Your Directors are pleased to present their report and financial statements for theyear ended 31st December 2019.
| || |
(Rs. in Million)
|Particulars ||2019 ||2018 |
|Sale of products ||122952.7 ||112162.3 |
|Add : Other operating revenues ||736.3 ||760.4 |
|Add : Other Income ||2468.8 ||2589.2 |
|Total Income ||126157.8 ||115511.9 |
|Less : Total Expense ||99407.9 ||91222.4 |
|Profit before tax ||26749.9 ||24289.5 |
|Less: Tax expense ||7054.4 ||8220.2 |
|Profit after tax ||19695.5 ||16069.3 |
|Add : Other Comprehensive Income ||(1547.7) ||(404.1) |
|Total Comprehensive Income ||18147.8 ||15665.2 |
|Opening balance in Retained Earnings ||27688.1 ||25054.5 |
|Amount available for appropriation ||45870.2 ||40821.8 |
|Interim dividends || || |
|2019: Rs. 101.00 per share ||9738.0 || |
|2018: Rs.90.00 per share || ||8677.4 |
|Special interim dividend paid out of accumulated profits of previous years (surplus in the profit & loss account) || || |
|2019: Rs. 180.00 per share ||17354.8 || |
|2018: Nil || || |
|Final dividends || || |
|2018: Rs. 25.00 per share ||2410.4 || |
|2017: Rs. 23.00 per share || ||2217.6 |
|Less: Dividend distribution tax ||6059.4 ||2238.7 |
|Closing balance in Retained Earnings ||10307.6 ||27688.1 |
|Key ratios: || || |
|Earnings per share (Rs.) ||204.28 ||166.67 |
|Dividend per share (Rs.) || || |
|Interim ||281.0* ||90.0 |
|Proposed - Final ||61.0 ||25.0 |
|Additional Information: || || |
|Profit from operations ||25862.5 ||23508.6 |
* includes special interim dividend of Rs. 180/- per equity share of Rs. 10/- each paidout of accumulated profits of previous years (surplus in the profit & loss account)
Total Sales and Domestic Sales for the year increased by 9.6% and 10.9% respectively.Domestic Sales growth is broad based largely driven by volume and product mix.
Other Income has decreased due to lower average liquidities post payment of specialinterim dividend on 23rd August 2019.
Tax Expense (including revaluation of deferred tax assets & liabilities) from 1stApril 2019 to 31st December 2019 has been computed at the rates introduced bythe Taxation Laws (Amendment) Ordinance 2019 dated 20th September 2019.Accordingly Net Profit after Tax and Earnings per share for the year have been positivelyinfluenced by the lower tax rates.
Your Company has created a contingency provision of Rs. 1163.4 million (Previous yearRs. 1242.5 million) for various contingencies resulting mainly from matters which areunder litigation/related disputes and other uncertainties requiring management judgement.Your Company has also reversed utilised/settled contingency provision of Rs. 914.6million (Previous year Rs. 205.6 million) due to the satisfactory settlement of certainlitigations and settlement of obligations under free replacement warranty for whichprovision is no longer required.
The Board of Directors have recommended a final dividend of Rs. 61.00 per equity shareamounting to Rs. 5881.4 million for the year 2019. The total dividend for 2019 aggregatesto Rs. 342.00 per equity share which includes first interim dividend of Rs. 23.00 perequity share paid on 15th May 2019; second interim dividend of Rs. 23.00 perequity share for 2019 out of current year profits and a special interim dividend of Rs.180/- per equity share out of accumulated profits of previous years (surplus in the profit& loss account) both paid together on 23rd August 2019; and the thirdinterim dividend Rs. 55.00 per equity share paid on 20th December 2019.
The dividend recommendation is in accordance with the Dividend Distribution Policy ofthe Company which is annexed and forms part of the Annual Report and the same is availableon the Company's website and can be accessed at https://www.nestle.in
Material changes affecting the Company
There have been no material changes and commitments affecting the financial position ofthe Company between the end of the financial year and date of this report. There has beenno change in the nature of business of the Company.
Amount Transfer to Reserves
Your Directors do not propose to transfer any amount to the reserves.
In 2019 the exports of your Company to South Asia (Nepal Bhutan Bangladesh and SriLanka) registered a double-digit growth primarily driven by categories such as MilkProducts Instant Coffee Instant Noodles and Infant Nutrition. Your Company's brandcontinued to have a high level of trust. United Kingdom registered high double-digitgrowth. Total exports however de-grew by 9.9% as a result of lower coffee exports toTurkey in 2019. The balance portfolio continued to grow because of a well-diversified mixof export markets. With the focus on range extension and channel proliferation brandMAGGI continued to grow amongst the Indian diaspora. United States and Canada remained thebiggest destination for culinary exports. Your Company is striving to enhance distributionin key markets and explore new territories. The Instant Tea exports registered anotheryear of credible growth on the back of strong demand for its premium grades in the marketsof East Asia. Your Company's endeavor in exploring new markets has delivered good resultsin the confectionery category with exports to Malaysia and Thailand in 2019.
Contribution to the Exchequer
Your Company over the years has been enabling significant contribution to varioustaxes. During the year 2019 the Company through its business enabled tax collections atCentral and State level close to Rs. 35.8 billion in aggregate.
In 2019 your Company steadfastly continued its nutrition health and wellness journeythrough strong volume and mix-led growth and strengthened its commitment towards asustainable future through its brands its factories its employees and its partners bytaking collective action.
Your Company stayed in its path of growth by investing in cutting-edge science andinnovation and taking decisive steps towards renovation. It has attractive productportfolio and in 2019 your Company launched several new products. By driving greateragility and rapidly adapting to the changing preferences of consumers your Companybrought meaningful differentiation by improving taste convenience and nutritionalqualities of its products that saw an increase in consumer trust.
This commitment for innovation was also seen in the way your Company does business.Through the cluster-based approach that is powered by data and technology your Companymade deeper penetration into newer markets unleashed growth potential and created atransparent planning process. This has led to an increased engagement with the consumers.In 2019 your Company was leading with strong market shares in 7 out of the 8 categories.Your Company continued to strengthen its business focus through Nestle BusinessExcellence by simplifying processes that reduces administrative cost by increasing thepenetration of its shared services.
Your Company further leveraged e-commerce through targeted communication rangeselling consumer base sampling which led to a growing contribution of e-commerce todomestic sales.
In 2019 your Company has continued to focus on its traditional trade and modern tradeto further strengthen its strategic priorities and build a more agile network of productdelivery to its consumers.
Improving the nutritional profile of products is at the very heart of your Company'sbusiness and is linked to United Nations Sustainable Development Goal 3. In line with its'Purpose' your Company continued to work towards reducing sodium sugars and saturatedfats and adding healthful ingredients like whole grain vegetables and micro-nutrients toits foods and beverages making them more nutritious. The total micro-nutrient fortifiedservings sold in 2019 in India is equivalent to 6.7 billion serves across several productlines.
Your Company launched asknestle.in a website that provides real-time andpersonalized advice on nutrition that can be customized for the audience. It aims to makenutrition education more accessible so that parents can inculcate better food practicesand make informed decisions about food choices and nutrition. With AskNestle parents canaccess a 'Growth Tracker' that enables them to track how their children are growing. Theservice also offers 'Custom Meal Plans' personalized for regional preferences andgenerates a daily nutrition score.
