Redington India Ltd.
|BSE: 532805||Sector: Others|
|NSE: REDINGTON||ISIN Code: INE891D01026|
|BSE 00:00 | 17 May||91.55||
|NSE 00:00 | 17 May||91.75||
|Mkt Cap.(Rs cr)||3,562|
|Mkt Cap.(Rs cr)||3562.21|
Redington India Ltd. (REDINGTON) - Director Report
Company director report
Your Directors are pleased to present their Twenty Fifth Annual Report together withthe Audited Financial Statements of the Company for the Financial Year ended on March 312018.
The Directors feel that it is appropriate to present the consolidated financialperformance of the Company in the manner set out below:
Your Directors have made the following appropriations out of the standalone profits ofthe Company:
* Net of the Dividend Distribution Tax credit of Rs. 4.4 Crore on account ofdividend received from subsidiary companies.
Financial Performance of the Company
The Standalone and Consolidated Financial Statements of the Company for the FinancialYear 2017-18 have been prepared in accordance with the Indian Accounting Standards (IndAS) as required under the Companies Act 2013.
The consolidated revenues of your Company was Rs. 43498.5 Crore as against Rs.41156.0 Crore in the previous year registering a growth of 5.7% while theconsolidated net profit for the year grew by 3.7 % to Rs. 481.6 Crore for 2017-18as against Rs. 464.2 Crore in the previous year.
The Earnings Per Share (EPS) on a consolidated basis (based on weighted average numberof shares during the year) increased to Rs. 12.0 for the year under review ascompared to Rs. 11.6 for the previous year.
A detailed analysis of the financial performance of the Company is given as part of theManagement Discussion and Analysis report which forms part of this report.
Statement on the salient features of the financial statements of Subsidiaries andAssociate Companies in the prescribed Form AOC 1 is appended as part of this report. Thedetails of the subsidiaries incorporated during the financial year under review are givenas part of notes to the consolidated financial statements.
Although it has been a challenging year for the Company the Directors are pleased torecommend an enhanced dividend of Rs. 2.40 per share (i.e. 120% of the Face Value)for the year ended March 312018 as compared to Rs. 2.30 per share (i.e. 115% ofthe Face Value) for the previous year.
INFORMATION TECHNOLOGY PRODUCTS
The IT procurement landscape in India is changing with digitalization creating newrevenue streams and new platforms. Digital disruption is being progressively witnessed inmost industries leading to technological advancement in all sectors.
Computing and printing
Transition to the Goods and Services Tax (GST) regime adversely affected the retailsector as many of the retailers were forced to liquidate the pre-GST inventory. Furtherpost-GST disruptions in supply-chains led to challenges in re-stocking at partners' stocklevels. Seasonality and online
festive sales drove positive consumer spending throughout the year despite depressedconsumer sentiment heralded by low employment opportunities static income levels andincreasing fuel prices. Proactive planning and alignment with E-Commerce companies inPersonal Computing space enabled us to capitalize on the accelerated demand fulfilment inthe unaddressed market place and keep up the sales momentum.
There was a spurt in demand from MSME and SME segments for single function printers toprint documents for GST compliance. Also Multi-Function Printers gained preference due toreduction of tax rates by the government. During the year under review there wasre-alignment of exclusive territories in HP Printing and Supplies Business and yourCompany strengthened its foot-print in key strategic areas in HP Printing.
Commercial PC business witnessed stable growth across the year capitalizing on keyopportunities in Government/BFSI and Education sector. Our strategy of focusing on diverseopportunities helped us in growing our business in midmarket and SME segments with smallerticket opportunities thereby helping us in mitigating the challenge posed by thepostponement of capex plans by large corporates.
Enterprise and Infrastructure
Though FY Rs.18 was marred by challenges in various forms on account of GSTimplementation there has been a gradual increase in terms of investment in the ITinfrastructure market. Digital India initiative fuelled much needed growth withinvestments from both Central and State Governments as also from verticals like BFSI andTelecom. Adoption of outsourced model by enterprises in India lead to increasinginvestment decisions by the Data Centre Providers. Expansion of both Captive andOutsourced Data Centres boosted the Server market. E-commerce transactions and hybrid ITinfrastructure in India fuelled the need for robust Cyber Security solutions. ConvergedInfrastructure and Software Defined Infrastructure in Data Centres were the new risingdemands from CIOs during the year. Your Company's deep engagement with renowned brandsenjoyed a healthy share of enterprise Infrastructure business.
During the year under review India saw consolidation of the cellular market andaggressive roll out of 4G thus aiding the demand for both feature phones and smartphones.However in the case of smartphones the demand was inclined towards the mid-pricedsmartphones with higher storage space better processors and other advanced features thusimpacting the demand of premium smartphones.
