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Radico Khaitan Ltd.

BSE: 532497 Sector: Consumer
NSE: RADICO ISIN Code: INE944F01028
BSE 10:13 | 01 Mar 588.95 18.50
(3.24%)
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580.00

HIGH

597.00

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574.05

NSE 10:09 | 01 Mar 589.00 19.35
(3.40%)
OPEN

579.95

HIGH

597.40

LOW

560.00

OPEN 580.00
PREVIOUS CLOSE 570.45
VOLUME 33718
52-Week high 597.00
52-Week low 220.00
P/E 32.57
Mkt Cap.(Rs cr) 7,865
Buy Price 588.95
Buy Qty 6.00
Sell Price 590.00
Sell Qty 33.00
OPEN 580.00
CLOSE 570.45
VOLUME 33718
52-Week high 597.00
52-Week low 220.00
P/E 32.57
Mkt Cap.(Rs cr) 7,865
Buy Price 588.95
Buy Qty 6.00
Sell Price 590.00
Sell Qty 33.00

Radico Khaitan Ltd. (RADICO) - Director Report

Company director report

Dear Members

Your Directors take pleasure in presenting the Thirty Sixth Annual Report on thebusiness and operations together with the Audited Financial Statements of your Company forthe year ended March 312020.

Summary of Standalone Financial Performance

(Rs. in Crore) FY2020 FY2019 Change(%)
Revenue from Operations (Gross) 9417.89 8058.00 16.9%
Revenue from Operations (Net) 2427.04 2096.95 15.7%
Other Income 9.19 13.29 (30.9)%
Income from Operations 2436.23 2110.23 15.4%
Cost of Goods Sold 1247.21 1035.43 20.5%
Excise Duty on Finished Goods1 8.46 (21.10) -
Employee Benefit Expenses 186.08 171.38 8.6%
Selling & Distribution Expenses 311.25 297.23 4.7%
Depreciation 52.53 42.44 23.8%
Finance Cost 31.61 35.48 (10.9)%
Other Operating Expenses 302.23 263.67 14.6%
Total Expenses 2139.37 1824.52 17.3%
Profit Before Tax & Exceptional Item 296.85 285.71 3.9%
Exceptional Item (24.17) 0.00
Profit Before Tax 272.69 285.71 (4.6)%
Current Tax 70.95 85.73
Deferred Tax (25.76) 11.91
Net Profit 227.50 188.06 21.0%
Net Income Margin (%)

9.4%

9.0%

Other Comprehensive Expenses / (Income) 2.70 0.72
Total Comprehensive Income 224.80 187.35 20.0%
Total Comprehensive Income Margin (%)

9.3%

8.9%

Basic EPS (Rs.) 17.05 14.10
Gross Profit1 1179.83 1061.52 11.1%
Gross Margin (%)

48.6%

50.6%

EBITDA2 368.19 349.23 5.4%
EBITDA Margin (%)

15.2%

16.7%

Paid-up Equity Share Capital (Face Value of Rs. 2 each) 26.71 26.68
Reserves & Surplus 1493.82 1288.26
Transfer to General Reserve - -
Proposed Dividend and tax thereon 26.71 19.30

Note:

1. Gross Profit adjusted for the excise duty component on the finished stock of countryliquor transferred to depot as per IND AS accounting treatment

2. EBITDA for 12M FY2020 adjusted for Rs.24.17 Crore pertaining to exceptional items:Write off of debtors in Bihar of Rs. 8.56 Crore in Q4 FY2020; Rs. 8.59 Crore paid underthe SV Scheme during Q3 FY2020 and Environmental Compensation of Rs.7.02 Crore paid duringH1 FY2020. SV Scheme is Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 whichbecame effective from September 2019 as per the Finance Act 2019

Performance Review

Revenue from Operations

Volume (Million Cases) FY2020 FY2019 Change (%)
Prestige & Above 7.05 6.12 15.2%
Regular & Others 17.25 15.48 11.4%
Total Volume 24.30 21.61 12.5%
Prestige & Above as % of Total

29.0%

28.3%

Revenue from Operations (Net) grew by 15.7%. Total IMFL volumes increased by 12.5%.This volume growth was led by a strong Prestige & Above category volume increase of15.2%. Volume growth was broad based across key states and key IMFL brands. Our new brandssuch as 8PM Premium Black whisky and 1965 The Spirit of Victory rum continued their stronggrowth trajectory and made meaningful contributions to the overall volumes. IMFL salesvalue during the same period increased by 18.5%. Non-IMFL sales value growth was 5.0%. Invalue terms Prestige & Above brands contributed to about 49.5% of total IMFL salesvalue. IMFL sales value accounted for 81.5% of the total Revenue from Operations (net) ofthe Company compared to 79.6% last year.