As a recognized leader in sustainability your Company has taken several steps towardsprotecting the environment and addressing climate change. By driving new behavior andexpanding waste management programs specifically in the hill states of India yourCompany played an instrumental role in shaping a waste free future. In 2019 MAGGInoodles NESCAFE and KITKAT became plastic neutral by managing an equivalent or higheramount of plastic waste than that generated through the consumption of the brands.Committed to manage resources sustainably; your Company reduced its energy use by 49%carbon emissions by 58% water use by 54% and water waste by 59% from 2004 to 2019. YourCompany continued to contribute to local communities and build enduring relationships withabout 4600 suppliers 1700 distributors 100000 dairy farmers 3500 coffee farmers andover 1200 spice farmers.
With traceability food safety and sustainability at its core and staying true to itsPurpose and Values your Company reinforced its commitment to the consumer community andthe planet by creating value for all its stakeholders and establishing that businessbenefits and societal impact are mutually inclusive. Your Company by incorporatingsustainability into every aspect of its business has reaffirmed its commitment asbusiness as a force for good.
Innovating and Renovating Prepared Dishes and Cooking Aids
The 'Prepared Dishes and Cooking Aids' business continued its strong performancesacross MAGGI range of products. MAGGI Noodles in the instant noodles category furtherstrengthened its leadership position in 2019 through a strong double-digit volume growth.A disciplined regional intervention consisting of media on-ground activation led topenetration growth and distribution ramp-up. MAGGI Noodles continued its focus oninnovating and renovating its portfolio with the launch of MAGGI Nutrilicious Atta Noodlesmade with a blend of 20 spices and herbs.
Your Company also launched MAGGI Fusian Noodles a range of Asian flavours inspiredMAGGI Noodles available in flavours such as Bangkok Sweet Chilli Hong Kong Spicy GarlicSingaporean Tangy Pepper.
MAGGI expanded its offering in the ready-to-eat segment with the launch of MAGGI Upnnaand MAGGI Poha providing convenience and taste to its consumers especially millennials.
The cooking aids received encouraging consumer response for MAGGI Masala-ae-MagicSeasonings with integrated media campaign where consumers were encouraged to engage withthe brand and experience the product. The simple natural ingredients inspire theconsumers to cook delicious balanced meals. Reflecting your Company's core purpose theproduct helps provide affordable nutrition for the whole family. Your Company's Saucesbusiness too expanded its portfolio to cater to the increasing level of experimentation inaccompaniment through the launch of Chilli Garlic Sauce under MAGGI Fusian range.
MAGGI also launched a website maggi.in that positioned the brand as an 'ally ineveryday cooking' under the platform MAGGI Consumer Connections engaging closely with thebrand and delivering on variety convenience and balance to the food.
Building Breakfast Cereals
Your Company's breakfast H9RH cereals business under the NESPLUS brand retailed a rangeof nutritious options to the Indian consumer. Each of these products are made with fourgrains: wheat rice oats and the traditional Indian millet jowar.
The variants include - Koko Choco - Burst Fillows Strawberry-Burst Fillows and NuttyHoney Granola as well as cereal bars. The products grew in modern trade and e-commercesaw tremendous on-ground activation with plans underway for innovation renovation andnew launches.
Strengthening of Milk Products and Nutrition Portfolio
The Milk Products and Nutrition business focuses on nurturing a healthier generationenabling a healthier future through scientific and nutritional expertise for individualsand families at all stages of life.
The Milk Product and Nutrition business delivered strong results despite externalchallenges linked to commodity price inflation. Your Company was able to mitigate some ofthese challenges amongst others by a relentless focus on identifying efficiencies acrossthe value chain passing on price increases where necessary as well as innovation in theportfolio.
Your Company expanded its presence in the Health Food Drinks category by bringing toIndia the world's number 1 cocoa malt beverage MILO. Launched in powder form in selectmarkets MILO has gained positive response from consumers and retailers. Your Company alsointroduced Nestle a+ Banglar Mishti Doi inspired by the regional delicacy of West Bengal.
Your Company continued to inspire enthusiasts to try their hand at baking desserts byoffering recipe options with their trusted.
In its Healthcare Nutrition Business marketed under the umbrella of Nestle HealthScience your Company consolidated its portfolio and delivered growth. This growth wasdriven by brand RESOURCE High Protein and RESOURCE Diabetic. Specialised nutrition brandPEPTAMEN in the critical care segment also enabled an increase in market share. YourCompany also made an entry in Weight Management Category with the launch of OPTIFAST afirst of its kind scientifically designed meal replacement diet for people with weightconcerns. This is an example of benefits from the continuous access to amongst otherthings research and development.
Your Company believes breast milk provides the best nutrition for babies and everychild should be exclusively breastfed for six months followed by introduction of ageappropriate complementary feeding and breast milk until two years and beyond.
In the Infant Formula category your Company re-launched LACTOGEN 1 with L. reuteri(probiotics). In the specialized formula segment Pre-NAN was relaunched with DHA(Docosahexaenoic Acid) and ARA (Arachidonic Acid) and for the first time manufactured inthe Samalkha manufacturing factory of the Company.
In the Baby Foods Category and in keeping with our line with the consumer trendtowards traditional millets becoming the modern super grains your Company has launchedthe first ever 'Ragi' variant under the brand CERELAC. In line with the growing Organicfood trend your Company launched a range of Organic Cereals under the CERELAC and CEREGROWbrands. Since two years your Company has been providing support to farms where organicpractices are in place. The products are made from 100 percent organic ingredients andhave the 'India Organic' and 'Jaivik Bharat' certification. The CEREGROW Branded organiccereals launch was supported with communication positioned on 'CEREGROW ka Poshan Organicki Tasalli'.
Growing Coffee and Beverages Portfolio
Year 2019 was an exciting year for the Coffee and Beverages business as your Companycontinued to focus on growing Coffee and Beverages market.
NESCAFE led the journey of bringing in new consumers into coffee category throughseveral initiatives and activations. This resulted in robust brand growth through the yearthat was reflected in strong gains in category household penetration for NESCAFE and inits market share. NESCAFE Classic continued its journey of building strong connectionswith consumers. The campaign "Badal Life ki Raftaar" was leveraged to continuebuilding relevance for coffee amongst the youth. On-ground activations such as samplingand college festivals enabled the brand to connect with youth in a relevant andexperiential manner.
NESCAFE SUNRISE moved ahead in its journey of driving a differentiated brand in thecore coffee market in the southern part of India.
Ml NESCAFE continued its premiumisation journey with ESCAFE Gold and NESCAFE E asmartphone-connected Tj M coffee-making mug which is compatible with products from theNESCAFE portfolio by reaching out to consumers seeking premium products across thecountry through stores as well as e-commerce.
To provide a delightful cafe-like coffee experience your Company renovated NESCAFECappuccino range with an indulgent frothy recipe and a premium look.
NESCAFE also launched several packs to leverage the e-commerce channel. These packsincluded trendy merchandise like NESCAFE branded portable travel flask foamer the iconicred mug a special cold coffee mason jar to elevate the coffee experience of the consumersand build relevance for coffee. The brand entered new spaces of gifting during thefestival of Rakshabandhan with the "NESCAFE Coolest Cold Coffee Kit" and duringDiwali with the "NESCAFE Ultimate Coffee Kit" and the "NESCAFE Gold CoffeeConnoisseur's Kit".