For your Company Mobility segment contributed nearly 20% of the annual India revenuesfor FY 18 encompassing major vendors such as Apple Google and Samsung. While the changesin distribution rights of Apple iPhone during the year under review resulted in a declinein the Company's market share given demand for iPhones in India and plans by Apple forits new product launch we expect your Company would be in a position to benefit greatlyfrom its association with this iconic brand. Your Company has a strong exclusivepartnership with Google for the distribution of its smartphone brand Pixel'. Giventhe strength of the brand Pixel promises to deliver continued and increasing value in thecoming years.
During the year under review your Company completed one full year in the distributionof Solar Equipment and Health & Medical Equipment (HME).
In Solar Equipment segment your Company focuses on the Solar PV Roof Top spacedistributing Solar PV products its components and raw materials. During the yearindustry wide tax issue on account of Anti-Dumping Tariff plagued the business. Howeveryour Company doubled the sales revenue from this vertical in FY Rs. 18. With India'sambitious target of attaining 100000 MW of solar capacity by 2022 there are immensegrowth opportunities in this space.
In HME segment your Company distributes Mid-size Equipment & Instruments whichforms a large segment of the industry. Since HME is an unorganized sector your companyhad initial challenges in establishing structured method of distribution. However thesestructural challenges are being gradually overcome by showcasing the relevance and valueof a well-organized national distributor which offers the backbone of high quality systemsand processes impeccable financial pedigree and ease of doing business.
IT Professionals in Indian organizations have witnessed a shift in increasing adoptionof cloud computing. According to research report from India-based CIO Klub and Ernst &Young LLP businesses are moving to the cloud to lower their IT infrastructure andadministrative costs and to adopt a flexible and scalable model for IT.
Your Company has invested towards becoming a premier cloud solutions provider. YourCompany helps partners to manage their entire multi cloud business through FullyAutomated Self-service Unified Digital Platform. It focuses
on deeper engagement with partners & their customers by managing each customer'sunique IT needs through a well- structured assessment followed by a documented plan tomigrate implement and manage the cloud infrastructure for optimisation and performance.Your Company is currently supporting its partner's customers in the following marketsegments:
Small & Mid-market customers: Cloud adoption web application hostingbackup & storage solutions.
Enterprise customers: Data Center transformation Hybrid cloud ERP on cloudDisaster recovery solutions business applications Big data & IoT and Advancetechnology enablement on cloud.
Cloud customers: Cost/Performance optimization
monitoring management and security solutions.
Digital Printing industry being one of the financially unorganized sectorsexperienced a double whammy on account of demonetization followed by GST implementation.Despite the challenges we saw a constant growth in print- page volume and servicerevenues. Your Company's continued focus on generating demand by conducting variousmarketing campaigns/initiatives including training programs for new applicationdevelopment and roadshows yielded success in building the customers' business.
Your Company has been making investment in distribution of 3D Printing products whichis touted to be the next major advancement in the printing industry. Your Company hasstrong partnerships with prime brands in this segment. During the year it signed up withHewlett Packard for their 3D Printers and partnered with Carl Zeiss as their exclusivedistributor for their 3D scanners in India. Your Company has also successfully establishedan on-demand part manufacturing facility called "Visual I" (read as Visual Eye)to engage with the customer on an end to end basis from the designing stage until themanufacturing process.
Your Company has two Wholly Owned Subsidiaries in India viz. ProConnect Supply ChainSolutions Limited (ProConnect) and Ensure Support Services (India) Limited (Ensure). YourCompany capitalises on the growth opportunities available in the supply chain solutionarena through ProConnect. Ensure is carrying out the after-sales support service businessfor various IT Hardware and Technology products as well as provides InfrastructureManagement Services. Pursuant to the Order of National Company Law Tribunal ChennaiBench Cadensworth (India) Limited an erstwhile wholly- owned Subsidiary was merged withthe Company with an Appointed Date of April 1 2016. The Order has been made effective onJuly 26 2017 upon complying with all the relevant requirements under the Companies Act2013
ProConnect Supply Chain Solutions Limited
ProConnect provides end to end supply chain solutions to various customers acrossdifferent industry verticals. It focuses on the opportunities in the fast growing ThirdParty Logistics (3PL) segment and is a neutral logistics service provider operating panIndia with 170+ warehouses encompassing 6.3 Mn sq. ft of warehousing space. ProConnectoffers its customers customized supply chain solutions enabling cost optimization whiledriving efficiency and agility. ProConnect's processes are certified with ISO 9001:2008Quality Management System (QMS). Rajprotim Supply Chain Solutions Limited a Subsidiary ofProConnect has also achieved a remarkable growth through customer satisfaction which hasadded few more to its exclusive clientele.
The intent of being a "Preferred Service Provider" is evident fromProConnect's ability to generate incremental revenues from its existing customers as wellas its success in adding new customers. With 165+ customers it is noteworthy that thecontribution from external business (other than Redington) has increased to 79%.ProConnect is well equipped to handle the warehousing & logistics needs of variedindustry verticals. As a testimony to this during the year it ventured into the highlyregulated Pharma industry which requires specialised infrastructure and capabilities.During the frenetic and high volume festive season ProConnect has extended exceptionalsupport to the E-Com players by providing timely and effective warehousing and logisticssupport. ProConnect's Mission Critical Service Division provides Supply Chain Services forproducts requiring strict adherence to stipulated timelines in order to meet thecriticality levels.