Gross Profit

Gross Profit was adjusted for the excise duty

component on the finished stock of country liquor transferred to depot as per Ind ASaccounting treatment. Gross Margin declined by over 200 bps to 48.6%. On Y-o-Y basisincrease in raw material prices is partly offset by higher IMFL price realization andhigher contribution from IMFL business. The Company also experienced a consolidation trendin ENA prices in the fourth quarter.

EBITDA

EBITDA adjusted for exceptional items of Rs. 24.17 Crore increased by 5.4% y-o-y withmargins of 15.2% (down 150 bps y-o-y). Exceptional items included write off of debtors inBihar of Rs.8.56 Crore in Q4 FY2020 Rs. 8.59 Crore paid under the Sabka Vishwas (LegacyDispute Resolution) Scheme 2019 during Q3 FY2020 and Environmental Compensation ofRs.7.02 Crore paid during H1 FY2020.

During FY2020 Advertising & Sales Promotion (A&SP) expenses were Rs. 139.61Crore (up 0.8%). Given the COVID-19 scenario A&SP expenses during Q4 FY2020 werelower than last year.

The Company continues to make judicious marketing investment which has enabled us tosustain the growth profile. Other Expenses have been higher primarily due to Cow Cess inthe state of Uttar Pradesh (effective April 2019).

Finance Cost

Finance Cost for FY2020 decreased by 10.9% y-o-y from Rs. 35.48 Crore to Rs. 31.61Crore.

Total Comprehensive Income

Total Comprehensive Income increased by 20.0% compared to last year.

Capital Structure Liquidity and Return Ratios

Share Capital

As of March 31 2020 Radico Khaitan had an authorized equity share capital of Rs.34Crore divided into 170000000 equity shares of Rs.2 each. The Company also had anauthorized preference share capital of Rs.60 Crore divided into 6000000 preferenceshares of Rs.100 each. As of March 31 2020 the Company had issued subscribed andpaid-up equity share capital of Rs. 26.71 Crore divided into 133534265 equity shares ofRs.2 each.

During the year under review the Company has allotted 125000 equity shares onexercise of stock options under the Employees Stock Option Scheme 2006 to the eligibleemployees. During the year under review the Company granted no stock options under theEmployees Stock Option Scheme 2006.

General Reserve

Your Directors do not propose to transfer any amount to General Reserve and the entireamount of the profit for the year ended March 31 2020 forms part of retained earnings.

Borrowings

As of March 31 2020 Total Debt was Rs.400.28 Crore Cash & Bank Balances were Rs.18.24 Crore resulting in Net Debt of Rs.382.04 Crore (vs. Rs. 319.35 Crore as of March 312019). Gross Debt consists of Rs. 397.37 Crore of Working

Capital loans and Rs. 2.91 Crore of Long-Term loans. During this period workingcapital has been higher due to increase in average collection period in certain statecorporations. However we do not see any credit risk with these receivables.

Working Capital

As of March 31 2020 the Company had trade receivables balance of Rs.823.05 Crore (up28.3% y-o-y) inventories of Rs.374.18 Crore (up 4.0% y-o-y) and trade payables ofRs.264.24 Crore (up 7.9%) resulting in working capital balance of Rs.932.99 Crore (up23.3% y-o-y). On gross sales basis working capital turnover was 36 days in FY2020compared to 34 days in FY2019 and 42 days in FY2018.

Return Ratios

Return on Average Equity (ROE) was 15.9% in FY2020 compared to 15.2% in FY2019. Returnon Average Capital Employed (ROCE) was 17.7% in FY2020 compared to 18.1% in FY2019.

Note:

ROE = Total Comprehensive Income / Average Shareholder Equity

ROCE = Earnings Before Interest & Tax (EBIT) / Average Capital Employed

Capital Employed = Shareholder Equity + Total Debt

COVID-19 and its Impact

The outbreak of COVID-19 created a global health calamity and economic crisis.Nationwide lock down in India brought businesses to a halt and disrupted the economy. Tofight the pandemic Radico Khaitan immediately implemented employee health and safetymeasures in line with health authoritiesRs. guidelines at all our office and factorypremises. During the lock down period IMFL bottling was fully suspended from 24-March to4-May but manufacturing of ENA was partially operational as we started production ofsanitizers to support the nationRs.s fight against Coronavirus. However we believe thatit is a temporary phase for the business and after the lock down is over we shall returnto normalcy soon.

The Company was focused on driving agility and responsiveness across the value chain.Furthermore we developed and implemented a company-wide policy framework to reflect howsystems and processes need to change post COVID-19.