The strong consumer acceptance and category transformation impact of NESCAFEReady-to-Drink cold coffee and milk beverage was recognised when it was awarded theBreakthrough Innovations Awards for India in the Emerging Play category by Nielsen aglobal retail measurement and data analytics company.
Further building on brand NESTEA your Company launched NESTEA Ready-to-Drink Iced Teain tetra-pack format in Peach and Lemon flavours.
More offerings in the Chocolate and Confectionery Portfolio
The Chocolates and Confectionery business delivered double digit growth and marketshare gains in 2019. This was aided by a combination of rapid acceleration on the premiumsegment and Hr continued momentum in the core mainstream segment with increase
The focus on innovation continued HEal with multiple 'category first' launches acrosskey brands. KITKAT accelerated its premiumisation journey with the launch of the mostindulgent variant KITKAT DESSERT DELIGHT Rich chocolate fudge. This will enable the brandto tap new opportunities in the gifting and sharing space.
By leveraging your Company's access to global research and r developmentMUNCH set another innovation benchmark in the coated wafer category with the launch ofMUNCH CRISP-POP. MUNCH CRISP-POP combines the exciting taste of caramel popcorn with thecrunch of MUNCH. MILKYBAR MOOSHA Cocoa Crispies builds on to the familiar creamy taste ofMILKYBAR with added crispy cocoa crispies giving a unique combination of creamy andcrispy.
Your Company continued its focus on portionability with packs/formats that helpedconsumers make informed choices. Most of the products per serve provide approximatelyunder 100kcal of energy. The 'light treat' wafer segment witnessed fastest growth in theportfolio.
With continued investments in visi-coolers and distribution infrastructure yourCompany increased its distribution reach in both urban and rural markets improving accessof its brands to consumers.
Nestle Professional -Out-of-Home business continued to grow steadily in 2019 with anear double digit growth. This growth was driven by improved performance of productsacross key Out of Home channels such as educational institutes airlines offices as wellas the food service channels such as hotels and restaurants.
Significant steps were taken by the beverages business to premiumise the portfoliothrough the launch of advanced and versatile beverage solutions offering widest range ofbeverage menu in the industry based on NESCAFE GOLD. The launch of new NESCAFE Officecorner with premium hot and cold beverages at affordable prices was recognized as aunique proposition in the industry.
Your Company's 'Out of Home' business extended its foods portfolio by launching newproducts in the 'Ready to eat' and 'Food Solutions' segment. With the launch of MAGGI Pohaand MAGGI Upma in an
'on the go' format your Company added Indian snacking options for the consumerstargeting the transport and education channel.
New products like MAGGI Liquid Seasoning and MAGGI PROFESSIONAL Thai Curry Pastes (100%Vegetarian Red & Green Curry Pastes) were also launched as food solutions tostrengthen presence in the Pan-Asian Restaurant segment. Your Company also engaged with200+ budding chefs from various reputed hotel management institutions through events likeYoung Culinary Talent Chef Master Classes and culinary contests. Your Companystrengthened engagement with 3000+ key opinion leaders. Your Company under the umbrella ofONE (One Nestle Experience) made a new beginning with the setting up of NESCAFE &MAGGI kiosks in various channels. Your Company through a franchise business modeloperates in approximately 476 Kiosks that are visited by over 14.4 million consumers everyyear.
To address the issue of plastic waste your Company has introduced wooden forks kotkapaper cups and paper bowls at the kiosks.
Awards and Recognitions
Your Company received awards at various industry platforms in the area of corporatemanagement marketing advertising digital engagement packaging human resourcedevelopment and corporate social responsibility. Some awards are listed below:
Mr. Suresh Narayanan recognized as the Best CEO in the FMCG category by BusinessToday.
Nestle India won "Best Overall Excellence in CSR" at the National CSRLeadership Awards 2019.
Three awards won at Nielsen Breakthrough Innovation Awards for NESCAFEReady-to-Drink (Emerging Play) MAGGI Masalas of India and KIT KAT Strawberry Duo (bothShort Term Play).
NESCAFE bagged Effie silver for its campaign 'Badal Life Ki Raftar'.
'AskNestle/NINA' won Gold for Most Innovative Mobile Campaign of the year atMOBEXX Awards 2019.
RESOURCE High Protein won The Global Emerald Award from the Nestle HealthScience Global Recognition Program.
Nestle Health Science won Nutrition and
Wellness Awards 2019 by CIMS Medical
MAGGI won at the 3rd edition of The Advertising Club's MARQUEESAwards 2019 in the FMCG (Foods) category.
Nestle India Supply Chain won Leadership Awards 2019 during 13th ELSCLeadership Conclave in the category of "Customer Intimacy & ServiceExcellence" Company of the Year.
NESCAFE E won Gold at The Great Lifestyle Brands Awards.
Pantnagar Factory Ponda Factory and NQAC Lab in the Moga Factory of the Companywere awarded by Confederation of Indian Industries for Excellence in Food Safety and FoodTesting.
Moga Factory of the Company was awarded The Golden Peacock National QualityAwards held at Dubai (UAE).
Moga Factory of the Company received "Golden Peacock Occupational Health& Safety Award" for the year 2019.
Samalkha Factory of the Company won the first prize in the 6th CIISafety competition 2019 for the Northern region.
Ponda Factory of the Company won the "Gomant Suraksha Puraskar" Award.
Tahliwal Factory of the Company won Gold Award in the 6th NationalAwards for Manufacturing Competitiveness.
In order to build a sustainable profitable business your Company invested inprogrammes equipped to adopt new skills that can adapt to the fast-changing market place.
Your Company also took significant steps in the area of diversity and inclusivity.
Your Company was recognized as one of the top three FMCG Companies in business schools.Your Company also launched 'SustaiNE' a first of its kind innovation challenge toencourage ideas on sustainable packaging solutions for a better tomorrow.
In 2019 your Company made successful lateral hires and strengthened its position as an'Equal Opportunity Employer'. Your Company also saw a strong representation of women bothas managers and in the field force.
In 2019 Women force constituted 22% of the total field force 78% of the managementtrainees 54% of the technical trainees 75% of the sales trainees.
In keeping with its commitment to diversity and inclusivity your Company organized'Unconscious Bias' programs for employees created provision of sanitary pad dispenser anddisposal units in all factories and sales offices and organised sessions on menstrualhealth in factories. Your Company enhanced travel benefits for mothers and institutedcreche reimbursement policy all of which contributed towards the creation of an inclusiveenvironment that led to an increase in representation of women employees.
Your Company has strengthened its urban distribution and services to channel partnersfor all its brands and SKUs. To drive visibility and efficiency your Company focused onhigh quality channel-level service requirements and ensured market coverage to meet theneeds of retailers and partners. In house subject matter experts were trained with globalexpertise to strengthen the field sales force. Festivals provided business opportunitiesto engage directly with shoppers and consumers through activation at stores.
The Indian rural market created opportunities for robust route to market model. Theproject 'Unlocking rural market' helped in building rural footprint by reaching thecustomers directly the usage of various point of sale material improved the visibility atretail outlets. Participation in local Haat activities helped in engaging rural consumersthrough customized plans. The urban and rural push on direct distribution enabled yourCompany in its promise of continuous excellence.