With GST now in place ProConnect is expected to witness further growth momentum in itsorganic business as well as through further expansion of key service offerings like inthe transportation segment.
Ensure Support Services (India) Limited
Ensure provides the entire gamut of post sales services and Infrastructure ManagementServices (IMS) focussing on both B2B and B2C businesses. Considering the market dynamicsof IT and Mobile product services Ensure continues to invest in automation for higherefficiency in operations and costs.
In the way forward it intends to continue growing the IMS and Warranty businesseswherein it has strong positioning and invest in the high-end businesses like ManagedSecurity Services and Managed Print Services which offer good growth opportunities.
Redington (India) Investments Limited is an Associate Company of your Company. It has awholly owned subsidiary Currents Technology Retail (India) Limited ("Currents")which operates a chain of Apple retail stores. During the year Currents opened two newsmall-format stores and witnessed higher sales especially in the second half of the yearfacilitated by the Apple product line-up and the new GST regime.
Your Company's overseas operations are carried out through two wholly ownedsubsidiaries; Redington International Mauritius Limited Mauritius (RIML) addressingMiddle East Turkey Africa (META) region and Redington Distribution Pte LimitedSingapore (RDPL) addressing the South Asian region comprising of Sri Lanka BangladeshNepal and Maldives markets.
Redington Gulf FZE a Wholly Owned Subsidiary of RIML addresses more than 26 marketsin Middle East Turkey and Africa. The year saw many significant developments -geopolitical economic taxation et al.
Serious differences between the Arab Quartet (UAE Saudi Arabia Bahrain & Egypt)and Qatar eventually snowballed into an economic blockade on Qatar. Apart from risinglevels of regional uncertainties this also resulted in a significant reduction in revenuefor Redington Gulf from Qatar. The impasse continues and has also brought into questionthe viability of the 6-member Gulf Cooperation Council which includes Qatar.
The Turkish Lira continued to depreciate against the US Dollar due to a variety ofconcerns -political economic situation in the country apart from Turkey's role ingeopolitics. In Kenya presidential elections were held twice due to poll related violenceand other concerns.
A very significant development during year under review was the introduction of Exciseduty and VAT in UAE and KSA. Apart from having an adverse effect on inflation in these twocountries muted demand is expected to slow down domestic sales in UAE for 2-3 quartersbefore picking up again.
Inspite of a changing business and economic landscape Redington Gulf FZE has continuedto deliver record growth in
revenues and profits while as also retaining its position as the largest technologydistributor in the region.
In order to address the growing e-commerce market in Turkey Redington Gulf set up asubsidiary of Arena to focus on this business segment.
Redington Gulf's subsidiary Linkplus Turkey continues to grow with addition of keybrands to its portfolio.
Computing & Printing
The PC market globally bucked the recent trend and recorded a flat growth and followeda similar trend in META as well.
Redington Gulf continued to demonstrate growth in the total number of PCs shipped andcontinues to have the highest market share in the region for key PC vendors such as HPDell and Lenovo.
Its persistent effort to focus on effective working capital management continued tobear results during this year as well.
Enterprise & Infrastructure
Redington Gulf consolidated its hyper convergence portfolio with addition of Nutanix aswell as cybersecurity and emerging security portfolio with Imperva and Palo Alto CloudSecurity distribution contracts in the Middle East. Key steps to demonstrate use cases forBig Data Analytics and IoT in our connected office were initiated as well to showcase tocustomers a very unique solution centre - Red Vault.
Significant contribution made by the Value Added distribution business were dulyrecognized by many global vendors with notable industry accolades such as GlobalInnovation Award for Red Vault VAD of the Year - Reseller ME and VAD of the Year - GECawards by Enterprise MEA.
The Mobility business of Redington Gulf for the year crossed a landmark revenue of USD1 billion further cementing its position as a leading Mobility distributor in MEA. Theyear also saw the addition of the brands to the distribution portfolio including Nokia.
Cloud Computing Big Data Analytics and Internet of Things
In order to provide value added offerings in this very important area Redington Gulfset up a consulting entity - Citrus Consulting to provide niche services such as CloudTransformation Services Data Analytics/Big Data and IoT.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
The details of changes in the Directorships during the Financial Year 2017-18 is givenbelow:
(a) Details of Appointment:
Ms. Chen Yi-Ju was appointed on the Board as an Additional Director (Non-ExecutiveNominee Director) with effect from December 26 2017. Your Company has received noticefrom a member proposing Ms. Chen Yi-Ju's appointment as Director of the Company. AResolution for appointment of Ms. Chen Yi-Ju as a NonExecutive Nominee Director of theCompany is included in the notice of the ensuing Annual General Meeting.