The Company has also undertaken a number of preventive measures to ensure safety of itsemployees in the offices and manufacturing units. Radico Khaitan has allowed alternateworking day for employees to ensure crowd management. Face masks and hand gloves are mademandatory for all employees at all times. Hand sanitizers are placed at the entry/exitpoints in offices as well as manufacturing units. The Company undertakes regularsanitization and disinfection of all touch-points at the manufacturing units offices andstores. While social distancing norms of at least one metre within our offices andmanufacturing units is followed we are encouraging virtual meetings and presentationsinstead of gathering in a conference room. In addition the Company has also implementedprovisions such as flexible work hours and stress management counselling for the staff.

Capital Market Ratings

Radico KhaitanRs.s long-term and short-term credit facilities are rated by CARERatings. The Company's long-term credit facilities are rated CARE AA- (Double A Minus)with stable outlook and short-term credit facilities are rated CARE A1+ (A One Plus).

CARE AA rated instruments are considered to have high degree of safety regarding timelyservicing of financial obligations. Such instruments carry very low credit risk. CARE A1rated instruments are considered to have very strong degree of safety regarding timelypayment of financial obligations. Such instruments carry lowest credit risk. Modifiers(+/-) reflect the comparative standing within the category.

Directors

During the year under review the Company appointed Ms. Sushmita Singha as anAdditional Independent Director with effect from April 1 2019 and Mr. Tushar Jain and Mr.Sharad Jaipuria as Additional Independent Directors with effect from August 8 2019subject to approval of shareholders at the 35th Annual General Meeting. At the 35th AnnualGeneral Meeting the shareholders approved their appointment as Independent Directors ofthe Company not liable to retire by rotation and to hold the office for a term of fiveconsecutive years commencing from the date of 35th Annual General Meeting. Details ofDirectors retiring by rotation / seeking appointment / reappointment at this Meeting areprovided in the annexure to the Notice.

Ms. Shailja Devi resigned from the Board of the Company on personal grounds and sheceased to be a Director of the Company with effect from May 7 2019. Mr. K.S. Mehta andMr. Ashutosh Patra were appointed as Independent Directors of the Company from September30 2014 for a period of five years. They ceased to be Directors of the Company from thedate of 35th Annual General Meeting. The Board puts on record its appreciation for thevaluable guidance provided by all the Directors during their tenure.

The Company has a Nomination & Remuneration Committee and formulated the criteriafor determining the qualifications positive attributes and independence of a Director("the Criteria"). The policy relates to the remuneration of the Directors KeyManagerial Personnel and other employees as required under Section 178(3) of the Act. Thecriteria includes that a person to be appointed on the Board of the Company should possessin addition to the fundamental attributes of character and integrity appropriatequalifications skills experience and knowledge.

Board Meetings

During FY2020 the Board of Directors met four times on May 2 2019 August 8 2019November 6 2019 and January 23 2020. The gap between any two consecutive meetings of theBoard of Directors of the Company was not more than 120 days. The details regardingcomposition number of Board Meetings held and attendance of the Directors during FY2020are set out in the Corporate Governance Report which forms part of this Annual Report.

Meeting of Independent Directors

The Independent Directors of the Company met separately on January 23 2020 without thepresence of the Non-Independent Directors and the members of management. The meeting wasconducted informally to enable the Independent Directors to discuss matters pertaining tothe Company's affairs and put forth their combined views to the Board of Directors of theCompany. In accordance with the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 ("Listing Regulations") following matters were inter-aliadiscussed in the meeting:

1. Review of the performance of NonIndependent Directors and the Board as a whole;

2. Review of the performance of the Chairperson of the Company taking into account theviews of Executive Directors and Non-Executive Directors;

3. Assess the quality quantity and timelines of flow of information between theCompany management and the Board that is necessary for the Board to effectively andreasonably perform their duties

Declaration by Independent Directors

The Company's Independent Directors have submitted requisite declarations confirmingthat they continue to meet the criteria of independence as prescribed under Section 149(6)of the Act and Regulation 16(1)(b) of the Listing Regulations. The Independent Directorshave also confirmed that they have complied with Schedule IV of the Act and the Company'sCode of Conduct. The Company keeps a policy of transparency and armRs.s length whiledealing with its Independent Directors. No transaction was entered with IndependentDirectors during the year which could have any material pecuniary relationship with them.Apart from sitting fee no other remuneration was paid to any of the IndependentDirectors.

The Ministry of Corporate Affairs ("MCA") vide Notification Number G.S.R.804(E) dated 22nd October 2019 and effective from December 1st 2019 has introduced theprovision relating to inclusion of names of Independent Directors in the Data Bankmaintained by Indian Institute of Corporate Affairs (IICA). All Independent Directors ofthe Company are registered with IICA.

In the opinion of the Board the Independent Directors hold highest standard ofintegrity and possess the requisite qualifications experience expertise and proficiency.