E-Commerce channels were leveraged for high impact product launches category buildingfor premium brands through targeted media and communications.
Your Company promised the customer product freshness on the shelves by ensuring qualityin value chain. The entire route to market from distribution center to distributorwarehouse to retailer shelf was monitored and quality in service was improved.
Your Company used technology for efficient and effective operations. It helped inbuilding the sales enablers like productivity SKU per call. The geo tagging of retailerand geo compact salesman market coverage plan helped reducing the waste in route tomarket.
Review of economic scenario and outlook
India has gained substantially in the World Bank's Ease of Doing Business rankings bymoving up from the 142nd position in 2014 to the 63rd position in2019 thereby progressing on seven out of the ten parameter. This is despite the fact thatin 2019 private consumption private investments and exports slowed down. Rural wagestightening of lending conditions and rising unemployment contributed to low demand forgoods and services. Exports also remained volatile as a result of global uncertaintiesaround trade and investments and geopolitical issues. Credit to micro small and mediumenterprises was affected. Uncertainty on employment impacted consumer investor andcorporate confidence.
The fall in domestic demand and low international crude oil kept the current accountdeficit under control and FDI picked up for a few quarters as India remained an attractiveinvestment destination.
In response to the slowdown the Government made policy announcements to boost supplyand demand and the investment climate.
Additionally the Reserve Bank of India cut its benchmark rates by 0.85% to stimulateprivate investment. The government reduced corporate tax rates. Steps were taken towardsbank consolidation to add robustness to the banking system and improve flow of credit toprivate sector.
These included liberalization of FDI norms for select sectors rollback of surcharge onforeign portfolio investors incentives to support several industries bank consolidationto increase capital inflows and reinvigorate private investments and hiring for boostingthe economy.
Opportunities and Risks
With multiple product offerings and brands your Company operates in a dynamicenvironment where the food and beverages industry is transforming rapidly.
With the consumer at the core it is your Company's effort to meet the changingpreferences of the diverse consumers. There is greater demand for healthier products thatare locally inspired. The emerging millennial consumer is not only technology savvy butis more discerning especially with respect to health and wellness. Our endeavor is tospot trends market products suiting consumer needs and to communicate with them regularlythrough a media platform of their choice. Your Company has been actively introducing newproducts with a focused social media and digital marketing approach. The Company's accessto global research and development and expertise is invaluable in these endeavors.
With increasing internet penetration and tech savvy consumer embedding technology inthe organizational processes is important. With sales automation and specialised digitalacceleration your Company has taken significant steps to provide solutions for itsdiverse consumer base. "AskNestle" is one such app-based initiative for childnutrition needs.
Your Company is impacted by the constant fluctuations in commodity and fuel prices. Itis your Company's endeavor to source the right material that is of high quality andconstantly keep track of emerging costs to take corrective action at the right time.
Economic slowdown impacts consumer demand. However your Company has managed to showsteady growth by deploying strategies suited for the times thus bucking the trend.
Building brand community through innovative marketing strategies are adopted to reachconsumers who also have similar social and cultural preferences. Changing consumerbehavior poses a constant challenge and proactive steps are being taken to maintain brandloyalty and market share. Your Company has strong focus on consumer safety and health andhas robust supply chain management to ensure proper handing storage and transportationensuring traceability along the chain as well as ensuring the freshest stocks reach theconsumer in the best conditions.
The technological advancement and IOT (Internet of things) has changed the supply chainprocess completely in today's world. This is a boon for the FMCG space since it helps toprevent situations wherein stocks at retailer are exhausting or a new product needs to bemade available immediately. Your Company ensures process optimization at its coreoperations improving growth prospects removing bottlenecks and ultimately enhancingbottom line of the Company.
Your Company takes climate change and environmental protection seriously. As mentionedin other sections of the Board's Report your Company has undertaken considerable work onconserving resources like energy water and ensured minimized impact on the environment.With depleting natural resources due to increased consumption safeguarding theenvironment is necessary. Climate change is one of the biggest threats we face as asociety and is also one of the greatest risks to the future of business. To address thisissue your Company is transforming its business to reduce Green House Gases emissionsend deforestation reduce food loss and waste and improve soil health. Your Company iscontinuously reducing waste and emissions while simultaneously optimizing on theproduction measures.
Your Company also maintains a BCP (Business Continuity Planning) process to prevent andto recover from any future potential threat or disaster to ensure smooth functioning ofthe business. Proper drills and advance planning is undertaken with inputs from all thekey stakeholders associated with it.
Quality and Safety
Quality and Food Safety are highest priority for your Company. The health of consumersis of paramount importance. To ensure this your Company has systems and processes inplace that ensures all products undergo stringent quality checks. In line with zero defectmindset during 2019 a special focus was given towards upstream raw material vendors forproducts such as wheat flour tomato and chilly paste and sugar as well as at yourCompany's factories ensuring right quality and compliant product.
Your Company developed a comprehensive and systematic programme on machinery safety forthe benefit of the employees to prevent any untoward incident. All the offices andfactories of your Company are certified under Safety and Health Management System thatcomplies with ISO 45001:2018 & Environment Management System that complies with ISO14001:2015.
Your Company has also taken considerable measures to promote road safety by conductingawareness campaigns for the employees as well as third party transport service drivers.Taking a holistic approach towards employee wellness your Company introduced severalhealth initiatives for its employees such as early screening and programs that supporthealthier lifestyle choices and also provide health risk assessment.
The aim of your Company is to develop business while improving its environmentalperformance in order to create a more sustainable future. In order to achieve this yourCompany continues to focus on measures for the conservation and optimal utilization ofenergy in all the areas of its operations. Factories are encouraged to consistentlyimprove operational efficiencies minimize consumption of natural resources and reducewater usage energy usage and carbon emissions while maximizing production volumes. Fromthe period 2004-2019 for every tonne of production your Company has reduced the usageof energy by around 49% reduced water usage by around 54% reduced greenhouse gasesgeneration by around 58% and the generation of waste water by around 59%.
Waste for Disposal: Your Company is continuously working towards reduction in wastefor disposal.In 2019 two more factories converted to zero waste to landfill. Now alleight factories have proudly achieved the coveted status of "zero waste tolandfill."
Reduction in Green House Gases emissions:
The Nanjangud Factory in the State of Karnataka has entered into long term powerpurchase agreements with two solar power developers to supply 24.7 Mio KWH (units) perannum which is 71% of the total energy requirement. This initiative has reduced GreenHouse Gases emissions by 22500 tonnes per annum in 2019 and also saved costs.
Packaging and Plastic waste management:
Plastics play a key role in preventing food wastage teifci and ensuring the quality andsafety of food products.
However the leakage of plastic waste into the environment has become a significantenvironment !* jM challenge. Your Company is tvlmr m strongly committed tominimizing the impact that plastic has on the environment and ensuring right disposal orreuse of packaging. Your Company is determined to look at every option to solve complexpackaging challenges by embracing multiple solutions. The vision of your Company is thatnone of its product packaging including plastics should end up in landfill or as litterand that 100% of packaging is reusable or recyclable by 2025.