(b) Details of Resignation:
During the year Ms. Suchitra Rajagopalan Independent Director & Mr. LinTai-Yang Non-Executive Director tendered their resignation from the services of theCompany on September 28 2017 and December 26 2017 respectively. The Board took note ofthe same and acknowledged their continued assistance and guidance provided for the growthand welfare of the Company during their tenure as director.
Mr. B. Ramaratnam Non-Executive Director was appointed on the Board w.e.f May 242016. Up to the Financial Year 2015 Mr. Ramaratnam was a partner of Deloitte Haskins& Sells the erstwhile Statutory Auditors of the Company. As per Companies Act 2013and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 to be anIndependent Director a Director inter alia must comply with the requirement that he/shewas not a partner of the Auditors firm for a period of 3 financial years before thefinancial year in which the appointment is considered. Pursuant to this Mr. Ramaratnamwas appointed as a Non-Executive Director. The cooling period of 3 years as mentionedabove was completed on March 31 2018 and he fulfilled the criteria for an IndependentDirector and is eligible for appointment as Independent Director.
On the recommendation of the Nomination and Remuneration Committee the Board ofDirectors at their meeting held on May 21 2018 appointed Mr. Ramaratnam as an IndependentDirector for a period of 5 years with effect from May 21 2018 to May 20 2023 subject tothe approval of the members of the Company in the ensuing Annual General Meeting.
Mr. Udai Dhawan and Mr. Tu Shu-Chyuan Directors of the Company are liable to retireby rotation and being eligible have offered themselves for re-appointment.
Brief particulars of the Directors who are getting appointed / reappointed arefurnished in Annexure A to the Notice of the Annual General Meeting.
At the Annual General Meeting held on July 28 2017 Mr. Raj Shankar was re-appointedas Managing Director for a period of 5 years with effect from July 26 2017. Being aNon-Resident his appointment is subject to the approval of Central Government. TheCompany has filed the requisite forms within due date and awaiting approval.
DIRECTORS' RESPONSIBILITY STATEMENT
In compliance with Section 134(5) of the Companies Act 2013 the Directors of theCompany state that:
a) I n the preparation of the annual accounts for the year ended March 31 2018 theapplicable accounting standards read with the requirements set out under Schedule III tothe Act have been followed and there are no material departures from the same;
b) The Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 31 2018 and of the profit ofthe Company for the year ended on that date;
c) The Directors 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) The Directors have prepared the annual accounts on a going concern' basis;
e) The Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and
f) The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
During the year
CRISIL (An S&P Global Company) has upgraded its longterm ratings on the bankfacilities of the Company to CRISIL AA /Stable' from CRISIL AA- / Positive'. Theshort-term rating and commercial paper have been reaffirmed at CRISIL A1+' (theirhighest rating in this category).
ICRA (A Moody's Investors Service Company) has upgraded its long-term ratings onthe bank facilities of the Company to [ICRA] AA (Stable) from [ICRA] AA- (Stable). Theshort-term rating and commercial paper rating have been reaffirmed at [ICRA] A1+ (theirhighest rating in this category).
These high ratings from the two leading rating agencies benefit the Company in itsborrowing program and helps in reducing the interest costs in India.
The Company's Statutory Auditors BSR & Co. LLP ("BSR") CharteredAccountants (Firm Registration No. 101248W/W - 100022) issued their report on theStandalone and Consolidated Financial Statements of the Company and the same is appendedhere to this Report. The Auditors' Reports on the Standalone and Consolidated FinancialStatements do not contain any qualification reservation or adverse remark.
Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 areport on the Corporate Governance Business Responsibility and Management Discussion andAnalysis is attached to this Annual Report.
Board and its committees
The details of the composition of the Board and its committees and its meetings heldduring the financial year are given in the Corporate Governance Report.
Independent Director Declaration
All the Independent Directors have given declaration as required under Section 149(7)of the Companies Act 2013.
Internal Financial Controls
The Company prepared a comprehensive document on Internal Financial Controls (IFC) inline with the requirement under the Companies Act 2013 which included Entity LevelControls (ELC) Efficiency Controls Risk Controls Fraud Preventative ControlsInformation Technology General Controls (ITGC) and Internal Controls on FinancialReporting (ICFR). A brief note on IFC including ICFR is given in Annexure A to thisReport.
The Board opines that the internal controls implemented by the Company for preparationof financial statements are adequate and sufficient.
The Risk Management Committee monitors the Risk management practices of the Company.The Committee meets periodically and reviews the potential risks associated with theCompany's business and discusses steps taken by the management to mitigate the same.
The Board of Directors reviewed the risk assessment and procedures adopted by theCompany and is of the opinion that there are no risks which may threaten the existence ofthe Company.