Board Evaluation

The Board of Directors of Radico Khaitan is committed to transparency in assessing theperformance of Directors. In accordance with the Companies Act 2013 and Rules madethereunder Schedule - IV of the Act and Regulation 4(2)(f) of the Listing RegulationsRadico Khaitan has framed a policy for the formal annual evaluation of the performance ofthe Board Committees and individual Directors. The Company has put in place a robustframework for evaluation of the Board its Committees the Chairman individual Directorsand the governance processes that support the BoardRs.s functioning. This framework coversspecific criteria and the grounds on which all Directors in their individual capacity areevaluated. The key criteria for performance evaluation of the Board and its Committeesinclude aspects such as composition and structure effectiveness of board processesinformation sharing and functioning.

The criteria for performance evaluation of the individual Directors include aspectssuch as professional conduct competency and contribution to the Board and Committeemeetings. The criteria for performance evaluation of the committees of the Board includeaspects such as the composition of committees and effectiveness of committee meetings. Theperformance evaluation of the Independent Directors was done by the entire Board excludingthe Director being evaluated. The performance evaluation of the Chairman and theNon-Independent Directors was carried out by the Independent Directors. The Board ofDirectors expressed their satisfaction with the evaluation process.

Policy on Nomination Remuneration and Board Diversity

The Board of Directors has framed a policy which lays down a framework in relation tothe remuneration of Directors Key Managerial Personnel and Senior Management of theCompany. This policy also lays down criteria for selection and appointment of BoardMembers as well as diversity of the Board. Radico Khaitan recognizes the benefits andimportance of having a diverse Board of Directors in terms of skill set and experience.The Company has an optimum mix of executive and non-executive independent directors andwoman director.

The detail of the policy is explained in the Corporate Governance Report and fullpolicy is also available on the Company's website at the following link:http://www.radicokhaitan.com/ investor-relations/

Roles and Responsibilities of Board Members

The Company has a clearly laid out policy defining the structure and role of the BoardMembers. The Company has an Executive Chairman and Managing Director presently Dr LalitKhaitan; a Managing Director currently Mr. Abhishek Khaitan and an optimum combination ofexecutive and non-executive independent directors. The duties of the Board Membersincluding Independent Directors have been elaborated in the Listing Regulations Section166 of the Companies Act 2013 and Schedule IV of the said Act. There is a clearsegregation of responsibility and authority amongst the Board Members.

Risk Management Policy

Radico KhaitanRs.s business is exposed to a variety of risks which are inherent to aliquor manufacturing company in India. In this volatile uncertain and complex operatingenvironment only companies that manage their risk effectively can sustain. Riskmanagement is embedded in Radico KhaitanRs.s corporate strategies and operating frameworkand the risk framework helps the Company meet its objectives by aligning operatingcontrols with the corporate mission and vision. The Company has in place comprehensiverisk assessment and minimization procedures integrated across all operations and entailsthe recording monitoring and controlling enterprise risks and addressing them timely andcomprehensively. The risks that the Company faces as strategic financial liquiditysecurity regulatory reputational and other risks are reviewed by the Risk ManagementCommittee the Audit Committee and the Board from time to time and new risks areidentified based on new business initiatives and the same are assessed minimisationframework and controls are designed and appropriately implemented.

Insurance of Fixed Assets

Your Company has adequately insured all its properties including Plant and MachineryBuilding and Stocks.

Awards and Recognition

During the year Radico Khaitan was ranked as the no. 1 mid-cap company in FortuneIndiaRs.s "The Next 500" list the first comprehensive ranking of IndiaRs.smidsize companies. The Next 500 list represents the most promising companies in Indiaoutside the Fortune 500. Radico Khaitan has consistently improved its ranking in this listfrom 60th in 2015 to 28th in 2019 and jumped 27 places to first rank in 2020.

The Company also continued to shine at the Monde Selection Quality Awards in 2020 withone grand gold and eight gold awards. Radico KhaitanRs.s Old Admiral Brandy emerged as theBrandy Brand Champion in the Spirits Business Magazine 2020 and ranked first. 8 PM whiskyranked 7th on the Indian Whisky Brand Champion list Contessa rum ranked 9th on the RumBrand Champion list and Magic Moments Vodka ranked 11th on the Vodka Brand Champion list.Rampur India Single MaltRs.s Double Cask expression has been awarded with the Rs.BestWorld Whisky Gold Medal 2020Rs. by The Fifty Best New York.

Employee Stock Option Scheme

Radico KhaitanRs.s employee stock option scheme was implemented to provide theemployees with an opportunity to share in the growth of the Company and to reinforce longterm commitment.

The ESOP Compensation Committee at its meetings held on 09.12.2019 granted 88000stock options and on 23.01.2020 granted 37000 stock options to the eligible employeesas per the Employees Stock Option Scheme 2006. The particulars of the options as requiredby SEBI (Share Based Employee Benefits) Regulations 2014 are appended as Annexure - A andforms part of this report.

