 2014 (including anystatutory modification(s) or re-enactment(s) thereof for the time being in force) on therecommendations of the CSR Committee. The CSR Policy outlines the CSR vision of yourCompany which is based on embedded tenets of trust fairness and care. The initiativesundertaken by your Company during the financial year 2017-18 in CSR have been detailed inthis Annual Report.
The Annual Report on CSR activities in accordance with the Companies (Corporate SocialResponsibility Policy) Rules 2014 is set out herewith as "Annexure " tothis Report.
14. CREDIT RATING
Brickwork Ratings were received with Rating Outlook downgraded from 'Positive' to'Negative' for Fund Based Long Term rating as "BWR BBB- (Credit watch with NegativeImplications)" for bank loan facilities for an amount of Rs 1463 crores Non FundBased Short Term rating as "BWR A3" for an amount of Rs 30 crores and assignedBWR BBB- (Credit watch with Negative Implications)
" for issue of Non-Convertible Debentures of Rs 94.45 crores.
15. AWARDS AND RECOGNITION
Our Managing Director Mr. Sanjay Dhingra has been ranked 34th amongthe"Top 100 CEO's of India" as published by the "Business Today"magazine in January 2018 edition.
During the year Mr. Sidhant Gupta Director has been awarded"25 of Delhi's MostInfluential Entrepreneurs of 2017" The award was institute by"EliteMagazine" & the ceremony was held on October 04 2017 at New Delhi.
Further Mr. Anand Ruhela IT head of the Company has won the"Big CIO Award"for innovative use of technology in FMCG Industry. Also the efforts of IT transformationand intiatives of Kwality Limited are being recognized by Enterprise IT World 'CIO200TechSummit' and 'ChangeAgents 2017'Awards which is an unprecedented milestone for the IndianIT industry where the award will recognize 200 of the top CIOs pan India.
Your Company has been conferred upon the prestigious"Iconic brand of the year(Dairy Products)" at a grand award ceremony held on 17th September 2017 in Mumbai.The recognition is primarily for the mega launch campaign which we did early this yearlaunch of the various value added products like UHT milk flavoured milk fortified withVitamin A & D based on the consumer/ market research that was conducted. This award isa consumer recognition of the efforts we as an organisation are putting on to become oneof the leading consumer Dairy Brands of India in accordance to our on-going BusinessTransformation strategy.
Your company has been ranked at the 8th Position in India in FMCG (sectorwise) & elevated to 185th position now as compared to 197thposition (during last year) in growth (revenue wise) all across in "Fortune IndiaMagazine" in December 2017 edition.
Further Mr. Pawan Kumar Sharma Vice President & HR Head has been conferred as 100HR Super Achievers. The event was organized by World HRD Congress on 16thFebruary 2018.
16. CASH FLOW STATEMENT
In conformity with the provisions of Regulation 34(2) (c) of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the Cash Flow Statement forthe year ended on March 312018 is attached as a part of the Financial Statement of theCompany.
17. MANAGEMENT DISCUSSION AND ANALYSIS
Management Discussion and Analysis forms an integral part of this report and givesdetails of the overall industry structure economic developments performance and state ofaffairs of the Company's businesses internal controls and their adequacy risk managementsystems and other material developments during the financial year 2017-18.
18. DIRECTORS AND KEY MANAGERIAL PERSONNELS (KMP):
The Companies Act 2013 introduced the new concept of Key Managerial Personnel (KMP)which includes the Managing Director Chief Executive Officer or Manager Whole TimeDirector Company Secretary and Chief Financial Officer. The Key Managerial Personnelwould guide the Board to achieve their defined objectives and purposes by adhering to goodCorporate Governance practices. KMP would also be looked upon by the Regulators for thenon-compliances.
The Key Managerial Persons of the Company as at March 312018 are:
During the financial year 2017-18 the Board of Directors at their meeting held onOctober 25 2017 had appointed Dr. Kuldeep Sharma (DIN: 07689428) as an AdditionalDirector and further as Whole Time Director of the Company subject to the approval ofmembers at the ensuing Annual General Meeting pursuant to Section 161196 197 203 andany other Provisions if any of the Companies Act 2013.
Ms. Swati Chaturvedi (DIN: 08187398) has been co-opted as Additional Director of theCompany w.e.f. 28th July 2018 to hold the office upto this Annual GeneralMeeting pursuant to Section 161 of the Companies Act 2013 and in respect of whom theCompany has received a notice in writing from member(s) under Section 160 of the CompaniesAct 2013 signifying their intension to propose her candidate for the office of a directorof the Company. The Board recommends the said resolution.