Details of Employee Benefit Scheme
The disclosures as required under Regulation 14 of SEBI (Share Based Employee Benefits)Regulations 2014 is given in Annexure B to this Report. The certificate from thestatutory auditors of the Company stating that Employee Share Purchase Scheme 2006Employee Stock Option Plan 2008 and Redington Stock Appreciation Right Scheme 2017 havebeen implemented in accordance with SEBI (Share Based Employee Benefits) Regulations 2014and the resolution passed in the general meeting is also appended thereto.
Information on Conservation of Energy and Technology Absorption
A. Conservation of Energy:
i. Steps taken for Conservation of Energy:
The operations of your Company involve low energy consumption. Adequate measures havehowever been taken to conserve energy by way of optimizing usage of power andvirtualization of Data Centre.
B. Technology Absorption:
i. Effort made towards technology absorption:
Your Company continues to use the latest technologies for improving the quality ofservices it offers. Digitalization adoption and absorption across cloud technologyvirtualization and mobility resulted in better operational efficiencies and TurnaroundTime (TAT). Business Intelligence (BI) and Analytics facilitate key decisions and improvesprocess efficiency.
ii. Import of Technology:
The Company has not imported any technology for its usage during the year.
iii. Expenditure on Research and Development:
Since your Company is involved in the Wholesale Distribution of Technology Productsthere is no expenditure incurred on research and development.
Foreign Exchange earnings and outgo
The details of Foreign Exchange earnings and Expenditure during the year are givenbelow:
Earnings in Foreign Currency:
Expenditure in foreign currency:
Policy on Appointment and Remuneration of Directors
The Board on the recommendation of the Nomination and Remuneration Committee has laiddown a policy on appointment of Directors and remuneration for the Directors KeyManagerial Personnel and Other Employees. The same is enclosed as Annexure C to thisreport.
The above policy is also accessible from the following link:
Performance evaluation of the Board and Committees
The details of annual evaluation made by the Board of its own performance and that ofits committees and individual Directors and performance evaluation criteria forIndependent Director laid down by Nomination and Remuneration Committee are enclosed asAnnexure D to this report.
Particulars of Employees
The Particulars of employees required under Section 197 (12) of the Companies Act 2013and Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 have been given in the Annexure E appended hereto and forms part of this report.
Particulars of Loans given Investments made
Guarantees given and Securities provided
Particulars of loans given and investments made are given under Notes 15 and 6respectively to the Standalone Financial Statements.
Corporate Social Responsibility
The Corporate Social Responsibility (CSR) Committee has formulated and recommended tothe Board a policy on CSR indicating the activities to be undertaken by the Company. Thereport on CSR is given under Annexure F to this report.
Secretarial Audit Report
Pursuant to Section 204 of Companies Act 2013 a Secretarial Audit was conducted by aPracticing Company Secretary Ms. CS R. Bhuvana. The report furnished by the Auditor isenclosed as Annexure G to this report and such report does not contain any qualificationreservation or adverse remark.
The Company has implemented a vigil mechanism to provide a framework for the Company'semployees and Directors to promote responsible and secure whistle blowing. It protectsemployees who raise a concern about serious irregularities within the Company. A briefsummary of the vigil mechanism implemented by the Company is annexed under Annexure H tothis report.
Extract of Annual Return
Extract of Annual Return of the Company in Form MGT-9 is annexed herewith as Annexure Ito this Report.
There are no significant and material orders passed by the regulators or courtsor tribunals impacting the going concern status and Company's operations in future.
The Company has not received any deposits as defined under Companies Act 2013during the Financial Year 2017-18.
The Board decided not to transfer any amount to the reserves.
None of the transactions with related parties falls under the scope of section188(1) of the Act. Information on transactions with related parties pursuant to section134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules 2014 are givenin Annexure J in Form AOC-2.
There are no material changes and commitments affecting the financial positionof the Company which have occurred between March 31 2018 and the date of this report.
The Dividend Distribution Policy pursuant to SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 is disclosed in Annexure K and on the websiteof the Company.
The Company has complied with the applicable secretarial standards.
COMPLIANCE WITH OTHER REGULATIONS Auditors
Certificate on Downstream Investment
With regard to the downstream investments in Indian Subsidiaries the Company is incompliance with the FEMA regulations and the Company has obtained a certificate from thestatutory auditors in this regard.
Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013
Your Company has framed a policy on prevention of Sexual Harassment of Women to ensurea free and fair enquiry process on complaints received from the women employee aboutSexual Harassment. No complaint was reported by any employees pertaining to SexualHarassment during the year under review.
Your Directors take this opportunity to thank the shareholders including the principalshareholders suppliers customers bankers business partners/associates for theirconsistent support and encouragement to the Company. Please join me and the Board membersin conveying our sincere appreciation to all employees of the Company its Subsidiariesand Associates for their hard work and commitment. Their dedication and competence hasensured that the Company continues to be a significant and leading player in the industry.