Dividend

The Company has a dividend policy that balances the dual objective of appropriatelyrewarding its shareholders and retaining capital to support future growth. Your Directorsare pleased to recommend a dividend of Rs.2.00 per equity share or 100% on face value ofRs.2.00 each for the year ended March 31 2020. The total dividend pay-out for thefinancial year will be Rs. 26.71 Crore. This higher dividend pay-out is to demonstrate ourcommitment towards our shareholders. The dividend is subject to approval of shareholdersat the Annual General Meeting on Monday August 31 2020 and will be paid to theshareholders whose names appear in the Register of Members as on the date of book closurei.e. August 25 2020 to August 31 2020.

Dematerialisation

During the year 313315 shares of the Company constituting 0.23% of the issued andsubscribed Share Capital of the Company were dematerialised. As on March 31 2020 98.95%of the shares of the Company have been dematerialized. Your Directors would request allthe members who have not yet converted their holdings into dematerialized form to do sothereby facilitating trading of their shares.

As per SEBI guidelines it is mandatory that the shares of a company are indematerialized form for trading.

Public Deposits

During the year under review your Company has neither invited nor accepted any fixeddeposits from the public within the meaning of Section 73 of the Companies Act 2013 readwith the Companies (Acceptance of Deposits) Rules 2014.

Subsidiaries and Joint Ventures

During the year under review the Company has no subsidiary. Radico Khaitan has onejoint venture namely Radico NV Distilleries Maharashtra Limited ("RNV"). TheCompany has 36% stake in the said joint venture. In terms of the Section 129 (3)financial results of RNV are consolidated with the accounts of the Company. In terms ofthe section 129 (3) of the Companies Act 2013 the salient features of the financialstatement of the joint venture company is set out in the prescribed form AOC - 1 and isattached herewith as a separate Annexure - B.

Transfer to Investor Education & Protection Fund

Section 124 of the Companies Act 2013 mandates that a company should transferdividend that has been unclaimed for a period of seven years from the unpaid dividendaccount to the Investor Education and Protection Fund (IEPF). To ensure maximumdisbursement of unclaimed dividend the Company sends reminders to the concernedinvestors before transfer of dividend to IEPF. Unclaimed dividend has been transferred toIEPF as per below table:

Financial Year Date of Declaration of Dividend Total Dividend Unclaimed Dividend as on 31-3-2020 Due Date of Transfer to IEPF account
FY2002 16.07.2002 38579176.00 730556.00 22.08.2009
FY2003 19.07.2003 34721258.40 914312.00 24.08.2010
FY2004 17.07.2004 38579176.00 973284.00 22.08.2011
FY2005 16.11.2005 42437093.60 983341.00 21.12.2012
FY2006 25.09.2006 48223970.00 1135840.00 30.10.2013
FY2007 26.09.2007 51231109.50 922432.00 05.11.2014
FY2008 30.09.2008 51231109.50 1065509.00 16.10.2015
FY2009 15.09.2009 30738665.70 699978.00 07.10.2016
FY2010 09.09.2010 79300632.60 1620668.00 26.10.2017
FY2011 09.09.2011 92853567.80 1630738.00 24.09.2018
FY2012 24.09.2012 106195503.20 2312827.00 11.10.2019

Key Managerial Personnel

There has been no change in Key Managerial Personnel during the year under review.

Remuneration of the Directors and Employees

Your Company's approach is to have performance-based compensation culture to attractand retain high quality talent. The remuneration policy therefore is market- led andtakes into account the competitive nature of the business so as to attract and retainquality talent and leverage performance significantly. The remuneration payable to eachExecutive Director is based on the remuneration structure as determined by the Board andis revised from time to time depending upon individual contribution the Company'sperformance and the provisions of the Companies Act 2013.

Particulars of Employees and Remuneration

In terms of the first proviso to Section 136 of the Act the Reports and Accounts arebeing sent to the shareholders excluding the information required under Rule 5 (2) and (3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014. Anyshareholder interested in obtaining the same may write to the Company Secretary at theRegistered Office of the Company on any working day of the Company up to the date of the36th Annual General Meeting.

The statement containing information as required under the provisions of Section

197(12) of the Act read with Rule 5 (1) Rule 5(2) and Rule 5(3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is given in Annexure -C and forms part of this Report.

Audit Report

The observations made in the Auditors Report as enclosed with this Report areselfexplanatory and therefore do not call for any further comments under Section 134 ofthe Companies Act 2013.

Statutory Auditor

M/s. BGJC & Associates LLP Chartered Accountants are the Statutory Auditors of theCompany for a period of five years with effect from July 11 2016. M/s. BGJC &Associates LLP have confirmed to the Company that they are not disqualified under Section141 of the Companies Act 2013 or any other applicable provisions for the time being inforce and are eligible for being appointed as statutory auditors of the Company. M/s. BGJC& Associates LLP have also confirmed to the Company that their appointment is withinthe limits prescribed under the Companies Act 2013.