RETIREMENT BY ROTATION AND SUBSEQUENT RE-APPOINTMENTS
As at March 312018 the Board of your Company is constituted of Six Directorscomprising of Dr. Rattan Sagar Khanna Chairman and Non-Executive Independent DirectorMr. Sanjay Dhingra Managing Director Mr. Manjit Dahiya Whole Time Director Dr. KuldeepSharma Whole Time Director Mr. Sidhant Gupta Non-Executive Director and Ms. AnkitaMehrotra Non-Executive Independent Director.
Mr. Sanjay Dhingra Managing Director is liable to retire by rotation at the ensuingAGM pursuant to Section 152 and other applicable provisions if any of the CompaniesAct 2013 read with the Companies (Appointment and Qualification of Directors) Rules2014 (including any statutory modification(s) or re-enactment(s) thereof for the timebeing in force) the Articles of Association of the Company and being eligible has offeredhimself for re-appointment. Appropriate resolutions for his re-appointment are beingplaced for the approval of the shareholders of the Company at the ensuing AGM.
Due to some personal and unavoidable circumstances Dr. Satyendra Kumar Bhalla
Mr. Sidhant Gupta and Ms. Ankita Mehrotra had tendered their resignation from theposition of Whole Time Director Non-Executive Director and Women Independent Director ofthe Company w.e.f October 25 2017 July 112018 and July 28 July 2018 respectively.
19. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 134(3) (c) of the Companies Act 2013 withrespect to Director Responsibility statement and based on the representation receivedfrom operating management the Directors hereby confirm that:
a) in the preparation of the annual accounts for the period ended on March 312018 theapplicable accounting standards have been followed and there are no material departuresfrom the same;
b) the directors have 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 at the end of the financial year March312018 and the profit and loss of the Company for the financial year ended March 312018;
c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;
d) the directors had prepared the annual accounts for the period ended on March 312018as on going concern basis;
e) the directors have laid down internal financial controls which are adequate and areoperating effectively; and
f) The directors had devised proper systems to ensure compliance with provisions of allapplicable laws and that such systems were adequate and operating effectively.
Your company has not raised any public deposit during the period under review.Therefore there was no public deposit outstanding as at the beginning or at the end ofthe period.
21. INTERNAL FINANCIAL CONTROL SYSTEM
The Company has adopted the policies and procedures for ensuring the orderly andefficient conduct of its business including adherence to Company's policies thesafeguarding 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.
Internal Control System has designed to provide reasonable assurance with regard torecording and providing reliable financial and operational information complying withapplicable Accounting Standards. The internal financial controls with reference to thefinancial statements were adequate and operating effectively.
22. RISK MANAGEMENT
The Company has well defined process in place to ensure appropriate identification andtreatment of risks. The identification of risk is done at strategic business operationaland process levels. All significant risks are well integrated with the functional andbusiness plans and are reviewed on a regular basis.
Further details form part of Corporate Governance Report.
M/s MSKA & Associates Chartered Accountants (Firm Registration Number: 105047W)were appointed as Statutory Auditors of the company at the Annual General Meeting held onSeptember 29 2017 to hold office till the conclusion of Annual General Meeting to be heldin the year 2022. In terms of the first proviso to Section 139 of the Companies Act 2013the appointment of the auditors shall be placed for the ratification at every AnnualGeneral Meeting. Accordingly the appointment of M/s MSKA & Associates CharteredAccountants is placed at the AGM for ratification by the shareholders. In this regard theCompany has received a certificate from the auditors to the effect that if they arereappointed it would be in accordance with the provisions of Section 141 of the CompaniesAct 2013.
The Auditors' Report for the financial year ended March 312018 on the financialstatements of the Company is a part of this Annual Report. The Auditor's Report for thefinancial year ended March 312018 does not contain any qualification reservation oradverse remark.
The Board of Directors of the Company on the recommendations made by the AuditCommittee at their meeting held on May 28 2018 has approved the appointment of M/s. M KJha & Co. Cost Accountants (Firm Registration No. 101333) as the Cost Auditor of theCompany to conduct the audit of cost records for the financial year 2017-18. Theremuneration proposed to be paid to the Cost Auditor subject to ratification by theshareholders of the Company at the ensuing 26th AGM would not exceed 1 lakh(Rupees One lakh only) excluding taxes and out of pocket expenses if any.
The Company has received consent from M/s. MK Jha & Co. Cost Accountants to actas the Cost Auditor for conducting audit of the cost records for the financial year2017-18 along with a certificate confirming their independence and arm's lengthrelationship.
M/s. Mukun Vivek & Company Company Secretaries were appointed to conduct thesecretarial audit of the Company for the financial year 2017-18 as required under Section204 of the Companies Act 2013 and Rules made thereunder. The secretarial audit report forFY 2017-18 forms part of the Annual Report as Annexure 3 to the Board's Report.
24. EXTRACT OF ANNUAL RETURN
In accordance with Section 134(3)(a)of the Companies (Amendment) Act 2017 the copy ofannual return in the prescribed form has been placed at our website www.kwality.com .