Collaboration and collective action are key for transforming how packaging is managedtoday. Recognizing this your Company is working with various stakeholders and partners toshape a waste-free future. Your Company is one of the founder members of the IndustryConsortium WECARE (Waste Efficient Collection and Recycling Efforts) that is representedby environmentally conscious businesses. Your Company has also fulfilled its ExtendedProducers Responsibility (EPR) towards responsibly managing the post-consumer plasticwaste generated by the products. In 2019 your Company extended its EPR projects to 20states and union territories such as Goa Gujarat Madhya Pradesh Rajasthan Tamil NaduUttar Pradesh Uttarakhand West Bengal Maharashtra Andhra Pradesh Delhi KeralaOrissa Assam Bihar Haryana Himachal Pradesh Jammu & Kashmir Karnataka andPunjab. It responsibly managed 15979 MT of post-consumer plastic waste for its end oflife.
Your Company launched 'Plastic Express' a mobile van that collects dry plastic wastefrom 'MAGGI Points' in Mussoorie and dry waste for its end of life. The year-long projectaims at engaging around 200 'MAGGI Points' in the hill town for collecting and disposingplastic waste responsibly.
In order to bring about a behavioural change to dispose plastic waste responsibly yourCompany introduced an integrated communications campaign titled '2 Minute Safaai Ke Naam'(2 minutes for cleanliness) in 2018 that was extended in 2019 to the 'Kumbh Mela'. Thiscampaign brought together multiple stakeholders to address the issue of proper plasticwaste disposal and also provided consumers with samplings in an used MAGGI Cup that weregiven in exchange for empty MAGGI Cuppa Noodles pack.
Achieving waste segregation at source is key to establish sustainable waste management HiUdaarisystems. Your Company has initiated a project titled "HILLDAARI" inMussoorie Dalhousie and Nainital that aims at empowering waste workers and also focuseson working collectively with local stakeholders like urban local bodies institutionsresidents households waste generators and waste workers to raise awareness aboutanti-littering and segregation at source.
Your Company in 2019 intensified its commitment towards customer and consumercentrality operational efficiencies waste reduction and delivery of fresh products.
By embracing digital transformation in operations your Company has adopted variousforms of digital tools such as consumer app to drive engagement with partners leading tospeed of response to customers and transparency of information in the value chainprocesses and making product delivery simpler and faster.
In 2019 your Company has introduced web based mobile App that monitors and providesreal time data on product availability and freshness from retail outlets that aregeo-mapped to the network.
Nestle Business Excellence
Your Company continued to strengthen its business through Nestle Business Excellence tosimplify and standardize processes to drive efficiency and provide high quality servicesin an integrated and seamless manner. In 2019 your Company by using technology and datafurther eased processes and added speed to how it does business. Your Company invested inits people to enhance their capabilities. A new Centre of Competence was setup to supportend-to-end activities for Order to Cash - from customer order to invoice payment Sourceto Pay - from sourcing materials and services to paying vendors Record to Report - fromrecording transactions to financial and performance reporting Hire to Retire - fromattracting talent to enabling employees on their Nestle journey.
The initiative of Nestle Continuous Excellence (NCE) enabled successful transitionsthrough people: alignment leadership development and Lean ways of working. Technologydata and systems were key enablers within each end-to-end activity to deliver speed andquality of execution. Your Company is constantly working towards transforming end-to-endprocesses and leveraging technology to simplify operations and enhance its capabilities toretain the competitive edge.
Statements in this Report particularly those which relate to Management Discussion andAnalysis as explained in the Corporate Governance Report describing the Company'sobjectives projections estimates and expectations may constitute 'forward lookingstatements' within the meaning of applicable laws and regulations. Actual results mightdiffer materially from those either expressed or implied in the statement depending on thecircumstances.
Directors' Responsibility Statement
The Directors state that:
a) in the preparation of the annual accounts for the year ended 31stDecember 2019 the applicable accounting standards have been followed and no materialdepartures have been made from the same.
b) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as at 31st December 2019 and of theprofits of the Company for that period.
c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities.
d) they have prepared the annual accounts on a going concern basis.
e) they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively and
f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
Directors and Key Managerial Personnel
Pursuant to the Retirement Policy of the Non-Executive Directors of the Company Mr.Ashok Kumar Mahindra Independent Non-Executive Director of the Company had retired witheffect from 31st March 2019. The Directors wish to place on record theirappreciation for the contribution made by Mr. Mahindra for over a decade as adistinguished Independent Non-Executive Director of the Company. During the year Ms.Roopa Kudva was appointed as an independent director of the Company for five consecutiveyears with effect from 164 January 2019 until 31st December 2023and Mr. Rajya Vardhan Kanoria was re-appointed as Independent Non-Executive Director foranother term of five years with effect from 13th May 2019 to 12thMay 2024. The members approved the aforesaid appointment of Ms. Roopa Kudva andre-appointment of Mr. Rajya Vardhan Kanoria at the 60th Annual General Meetingheld on 25th April 2019.
The members of the Company re-appointed Mr. Shobinder Duggal as a whole-time Directordesignated as Executive Director-Finance & Control and Chief Financial Officer of theCompany from 10th May 2019 until 31st December 2019 through postalballot. Your Board of Directors at its meeting held on 8th November 2019 notedthat the term of Mr. Duggal as a Whole-time Director will come to an end on 31stDecember 2019 and on the recommendation of the Nomination and Remuneration Committeeapproved Mr. Duggal's continuation as the Key Managerial Personnel designated as ChiefFinancial Officer of the Company upto 29th February 2020. The Directors wishto place on record their appreciation for the contribution made by
Mr. Duggal during his long association of over a decade and a half as distinguishedwhole-time director on the Board of the Company. The term of Mr. Suresh Narayanan asManaging Director which was for a period of five years from 1st August 2015is to expire on 31st July 2020. Mr Suresh Narayanan was also appointed as theChairman of the Company with effect from 29th October 2015 in addition to hisresponsibility as the Managing Director of the Company by the Board of Directors. On therecommendation of Nomination and Remuneration Committee the Board of Directors hasrecommended the re-appointment of Mr. Suresh Narayanan as Managing Director of the Companyfor a period of five years from 1st August 2020 till 31st July2025 for the approval of the shareholders in its forthcoming Annual General Meeting.
In terms of the Articles of Association of the Company on the recommendation of theNomination and Remuneration Committee the Board of Directors at its Meeting held on 8thNovember 2019 appointed Mr. David Steven McDaniel as an Additional Director andwhole-time Director designated as "Executive Director - Finance & Control andChief Financial Officer" of the Company with effect from 1st March 2020for a term of five consecutive years upto 28th February 2025 subject toapprovals.
Mr. David McDaniel holds office from 1st March 2020 upto the date of theforthcoming Annual General Meeting and is eligible for the appointment. Based on therecommendation of the Nomination and Remuneration Committee the Board of Directors hasrecommended the appointment of Mr. David McDaniel as Whole-time Director designated as"Executive Director - Finance & Control and CFO" for a term of five yearsfrom 181 March 2020 till 28th February 2025 for the approval ofthe shareholders in its forthcoming Annual General Meeting. The same shall be subject toapproval of the Central Government as he is non-resident in India. Mr. Martin Roemkensshall retire at the forthcoming Annual General Meeting by rotation and being eligibleoffers himself for re-appointment. Details of the proposal for appointment/re-appointmentof Directors are mentioned in the Explanatory Statement of the Notice of the 61stAnnual General Meeting of the Company pursuant to Section 102 of the Companies Act 2013.Their appointments are appropriate and in the best interest of the Company.