The report of the Statutory Auditors along with notes to Schedules is enclosed to thisreport. The observations made in the AuditorsRs. Report are self-explanatory and thereforedo not call for any further comments. The AuditorRs.s Report does not contain anyqualification reservation or adverse remark.

Cost Auditor

As per the requirement of Central Government and pursuant to Section 148 of theCompanies Act 2013 read with the Companies (Cost Records and Audit) Rules 2014 asamended from time to time your Company has been carrying out audit of cost recordsrelating to Industrial Alcohol every year.

The Board of Directors on the recommendation of the Audit Committee has appointed Mr.R. Krishnan Cost Accountants as the cost auditor to audit the cost accounts of theCompany for the financial year 2020 at a remuneration of Rs.1.10 Lakhs plus applicablegovernment taxes (GST) and reimbursement of out of pocket expenses. As required under theCompanies Act 2013 a resolution seeking memberRs.s approval for the remuneration payableto the Cost Auditor forms part of the Notice convening the Annual General Meeting.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act 2013 and rules madethereunder the Company has appointed Mr. Tanuj Vohra Partner at M/s. TVA & Co. LLPCompany Secretaries a firm of Company Secretaries in Practice (C.P. No. 5253) toundertake the Secretarial Audit of the Company. The Secretarial Audit Report is includedas Annexure - D and forms an integral part of this Report. There is no secretarial auditqualification for the year under review and the Company has received a no disqualificationcertificate from company secretary in practice.

Particulars of Loans Guarantees or Investment by the Company under Section 186 of theCompanies Act 2013

Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are given in the notes to Financial Statements.

Vigil Mechanism

Pursuant to the requirement of Section 177 (9) & (10) of the Companies Act 2013Radico Khaitan has in place a robust vigil mechanism and has adopted a Whistle BlowerPolicy which allows employees of the Company to raise their concerns relating to fraudmalpractice or any other activity or event which is against the interest of the Company orsociety as a whole. All employees shall be protected from any adverse action for reportingany unacceptable or improper practice and/or any unethical practice fraud or violation ofany law rule or regulation. This policy is also applicable to the Directors of theCompany. All cases reported as part of whistle-blower mechanism are taken to their logicalconclusion within a reasonable timeframe. Details of complaints received and the actiontaken are reviewed by the Audit Committee. The functioning of the Vigil Mechanism isreviewed by the Audit Committee from time to time. The Vigil Mechanism Policy has beenuploaded on the website of the Company at http://www.radicokhaitan.com/investor-relations/ .

Archival Policy

Pursuant to the Listing Regulations and in line with Radico KhaitanRs.s Policy onDetermination of Materiality of Events the Company shall disclose all such events to theStock Exchanges and such disclosures shall be hosted on the website of the Company for aperiod of 5 years and thereafter the same shall be archived so as to be available forretrieval for a further period of three years by storing the same on suitable media.Thereafter the said information documents records may be destroyed as per the Company'spolicy on preservation of documents.

Policy on Dividend Distribution

The Board of Directors have adopted Dividend Distribution Policy in terms of therequirements of Listing Regulations. The Policy is available on the website of the Companyat https://www. radicokhaitan.com/investor-relations . The Dividend Distribution Policyforms a part of this Report.

Related Party Transactions

All transactions entered with Related Parties for the year under review were on armRs.slength basis and in the ordinary course of business and that the provisions of Section 188of the Companies Act 2013 are not attracted. Thus disclosure in form AOC-2 is notrequired. Further there are no material related party transactions during the year underreview with the promoters directors or key managerial personnel. The Company hasdeveloped a Related Party Transactions framework through Standard Operating Procedures forthe purpose of identification and monitoring of such transactions.

All Related Party Transactions are placed before the Audit Committee as also to theBoard for approval. Omnibus approval was obtained on a quarterly basis for transactionswhich are of repetitive nature. Transactions entered into pursuant to omnibus approval areaudited by the Legal & Compliance Department and a statement giving details of allRelated Party Transactions are placed before the Audit Committee and the Board for reviewand approval on a quarterly basis.

The Policy on Related Party Transactions as amended and approved by the Board ofDirectors has been uploaded on the website of the Company. The web-link of the same hasbeen provided in the Corporate Governance Report. None of the Directors has any pecuniaryrelationship of transactions vis-a-vis the Company.

Environmental Protection Measures Taken by the Company

In view of the corporate responsibility on environmental protection the Company hasadopted a number of measures for improvement in the field of environment safety andhealth. Measures such as standard operating procedures training programmes for all levelsof employees regarding resource conservation housekeeping Green Belt development andonsite emergency plan have been taken. Sustainable living is a part of long-term businessstrategy and your Company continuously strives to reduce our environmental footprintwhile enhancing the livelihood of people across our product value chain.