25. SECRETARIAL STANDARDS OF ICSI
Your Company complies with the Secretarial Standards specified by the Institute ofCompany Secretaries of India on Meetings of the Board of Directors (SS-1) and GeneralMeetings (SS-2) and notified by Ministry of Corporate Affairs.
The equity shares of the Company continue to be listed on the BSE Limited (BSE) andNational Stock Exchange of India Limited (NSE). The annual listing fees for the currentyear have been paid to the BSE Limited (BSE) and National Stock Exchange of I ndia Limited(NSE).
27. PARTICULARS OF REMUNERATION OF DIRECTORS KMPs AND 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 appendedas Annexure 4 to the Board's Report.
Details of employees employed for the whole year and are in receipt of remuneration ofRs. 10200000/- or more or if employed for the part of the year and in receipt of Rs.850000/- or more a month under rule 5(2) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014.
28. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION
The Remuneration Compensation and Nomination Committee has framed a policy forselection and appointment of Directors including determining qualifications andindependence of a Director Key Managerial Personnel Senior Management Personnel andtheir remuneration and other matters provided under Section 178(3) of the Companies Act2013 and Regulation 19 of the Listing Regulation (including any statutory modification(s)or re-enactment(s) thereof for the time being in force) and appended as Annexure 5 of theBoard's Report.
The Nomination and Remuneration Policy can be accessed on the website of the Company(www.kwality.com ).
29 DECLARATION BY INDEPENDENT DIRECTORS
The Company has received necessary declaration from each independent director underSection 149(7) of the Companies Act 2013 that he/she meets the criteria of independencelaid down in Section 149(6) of the Companies Act 2013 and Regulation 25 of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.
30. PERFORMANCE EVALUTION OF THE BOARD
Pursuant to applicable provisions of the Companies Act 2013 and the ListingRegulations the Board in consultation with its Remuneration Compensation and NominationCommittee has formulated a framework containing inter-alia the criteria for performanceevaluation of the entire Board of the Company its Committees and individual Directorsincluding Independent Directors.
The Directors carried out the annual performance evaluation of the Board Committees ofBoard and individual Directors along with assessing the quality quantity and timelinessof flow of information between the Company management and the Board that is necessary forthe Board to effectively and reasonably perform their duties. The details of evaluationprocess of the Board its Committees and individual Directors including IndependentDirectors have been provided under the Corporate Governance Report which forms part ofthis Report.
31. NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS
During the Financial Year 2017-18 the Board met Six times. The dates of the meetingsare as under:
32. "KWALITY EMPLOYEE STOCK OPTION PLAN 2014" ("ESOP 2014")
The details of the grants allotted under KWALITY EMPLOYEE STOCK OPTION PLAN 2014"
("ESOP 2014") and also the disclosures in compliance with SEBI (Share BasedEmployee Benefits) Regulations 2014 and Section 62 (1) (b) read with Rule 12(9) of theCompanies (Share Capital & Debentures) Rules 2014 is as follow:
Note 1- Employee wise details of options granted during the year:-
I. Senior Managerial Personnel
II. Any other employee who receives a grant of options in any one year of optionamounting to five percent or more of options granted during the year
III. Identified employees who were granted option during any one year equal to orexceeding one percent of the issued capital (exceeding outstanding warrants andconversions) of the company at the time of grant: None
33. ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Information required under Section 134(3)(m) of the Companies Act 2013 read with theRule 8 of the Companies (Accounts) Rules 2014 is set out in an Annexure 6 to this report.
34. CORPORATE GOVERNANCE
A separate section on Corporate Governance and a certificate from the statutoryauditors of the Company regarding compliance with the conditions of Corporate Governanceas stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 forms part of this Annual Report.
35. POLICY TO PREVENT SEXUAL HARASSMENT AT WORK PLACE
As required under the provisions of Sexual Harassment of Women at Workplace(Prevention
Prohibition and Redressal) Act 2013 the Company has constituted a Sexual HarassmentPolicy.
We follow a gender neutral approach in handling complaints of sexual harassment. Allemployees are of equal value with no discrimination between individuals at any point onthe basis of race colour gender religion political opinion national extractionsocial origin sexual orientation or age. The Company is committed to providing a safe andconducive work environment to all its employees and associates. No complaints werereceived by the Company during the year under review.
36. GREEN INITIATIVES
Electronic copies of the Annual Report 2017-18 and the Notice of the 26thAnnual General Meeting are sent to all the members whose email addresses are registeredwith the Company/ depository participant(s). For members who have not registered theiremail addresses physical copies are sent in the permitted mode.
The Board conveys its appreciation for its customers shareholders suppliers as wellas vendors bankers business associates regulatory and government authorities for theircontinued support cooperation and encouragement. Your Directors also wish to place onrecord their sincere thanks and gratitude for the contribution made by our employees atall levels and in ensuring an excellent all around operational performance.