INDEX OF ANNEXURES TO THE BOARD'S REPORT
A Note on Internal Financial Controls
B Disclosures as required under Regulation 14 of SEBI (Share Based Employee Benefits)Regulations 2014
C Policy on appointment of Directors and remuneration for the Directors Key ManagerialPersonne and Other Employees.
D Details of Performance evaluation of Board & its Committees and the Evaluationcriteria for Independen Directors
E Particulars of employees required under Rule 5 of Companies (Appointment andRemuneration o Managerial Personnel) Rules 2014
F Report on Corporate Social Responsibility
G Secretarial Audit Report
H Summary of the vigil mechanism
I Extract of Annual Return
J Form AOC-2
K Dividend Distribution Policy
The Companies Act 2013 has laid down responsibility on the Directors with respect toInternal Financial Control (IFC). The Institute of Chartered Accountants of India hasissued a Guidance Note which prescribes the framework and risk that needs to be covered bya company regarding IFC.
The Company has envisaged the necessity for a good financial control environment muchahead of the requirement envisioned under the Companies Act 2013. The Company has anexisting framework of IFC which has been documented and tested based on the results ofsuch assessments carried out by Management no reportable material weakness or significantdeficiencies in the design or operation of internal financial controls were observed.
Some of the key controls are:
Entity Level Controls (ELCs):
ELCs are imperative to an organization as it fosters a culture which sets the tone fora sound control environment within the organization. Support of management is essential tobuild and sustain an effective control environment. The Company has perceived thisnecessity and has demonstrated its intention and commitment by adopting COSO Principle(Committee of Sponsoring Organizations of the Treadway Commission) which is followedacross the globe in framing its IFC.
Entity-level controls include
Controls related to the control environment;
Controls over management override Efficiency Controls:
Over the years the Company has built up a reservoir of knowledge in the field ofdistribution which has evolved into discrete business intelligence. The businessintelligence is leveraged to assist in the decision making process by way of efficiencycontrols.
The Company believes that efficiency controls are essential for long term sustenance ofthe Company. Hence higher emphasis is placed on coverage and completeness of efficiencycontrols. Influence of market trends geography the economy and vendor policy areconsidered in formulating efficiency controls.
The Company has a defined process for risk management. Risks are identified based oninternal and external factors. Risk are then analysed and managed based on appetitetransfer mitigation and avoidance.
Insurance coverage factoring etc. is resorted to wherever the risk can betransferred. Risks are mitigated when it is not avoidable. Risks are avoided when itcannot be transferred or mitigated and the returns are not commensurate with the rewards.
Fraud Deterrence Controls:
The Company has identified certain key areas where possibility of fraud could occur.Checks & balances are built into the system during transaction processing to deterfraud. Areas prone to frauds are subject to constant review and audit by the external andthe in-house internal audit team.
Information Technology General Controls (ITGCs):
ITGCs is an integral part of control environment of the Company. ITGCs are broadcontrols over general IT activities such as security and access computer operationssystems development and system changes.
Emphasis is placed on preventive controls and internal checks through the IT system.
Internal Control on Financial Reporting (ICFR):
The Company has developed robust controls for financial reporting. The controls hoversaround two parameters one based on information generated by the Company through itsoperations and two requirements specified under various statutes.
The controls are designed from the point of view of "What could go wrong" orthe inherent risk associated with the particular transaction or account that could distortthe financial statement. The Institute of Chartered Accountants of India has issued aGuidance Note which is considered for detailing the inherent risk associated with aparticular account in addition to the risk perceived by the Company.
A Summary of Status of ESOPs Granted
The position of the existing scheme is summarized as under -
The details of options granted options vested and options outstanding under EmployeeStock Option Plan 2008 are given in note no. 42 of the Standalone Financial Statements.
B The Company uses Fair Valuation method of accounting for Equity based plans.
E Option Movement during the year 2017-18
F Weighted average exercise price of options granted during 2017-18 whose
G Weighted average fair value of options granted during 2017-18 whose
H Employee-wise details of options granted during the financial year 2017-18 to:
I Method and Assumptions used to estimate the fair value of options granted during theyear: The fair value has been calculated using the Black Scholes Option Pricing model
DETAILS RELATED TO REDINGTON STOCK APPRECIATION RIGHT SCHEME 2017 (SAR SCHEME)
A Details related to SAR
Description of the SAR Scheme: The Company has approved the grant of Stock AppreciationRights (SARs) to the eligible employees of the Company and its Subsidiaries under theRedington Stock Appreciation Right Scheme 2017. The maximum number of shares to be issuedagainst the SARs shall not exceed 8681681 equity shares of Rs. 2/- each as adjusted forany changes in the capital structure of the Company.
The position of the existing scheme is summarized as under -
The details of SARs granted during the year is given in note 43 of the StandaloneFinancial statement. The scheme is administrated by the Compensation Committee and noTrust has been created for this purpose.
B SAR Movement during the year 2017-18
C Employee-wise details of SARs granted during the financial year 2017-18 to:
(i) Senior managerial personnel:
* The Exercise price is Rs. 2 per equity share.