Energy Conservation Technology Absorption and Foreign Exchange Earnings and Outgo

As per Section 134 (3) (m) read with the Companies (Accounts Rules) 2014 the relevantinformation and data is given in Annexure - E and forms part of this Report.

Corporate Social Responsibilities (CSR)

CSR at Radico Khaitan is creating sustainable programs that actively contribute to andsupport the social and economic development of the society. The Company is committed tocommunity development enhancing livelihood promoting education and health care includingpreventive health care and ensuring environmental sustainability. As part of its CSRprogrammes the Company partners with the community and addresses issues of water andsanitation education health and skill-building. Radico Khaitan also promotes andencourages responsible drinking through engaging with employees taking preventativeaction education and raising awareness and bringing communities on board to address localchallenges at their root. The CSR policy of the Company is available on the Company'swebsite.

Composition of the CSR Committee as on March 31 2020

1. Dr. Lalit Khaitan Chairman
2. Mr. Abhishek Khaitan* Member
3. Mr. K.P. Singh Member
4. Ms. Shailja Devi ** Member
5. Ms. Sushmita Singha Member

The Company's projects are in accordance with Schedule VII of the Companies Act 2013and the Company's CSR Policy. The Report on CSR activities as required under Companies(Corporate Social Responsibility Policy) Rules 2014 is set out as Annexure - F formingpart of this Report.

An unspent amount of Rs.25.96 Lakhs which could not be spent due to sudden lockdown incountry from 21st March 2020 due to COVID 19 will be spent together with the eligiblespend of FY2021.

Significant and Material Orders Passed by the Regulators or Courts

During the year the Central Pollution Control Board (CPCB) levied an environmentalcompensation of Rs.7.02 Crore on the Company and the same was paid by the Company. Theoperations of molasses plant at Rampur were briefly hampered due to the CPCB order. Theloss pertaining to such restriction was around Rs. 15 Crore. The matter pertaining to theCPCB was filed before NGT. Apart from that there has been no significant and materialorder passed by the Regulators or Courts that would impact the going concern status of theCompany and its future operations.

Safety & Wellbeing of Women

Gender equality and women safety is a very important part of Radico KhaitanRs.s humanresource policies. The Company has zero tolerance for sexual harassment at workplace andhas adopted a policy on prevention prohibition and redressal of sexual harassment atworkplace in line with the provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and the Rules thereunder for preventionand redressal of complaints of sexual harassment at workplace. The Company has endeavouredto encourage women professionals by creating proper policies to tackle issues relating tosafe and proper working conditions and create and maintain a healthy and conducive workenvironment that is free from discrimination. During the year under review there were nosexual harassment cases reported to the Company.

Composition of the Sexual Harassment Committee as on March 31 2020

1. Ms. Roopali Makhija Presiding Officer
2. Ms. Jyoti Negi Member
3. Mr. Amit Manchanda Member
4. Ms. Manu Chaudhary Member
5. Mr. Vinay Padroo Member
6. Mr. Mukesh Arora Member

Business Responsibility Report

The Business Responsibility Report for FY2020 as stipulated under Regulation 34(2)(f)of the Listing Regulations is annexed as a separate report and forms part of this AnnualReport.

Extract of Annual Return

Pursuant to Section 92 (3) of the Companies Act 2013 and Rule 12 (1) of the Companies(Management and Administration) Rules 2014 the extract of the Annual Return is providedin Annexure- G.

Management Discussion and Analysis

Management Discussion and Analysis Report as required under the Listing Regulations isprovided as a separate report and forms part of this Annual Report.

Corporate Governance Report

Report on Corporate Governance along with the certificate from Mr. Tanuj Vohra Partnerat M/s. TVA & Co. LLP Company Secretaries confirming compliance with conditions ofcorporate governance as stipulated under the Listing Regulations forms part of theAnnual Report.

Reporting of Frauds

There was no instance of a fraud during the year under review which required thestatutory auditor to report to the Audit Committee or the Board under section 18 (12) ofthe Companies Act 2013 and rules made thereunder.

Cyber Risk

The failure of information Technology (IT) systems due to malicious attacks and / ornon-compliance with data privacy laws can potentially lead to financial loss businessdisruption and / or damage to the Company's reputation. Radico Khaitan has in place a dataprotection policy. It also maintains a cyber security infrastructure. The Company usesstandardised backup tools service and procedures to ensure that information and data arestored at two or more diverse locations.

Internal Financial Controls

The Board of Directors of the Company has devised systems policies procedures andframeworks which are currently operational within the Company for ensuring the orderlyand efficient conduct of its business which includes adherence to policies safeguardingits assets prevention and detection of frauds and errors accuracy and completeness ofthe accounting records and timely preparation of reliable financial information.