All the Independent Directors of your Company have submitted the declaration confirmingthat they meet the criteria of independence as prescribed under the Act and the ListingRegulations are not disqualified from continuing as Independent Directors.The Board is ofthe opinion that the Independent Directors of the Company possess requisitequalifications experience and expertise and they hold highest standards of integrity. TheIndependent Directors of the Company have confirmed compliance of relevant provisions ofRule 6 of the Companies (Appointments and Qualifications of Directors) Rules 2014. TheNomination and Remuneration Committee had adopted principles for identification of KeyManagerial Personnel Senior Management including the executive directors which are basedon "The Nestle Management and Leadership Principles" and "Nestle LeadershipFramework". The Appointment and Remuneration Policy of the Company includes criteriafor determining qualifications positive attributes and independence of a director andpolicy relating to the remuneration of Directors Key Managerial Personnel and otheremployees is framed with the object of attracting retaining and motivating talent whichis required to run the Company successfully. The same is available on the website of theCompany at the link: https://www.nestle.in/investors/policies
The details of familiarization programmes to Independent Directors with the Companytheir roles rights responsibilities in the Company nature of the industry in which theCompany operates business model of the Company and related matters are available on thewebsite of the Company at the link: https://www.nestle.in/investors/directorsandofficerfamiliarisation-programme
The Company has devised a formal process for annual evaluation of performance of theBoard its Committees and Individual Directors ("Performance Evaluation") whichinclude criteria for performance evaluation of non-executive directors and executivedirectors as laid down by the Nomination and Remuneration Committee and the Board ofDirectors of the Company. It covers the areas relevant to the functioning as IndependentDirectors or other directors member of the Board or Committee of the Board. TheIndependent Directors carried out annual performance evaluation of the Chairman andExecutive Directors. The Board carried out annual performance evaluation of its ownperformance. The performance of each Committee was evaluated by the Board based on reporton evaluation received from respective Committees. The Company engaged a leading HRConsulting Firm for compilation of the report and feedback received from the Boardmembers Committee members and directors in the questionnaires circulated and foridentifying key inferences and observations with respect to Performance Evaluation. Aconsolidated report was shared with the Chairman of the Board for his review and givingfeedback to each Director.
Corporate Social Responsibility
During the year under review the Corporate Social Responsibility Committee comprisedof Dr. (Mrs.) Swati A. Piramal (Chairperson)
Ms. Rama Bijapurkar Independent Non-executive Director and Mr. Suresh NarayananChairman and Managing Director of the Company. The terms of reference of the CorporateSocial Responsibility Committee is provided in the Corporate Governance Report. YourCompany has also formulated a Corporate Social Responsibility Policy (CSR Policy) which isavailable on the website of the Company at https://www.nestle.in/investors/policies AnnualReport on CSR activities as required under the Companies (Corporate Social ResponsibilityPolicy) Rules 2014 has been appended as Annexure 2 and forms part of this Report.
In terms of Section 135 of the Companies Act 2013 read with Companies (CorporateSocial Responsibility Policy) Rules 2014 as amended ("CSR Rules") and inaccordance with the CSR Policy during the year 2019 the Company has spent above twopercent of the average net profits of the Company during the three immediately precedingfinancial years. The details are provided in the Annual Report on CSR activities. Inaddition to the above the Company has been implementing societal activities since manydecades under umbrella of Creating Shared Value activities which have not been reckonedfor arriving at the spends as per CSR Rules.
Some key initiatives that your Company has been engaged in are as follows:
NESTLE HEALTHY KIDS Programme: The Nestle
Healthy Kids Programme has been developed with a focus to raise nutrition health andwellness awareness among adolescents. The programme contributes towards overalldevelopment of adolescents as well as encourages healthier lifestyle by arming them withknowledge that impacts them in a meaningful way. The programme is being conducted since2009 and is helping raise awareness regarding good nutritional and cooking practices goodhygiene and promoting physical fitness. The programme is implemented through two modesone is in partnership with six regional universities and the second is with NGO Magic BusIndia Foundation. The programme celebrated its 10th year of implementation andhas expanded significantly since its inception incorporating pertinent elements likeplastic waste management etc. in the existing curriculum as well as including parents andteachers as direct beneficiaries in the programme.
Till year 2019 over 300000 adolescents across 23 states have been encouraged to livehealthier lives through Nestle Healthy Kids Programme.
Project Jagriti: As part of the commitment to inspiring people to lead healthier livesand providing educational programmes your Company in partnership with MAMTA HealthInstitute for Mother and Child implemented Project Jagriti. The project focuses ondeveloping community support for improved health and nutrition outcomes among adolescentsyoung couples and caregivers while improving the uptake of public health services. In2019 your Company moved to a system-led approach with a focus on counseling anddevelopment of front- line workers such as Accredited Social Health Activists (ASHA) andAnganwadi Workers etc. This approach is useful in populations that are deficient inknowledge and unaware of their health needs and rights. Till year 2019 the programme hasreached out to 5 million beneficiaries - 1.7 million direct and impacting 3.3 millionbeneficiaries indirectly across 8 States/Union Territories.
Project SERVE SAFE FOOD: Recognizing the potential of street food vending as animportant source of livelihood your Company joined hands with NGO Nidan and NationalAssociation of Street Vendors of India (NASVI) to develop programmes to train street foodvendors on subjects such as health hygiene food handling food safety personal hygienecart hygiene and garbage disposal. Till 2019 this programme has been implemented across17 states/Union Territories reaching over to 20000 street food vendors.
Project Vriddhi: Strengthening your Company's commitment towards building a healthiersociety and positively impacting the lives of people in marginalised communities yourCompany in collaboration with S M Sehgal Foundation launched Project 'Vriddhi' aninitiative towards village adoption. The three-year project is aimed at improving thelivelihoods of 1500 people in the village of Rohira in Nuh district Haryana forbringing a positive change in the lives of the locals.
The project focuses on improving access to clean drinking water for communitiespromoting water-saving irrigation practices increasing awareness on nutrition enhancingfarm productivity and providing healthy learning environment in schools by improvinghygiene and sanitation practices.
Business Responsibility Report
Nestle's approach to business is Creating Shared Value as used by your Company and itis about the impact of the business and engagement through it. Your Company is mindful ofthe needs of the communities and works to make a positive difference and create maximumvalue for the society. It has been conducting business in a way that delivers long-termshareholder value and benefits society.
As stipulated under the Listing Regulations the Business Responsibility Reportdescribing the initiatives taken by the Company from an environmental social andgovernance perspective is attached in the format prescribed as Annexure 3 and formsintegral part of the Annual Report.
Statutory Auditors and Auditors' Report
In terms of Section 139 of the Companies Act 2013 read with the Companies (Audit andAuditors) Rules 2014 Members of the Company in 58th Annual General Meetingheld on 11th May 2017 approved the appointment of M/s. B S R and Co. LLPChartered Accountants (ICAI Registration No-101248W/W-100022) as the Statutory Auditorsof the Company for an initial term of 5 years i.e. from the conclusion of 58thAnnual General Meeting till the conclusion of 63rd Annual General Meeting ofthe Company. The Statutory Auditors have confirmed they are not disqualified fromcontinuing as Auditors of the Company.