DETAILS RELATED TO EMPLOYEE SHARE PURCHASE SCHEME 2006:
The Company offered shares to eligible employees under Redington (India) Limited -Employee Share Purchase Scheme 2006.
A trust in the name and style of "Redington Employees Share Purchase SchemeTrust" was formed for the purpose of administering
the scheme. All the obligations of the trust have been fulfilled and there are nooutstanding shares as on March 312018. Pursuant
to the same the Board of Directors at their meeting held on May 21 2018 haveapproved the dissolution of the said trust.
INDEPENDENT AUDITOR'S CERTIFICATE IN CONNECTION WITH THE EMPLOYEE SHARE PURCHASESCHEME 2006 EMPLOYEE
STOCK OPTION PLAN 2008 AND STOCK APPRECIATION RIGHTS SCHEME 2017 OF REDINGTON (INDIA)LIMITED (THE COMPANY')
1. This certificate is issued in accordance with the terms of our engagement letterdated September 11 2017.
2. We were informed by Redington (India) Limited (the Company') that the Companyrequires a certificate from its statutory auditors for the year ended March 31 2018confirming that the Employee Share Purchase Scheme 2006 Employee Stock Option Scheme2008 and Stock Appreciation Rights Scheme 2017 (the Schemes') were implemented inaccordance with the Securities and Exchange Board of India (Share based Employee Benefits)Regulations 2014 (SEBI SBEB regulations') read with the circular CIR/CFD/POLICYCELL/2/2015 dated June 16 2015 and in accordance with the resolutions of the Companypassed in the general meeting approving the Schemes.
3. The Company's management is responsible for maintaining the information anddocuments which are required to be maintained under the above regulations. Implementingthe Schemes in accordance with the SEBI SBEB regulations and in accordance with theresolutions passed in the general meeting is the responsibility of the Company.
4. The Company's management is also responsible for compliance with the SEBI SBEBregulations read with the circular CIR/ CFD/POLICY CELL/2/2015 dated June 16 2015 withrespect to the Schemes.
5. Pursuant to requirements of above mentioned guidelines our responsibility is toprovide a reasonable assurance based on our examination of records documents andinformation and explanation given to us by the management whether the Schemes are incompliance with the above mentioned SEBI SBEB Regulations and are in accordance with theresolutions passed in the general meeting of the Company.
6. We conducted our examination in accordance with the Guidance Note on Reports orCertificates for Special Purposes issued by the Institute of Chartered Accountants ofIndia (ICAI) and the Standards on Auditing specified under the Section 143 (10) of theCompanies Act in so far as applicable for the purpose of this certificate. The GuidanceNote on Reports or certificates for Special Purposes requires that we comply with theethical requirements of the Code of Ethics issued by the ICAI.
7. In connection with the above we have performed the following procedures:
a. Read the Schemes provided to us by the Company;
b. Read the resolutions passed at the meeting of the Board of directors;
c. Read the shareholders' resolution passed at the general meeting; and
d. Obtained required explanation and representation from the management.
8. We have complied with the relevant applicable requirements of the Standard onQuality Control (SQC) 1 Quality Control for Firms that Perform Audits and Reviews ofHistorical Financial Information and Other Assurance and Related Services Engagements.
9. In our opinion and to the best of our information and according to the informationand explanations given to us and the representation provided by the Management we certifythat the Company has implemented the Schemes in accordance with the SEBI SBEB regulationsand in accordance with the resolution of the Company passed at the general meeting.
Restriction on use
10. This certificate is addressed and provided to the members of the Company solely forthe purpose to enable the Company to comply with the requirement of the SEBI SBEBregulations and it should not be used by any other person or for any other purpose.Accordingly we do not accept or assume any liability or any duty of care for any otherpurpose or to any other person to whom this certificate is shown or into whose hands itmay come without our prior consent in writing.
PART A - POLICY ON APPOINTMENT OF DIRECTORS
For the Board of a Company to be effective and efficient it should comprise ofindividuals who have professional qualifications and proven experience in their respectivefields of specialization.
The Nomination and Remuneration committee evaluates the Directors and recommends theBoard for their appointment / reappointment and ensures optimum composition of Board.While recommending appointment of an Individual as a Director on the Board the committeehas to review the following factors including the others:
Diversity of the Board
Qualification and positive attributes
Independence of Directors (in the case of Independent Directors)
Diversity of Board
Diversity in the Board enhances diversity of ideas. Having this ideology in mind theCommittee shall take into consideration various factors including the following to ensureBoard Diversity:
Optimum composition of Executive Directors and Non-Executive Directors on theBoard;
Professional experience and expertise in different areas of specialization;
Diversity criteria including but not limited to gender age ethnicity racereligion culture and geographic background;
Academic qualification functional expertise personal skills and qualities
The ultimate decision is based on merit and contribution that the selected candidatesbring to the Board.