The internal financial controls have been documented digitised and embedded in thebusiness process. Assurance on the effectiveness of internal financial controls isobtained through management reviews controls self-assessment continuous monitoring byfunctional experts as well as testing of the internal financial control systems by theinternal auditors during the course of their audits. We believe that these systems providereasonable assurance that our internal financial controls are designed effectively and areoperating as intended.

Management team has assessed the effectiveness of the Company's internal control overfinancial reporting as at March 31 2020. The Statutory Auditors of the Company haveaudited the financial statements included in this Annual Report and issued their report oninternal control over financial reporting (as defined under section 143 of the CompaniesAct 2013). The Company has appointed reputed firms of Chartered Accountants to carry outInternal Audits. The audit is based on focused and risk-based internal plans which isreviewed every year in consultation with the Audit Committee. In line with internationalpractices the focus of Internal Audit is oriented towards the review of internal controlsand risks in operations.

Audit Committee

The Audit Committee invites the Chairman & Managing Director Managing Director

Chief Financial Officer Company Secretary Statutory Auditor(s) and Internal Auditorand Cost Auditors to attend the meetings of the Audit Committee. The Company Secretaryacts as Secretary to the Committee. The minutes of each Audit Committee meeting are placedand discussed at the next meeting of the Board. All Members of the Audit Committee arequalified in finance and bring in expertise in the fields of finance taxation economicsindustry and risk.

Composition of the Audit Committee as of March 31 2020

1. Mr. Sarvesh Srivastava Chairman
2. Dr. Raghupati Singhania Member
3. Mr. Tushar Jain Member

Statement on Compliance of Secretarial Standards

The Company has followed applicable Secretarial Standards i.e. SS-1 and SS-2 relatingto Rs.Meetings of the Board of DirectorsRs. and Rs.General MeetingsRs. respectively.

DirectorsRs. Responsibility Statement

Based on the framework of Internal Financial Controls and compliance systemsestablished and maintained by the Company the work Auditors and Secretarial Auditorsincluding the Audit of Internal Financial Controls over financial reporting by theStatutory Auditors and the reviews performed by Management and the relevant BoardCommittees including the Audit Committee the Board is of the opinion that the Company'sinternal financial controls were adequate and effective during FY2020.

To the best of knowledge and belief and according to the information and explanationsobtained by them your Directors make the following statement in terms of Section 134 (3)(c) of the Companies Act 2013.

1. In the preparation of the Annual Accounts for the year ended March 31 2020 theapplicable accounting standards have been followed along with proper explanation relatingto material departures if any;

2. The Board has selected such accounting policies and applied them consistently andmade judgements and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 31 2020 and of the profit ofthe Company for the year ended on that date;

3. The Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.

4. The annual accounts have been prepared on a going concern basis;

5. The Directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and

6. The Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

Dispatch of Annual Report through Electronic Mode

In compliance with the MCA Circulars and SEBI Circular dated May 12 2020 notice ofthe AGM along with the Annual Report 2019-20 is being sent only through electronic mode tothose members whose email addresses are registered with the Company/ Depositories. Membersmay note that the Notice and Annual Report 2019-20 will also be available on the Company'swebsite (https://www.radicokhaitan.com/investor- relations ) websites of the StockExchanges i.e. BSE Limited and National Stock Exchange of India Limited atwww.bseindia.com and www. nseindia.com respectively and on the website of the Company'sRegistrar and Transfer Agent KFin Technologies Private Limited ("KFinTech") athttps://evoting.karvy.com .

Acknowledgements

Financial year 2020 had seen unprecedented operating environment due to the outbreak ofthe pandemic which brought the global economic activity to standstill. It adverselyimpacted all sectors of the economy. Your Company was no exception and continues to fightadversities. During this difficult time your trust and confidence has been of immensesupport. Your Directors take this opportunity to thank our customers for their continuedloyalty with our products which has resulted in Radico Khaitan outperforming the industry.This encourages us to continue to deliver consumer satisfaction through our diverseproduct portfolio. Your Directors take this opportunity to express their sincereappreciation to all the employees for their commitment and contribution to the success ofthe Company. Their enthusiasm and hard work has enabled the Company to not only facevarious challenges but also be at the forefront of the industry.

The Board would like to convey their sincere gratitude to the investors and bankers fortheir continued support during the year.

Your Directors further take this opportunity to acknowledge the support and assistanceextended by the Regulatory Authorities such as SEBI Stock Exchanges and other Central& State Government authorities and agencies Auditors Registrars Legal Advisors andother consultants. The Board also appreciates the support and co-operation your Companyhas been receiving from its supply chain partners and others associated with the Companyas its trading partners. Your Company looks upon them as partners in its progress and hasshared with them the rewards of growth.

We look forward to another successful year ahead.

For & on behalf of the Board
Dr. Lalit Khaitan
Place: New Delhi Chairman & Managing Director
Date: July 23 2020 DIN - 00238222

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