The Report given by M/s. B S R and Co. LLP Chartered Accountants on the financialstatement of the Company for the year 2019 is part of the Annual Report. The Notes onfinancial statement referred to in the Auditors' Report are self-explanatory and do notcall for any further comments. The Auditors' Report does not contain any qualificationreservation adverse remark or disclaimer. During the year under review the Auditors hadnot reported any matter under Section 143 (12) of the Act therefore no detail is requiredto be disclosed under Section 134 (3)(ca) of the Act.
Cost Accounts and Cost Auditors
The Company is required to make and maintain cost records for milk powder products asspecified by the Central Government under sub-section (1) of section 148 of the Act.Accordingly the Company has been making and maintaining the records as required.
In terms of Section 148 of the Act read with Companies (Cost Records and Audits) Rules2014 the Audit Committee recommended and the Board of Directors appointed M/s. RamanathIyer and Co. Cost Accountants New Delhi (Registration No. 00019) being eligible as CostAuditors of the Company to carry out the cost audit of milk powder products manufacturedby the Company falling under the specified Customs Tariff Act Heading in relation to thefinancial year ending 31st December 2020. The Company has received theirwritten consent that the appointment is in accordance with the applicable provisions ofthe Act and rules framed thereunder.The Cost Auditors have confirmed they are notdisqualified to be appointed as the Cost Auditors of the Company for the year ending 31stDecember 2020.
The remuneration of Cost Auditors has been approved by the Board of Directors on therecommendation of Audit Committee and in terms of the Companies Act 2013 and Rulesthereunder requisite resolution for ratification of remuneration of the Cost Auditors bythe members has been set out in the Notice of the 61st Annual General Meetingof your Company.
Secretarial Auditors and Secretarial Standards
The Secretarial Audit was carried out by M/s. S.N. Ananthasubramanian & Co.Company Secretaries (PCS Registration No. 1774) for the financial year ended on 31stDecember 2019.
The Report given by the Secretarial Auditors is annexed as Annexure 4 and formsintegral part of this Report. The Secretarial Audit Report is self-explanatory and do notcall for any further comments. The Secretarial Audit Report does not contain anyqualification reservation adverse remark or disclaimer. During the year under reviewthe Secretarial Auditors had not reported any matter under Section 143 (12) of the Acttherefore no detail is required to be disclosed under Section 134 (3)(ca) of the Act.
In terms of Section 204 of the Companies Act 2013 read with the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 the Audit Committee recommended andthe Board of Directors appointed M/s. S.N. Ananthasubramanian & Co. CompanySecretaries (PCS Registration No. 1774) as the Secretarial Auditors of the Company inrelation to the financial year ending 31st December 2020. The Company hasreceived their written consent that the appointment is in accordance with the applicableprovisions of the Act and rules framed thereunder. The Secretarial Auditors have confirmedthey are not disqualified to be appointed as the Secretarial Auditors of the Company forthe year ending 31st December 2020.
During the Financial Year your Company has complied with applicable SecretarialStandards i.e. SS-1 and SS-2 relating to "Meetings of the Board of Directors"and "General Meetings" respectively.
Meetings of the Board
Eight Meetings of the Board of Directors were held during the year. The particulars ofthe meetings held and attended by Directors are detailed in the Corporate GovernanceReport.
Extract of Annual Return
The extract of annual return in Form MGT 9 as required under Section 92(3) of theCompanies Act 2013 and Rule 12 of the Companies (Management and Administration) Rules2014 is available on the website of the Company at the link:https://www.nestle.in/investors/stockandfinancial s/annualreturns
Details of Loans and Investments
Details of the loans given by your Company under Section 186 of the Act during thefinancial year ended 31st December 2019 are as follows: Purina PetCare IndiaPrivate Limited (Fellow Subsidiary): Rs. 150 Million at the interest rate of 6.48 % perannum for general business purpose (Loan outstanding at the end of the year was Nil). Fordetails of investments please refer note no. 9 forming part of financial statements.
Related Party Transactions
Your Company has formulated a policy on related party transactions which is alsoavailable on Company's website at https://www.nestle.in/investors/policies This policydeals with the review and approval of related party transactions. The Board of Directorsof the Company has approved the criteria to grant omnibus approval by the Audit Committeewithin the overall framework of the policy on related party transactions. Prior omnibusapproval is obtained for related party transactions which are of repetitive nature andentered in the ordinary course of business and at arm's length. All related partytransactions are placed before the Audit Committee for review and approval.
All related party transactions entered during the financial year 2019 were in ordinarycourse of the business and were on an arm's length basis. In terms of the Act no materialrelated party transactions were entered during the Financial Year by your Company. Thedisclosure of related party transactions as required under Section 134(3)(h) of theCompanies Act 2013 in Form AOC 2 is not applicable to your Company. Members may refer tonote no. 44 to the financial statement which sets out related party disclosures pursuantto IND AS-24.
In terms of Regulation 23(4) and other applicable provisions of the ListingRegulations the members of the Company at its 60th Annual General Meeting heldon 25th April 2019 approved the Ordinary Resolution ('Ordinary Resolution')inter alia for continuation of the payment of general licence fees (royalty) by theCompany to Societe des Produits Nestle S.A. ("the Licensor") being a relatedparty at the rate of 4.5% (four and a half percent) net of taxes of the net sales ofthe products sold by the Company as per the terms and conditions of the existing GeneralLicence Agreements ("GLAs") notwithstanding that the transaction(s) involvingpayments to the Licensor with respect to general licence fees (royalty) during anyfinancial year including any part thereof is considered material related partytransaction(s) being in excess of the limits specified under Regulation 23(1A) of theListing Regulations at any time. In terms of the Listing Regulations no related partyvoted on the Ordinary Resolution. The Ordinary Resolution is effective from 1stJuly 2019 and approval of members shall be sought every 5 (five) years in compliance withthe applicable laws and regulations.
The Board of Directors had constituted Risk Management Committee (RMC) to identifyelements of risk in different areas of operations and to develop policy for actionsassociated to mitigate the risks.
The RMC on timely basis informed members of board of directors about risk assessmentand minimization procedures. In the opinion of the RMC there are no such risks which maythreaten the existence of the Company. The details of Risk Management Committee areincluded in the Corporate Governance Report.
Your Company has not accepted any Public Deposits under Chapter V of the Companies Act2013.
Significant and Material orders passed by the Regulators /Courts/Tribunals
No significant or material orders were passed by the Regulators or Courts or Tribunalswhich impacts the going concern status and Company's operations in future.
Complaint filed in National Commission
The Union of India Department of Consumer Affairs in 2015 had filed a complaint beforethe National Consumer Dispute Redressal Commission on the allegation that by selling MAGGINoodles in the past your Company has indulged in unfair trade practice sold defectivegoods to the public and sold goods which will be hazardous. Complaint seeks compensationof Rs. 2845.5 million and punitive damages of Rs. 3554.1 million. Your Company haschallenged the complaint. The court proceedings are currently ongoing.
Internal Financial Controls and their adequacy
The Directors had laid down internal financial controls to be followed by the Companyand such policies and procedures adopted by the Company 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 of reliablefinancial information. The Audit Committee evaluates the internal financial control systemperiodically.
During the year 2019 Mr. Rajya Vardhan Kanoria Independent Non-Executive Director wasappointed as the Chairman of Audit Committee effective from 1st April 2019in place of Mr. Ashok Kumar Mahindra who ceased to be Chairman of the Audit Committeeupon his retirement as a Director of the Company. The Audit Committee was reconstitutedand Ms Roopa Kudva Independent Non-Executive Director was appointed as member of theAudit Committee with effect from 14th February 2019. Dr. Rakesh MohanIndependent Non-Executive Director is other member of the Committee. Accordingly AuditCommittee comprises Independent Non-Executive Directors namely Mr. Rajya Vardhan Kanoria(Chairman) Dr. Rakesh Mohan and Ms. Roopa Kudva.
Powers and role of the Audit Committee are included in Corporate Governance Report. Allthe recommendations made by the Audit Committee were accepted by the Board of Directors.
The Vigil Mechanism of the Company is governed by significant documents "TheNestle Corporate Business Principles" "The Nestle Management and LeadershipPrinciples" "Nestle Code of Business Conduct" and "Nestle India VigilMechanism/ Whistle-blower Policy". The documents are available on Company's websiteat https://www.nestle.in/investors/policies The said mechanism is available to theDirector(s)/ Employee(s) who can report to the Company Secretary on a confidentialbasis any practices or actions believed to be inappropriate or illegal under the NestleIndia Code of Business Conduct ("the Code"). The Code/ Policy provides foradequate safeguards against victimization of director(s)/ employee(s) who avail of themechanism and also provides for direct access to the Chairman of the Audit Committee inexceptional cases. It is affirmed that no person has been denied access to the AuditCommittee. As an additional facility to all the Directors and Employees of the Companythe Company under the Code provides Integrity Reporting System ("IRS") anindependent third party operated free phone and web based facility for the directors andemployees of the Company across all locations.
The details of IRS along with FAQs are available to the Directors and Employees on theCompany's intranet portal. Further the Company has appointed Ombudsman for Infant Codeunder which employees can report Infant Code violations directly to the Ombudsman withadequate safeguard to protect the employee reporting. The Company also provides anindependent third party operated free phone and web based facility "Tell us"to all internal and external stakeholders with a dedicated communication channel forreporting potential instances of non-compliance with Nestle Corporate Business Principles.Details of the link to "Tell Us" are available on www.nestle.in
The Company sensitizes the availability of the above vigil mechanism from time to timeto the directors and employees of the Company.
Information regarding Conservation of Energy Technology Absorption and ForeignExchange Earnings and Outgo
Information required under Section 134(3)(m) of the Act read with Rule 8 of theCompanies (Accounts) Rules 2014 for the financial year ended 31st December2019 in relation to the Conservation of Energy Technology Absorption and Foreign ExchangeEarnings and Outgo is given in the Annexure 5 forming integral part of this report.
Information regarding employees and related disclosures
Your Company considers people as its biggest assets and 'Believing in People' is at theheart of its human resource strategy. It has put concerted efforts in talent managementand succession planning practices strong performance management and learning and traininginitiatives to ensure that your Company consistently develops inspiring strong andcredible leadership. During the year the focus of your Company was to ensure that youngtalent is nurtured and mentored consistently that rewards and recognition arecommensurate with performance and that employees have the opportunity to develop and grow.
Your Company has established an organization structure that is agile and focused ondelivering business results. With regular communication and sustained efforts it isensuring that employees are aligned on common objectives and have the right information onbusiness evolution. Your Company strongly believes in fostering a culture of trust andmutual respect in all its employees and seeks to ensure that Nestle values and principlesare understood by all and are the reference point in all people matters.
The statement of Disclosure of Remuneration under Section 197 of the Act and Rule 5(1)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014("Rules") is appended as Annexure 6 to the Report. The information as per Rule5 of the Rules forms part of this Report. However as per second proviso to Section136(1) of the Act and second proviso of Rule 5 of the Rules the Report and FinancialStatements are being sent to the Members of the Company excluding the statement ofparticulars of employees under Rule 5(2) of the Rules. Any Member interested in obtaininga copy of the said statement may write to the Company Secretary at the Registered Officeof the Company.
As per the requirement of The Sexual Harassment of Women at the Workplace (PreventionProhibition and Redressal) Act 2013 (POSH) your Company has a robust mechanism in placeto redress complaints reported under it. The Company has complied with provisions relatingto the constitution of Internal Complaints Committee under POSH. The Internal Committee(IC) was composed of internal members and an external member who has extensive experiencein the field. In 2019 seven cases of sexual harassment were reported which have beeninvestigated and resolved as per the provisions of the POSH.
During the course of 2019 several initiatives were undertaken to demonstrate theCompany's zero tolerance philosophy against discrimination and sexual harassment whichincluded creation of comprehensive and easy to understand training and communicationmaterial which are also made easily accessible. In addition workshops were also run forthe employees to enhance awareness and knowledge of other biases that may influencethinking and actions by running the unconscious bias session.
Statement on Investor Education and Protection Fund
Pursuant to the provisions of Section 124 of the Act Investor Education and ProtectionFund Authority (Accounting Audit Transfer and Refund) Rules 2016 ("IEPFRules") read with the relevant circulars and amendments thereto the amount ofdividend remaining unpaid or unclaimed for a period of seven years from the due date isrequired to be transferred to the Investor Education and Protection Fund (IEPF)constituted by the Central Government. The Company had accordingly transferred Rs.2883288 Rs. 3343770 and Rs. 3597120 being the unpaid and unclaimed dividend amountpertaining to Final Dividend 2011; First Interim Dividend 2012; and Second InterimDividend 2012 on 23rd May 2019 13th September 2019 and 17thJanuary 2020 respectively to the IEPF. Pursuant to the provisions of IEPF Rules allshares in respect of which dividend has not been paid or claimed for seven consecutiveyears shall be transferred by the Company to the designated Demat Account of the IEPFAuthority ('IEPF Account') within a period of thirty days of such shares becoming due tobe transferred to the IEPF Account. Accordingly the Company has transferred such equityshares on which the dividend remained unpaid or unclaimed for seven consecutive years tothe demat account of IEPF Authority after following the prescribed procedure.
The Company has been awarded AAA credit rating for its bank credit facilities byCRISIL.
It is the highest rating and indicates a stable outlook for the Company. The ratingreflects that the Company has serviced its financial obligations on time. As regards theshort term facility provided by the bank the Company has been awarded the credit ratingof A1+. The rated instrument reflects strong degree of safety and lowest credit risk.
The Company maintained healthy cordial and harmonious industrial relations at alllevels. Despite severe competition the enthusiasm and unstinting efforts of the employeeshave enabled the Company to remain at the forefront of the Industry.
Your Company continued to receive co-operation and unstinted support from thedistributors retailers stockist suppliers and others associated with the Company as itstrading partners. The Directors wish to place on record their appreciation for the sameand your Company will continue in its endeavor to build and nurture strong links withtrade based on mutuality respect and co-operation with each other and consistent withconsumer interest.
Your Company has been able to operate efficiently because of the culture ofprofessionalism creativity integrity and continuous improvement in all functions andareas as well as the efficient utilization of the Company's resources for sustainable andprofitable growth.
The Directors hereby wish to place on record their appreciation of the efficient andloyal services rendered by each and every employee without whose whole-hearted effortsthe overall satisfactory performance would not have been possible. Your Directors lookforward to the long term future with confidence.
|On behalf of the Board of Directors || |
|Date : 13th February 2020 ||Suresh Narayanan |
|Place : Gurugram ||Chairman and Managing Director |