Qualification and positive attributes
The committee may also assess whether they meet qualification criteria and the positiveattributes set below:
Financially literate which means he/she possess the ability to read andunderstand basic financial statements i.e. balance sheet Statement of Profit and Lossand statement of cash flows.
Possess high levels of personal professional integrity
Have appropriate knowledge / experience about the industry and the Company orability to acquire required knowledge and understanding.
Able to provide guidance to the Board in matters of business finance strategyand corporate governance
Able to analytically look into the issues placed before the Board and providestrategies to solve them
Possess better communication skills and ability to work harmoniously with fellowDirectors and management;
Willingness to devote the required time including being available to attendBoard and Committee meetings;
Independence of Directors (only in the case of Independent Directors)
Any relationship between the Company and Directors other than in the normal course willaffect the Independence of Directors in many ways. The Committee shall assure that thecandidate proposed for the position of Independent Director meets the minimum criteria forIndependence set out under Section 149 of the Companies Act 2013. It shall also assess ifthe candidate would be able to meet the standards mentioned in the code for IndependentDirectors under the Companies Act 2013.
PART B POLICY ON REMUNERATION TO BOARD OF DIRECTORS KEY MANAGERIAL PERSONNEL ANDOTHER EMPLOYEES Introduction
With the view to ensure that the Company attracts motivates and retains qualifiedindustry professionals for the Board and Management in order to achieve its strategicgoals this policy is designed to encourage behavior that is focused on long-term valuecreation while adopting the highest standards of good corporate governance. Theremuneration policy of the Company is aimed at rewarding performance based on review ofachievements on a regular basis and is in consonance with the existing industry practices.
This policy is now re-framed to ensure that the requirements of Section 178 of theCompanies Act 2013 is met and it intends to define general guidelines for the Company'spay to the Board of Directors Key managerial Personnel and Senior Management and otheremployees.
Remuneration of Directors
The Board of Redington (India) Limited comprises of three categories of Directors viz.Executive Directors Non Executive Directors and Non Executive Independent Directors.
The Remuneration to Executive and Non Executive Directors are governed by theprovisions of Companies Act 2013 and the rules framed thereunder and the notificationsissued by the Ministry of Corporate Affairs from time to time.
The Executive Director's compensation comprises of two broad components - FixedRemuneration and a performance-linked variable component. The fixed remuneration isdetermined based on market standards and the Company's specific needs from time to time.The Board of Directors evaluate the fixed remuneration annually based on the results fromthe previous period and with due consideration to the trend within the market standards.
Variable Components of the Executive Directors includes performance linked bonus whichwill be decided by the Board based on the performance criteria with the objective tocreate long term shareholder value.
Executive Directors do not receive any sitting fees for attending the Board andCommittee meetings.
Non Executive Directors
The Non Executive Directors including Independent Directors are paid commission uptoone percent of the profits as may be decided by the Nomination and Remuneration committeeand the Board of Directors. This profit is to be shared amongst the Non ExecutiveDirectors.
Non Executive Independent Directors are eligible for fixed amount of sitting fees forattending meeting of the Board of Directors and its committees as allowed under theCompanies Act 2013.
Reimbursement of expenses
All expenses incurred by the Board of Directors for attending the meetings and eventsof the Company are reimbursed at actuals. Remuneration to Key Managerial Personnel andSenior Management Personnel
It is to be ensured that Key Managerial Personnel (KMP) and Senior Management Personnelare paid as per the trend prevalent in the similar industry nature and size of business.The level and components of remuneration is reasonable and sufficient to attract andretain the KMPs and Senior Management.
The remuneration for Key Managerial Personnel and Senior Management comprises of twobroad components i.e Fixed and Variable.
The fixed component is paid on a monthly basis and the variable component is paid onthe degree of their achieving "Key Result Areas". Executive Directors on yearlybasis on discussion with the KMP and senior management personnel frame the Key ResultArea (KRA). The KRA is fixed with an aim to achieve the overall objectives of the Company.
Remuneration to other employees
To have a strong bondage with the Company and long time association of the employeesthe management while fixing remuneration to the employee ensures that it:
Appropriately compensate employees for the services they provide to the Company;
Attract and retain employees with skills required to effectively manage theoperations and growth of the business;
Motivate employees to perform in the best interests of the Company and itsstakeholders
In consonance with this well formulated principle the compensation of employees hasbeen linked to performance. However for compensation above certain limits have variablecomponent in the salary structure and are linked to Key Result Area (KRA) fixed to theemployees.
Share/Stock based compensation
To attract and retain the talent motivate employees to achieve business goals rewardperformance with ownership and align employees interests with those of shareholders theCompany endeavours to create wealth to the Directors and employees by way of share/stockbased compensation framed by the Company. Prior to and post listing of the shares of theCompany on the stock exchanges the Company formulated various schemes to offershares/stock based compensation to the Directors and employees.
To protect the interest of the Directors and employees while carrying out their dutieswhich are exposed to various legal and regulatory requirements the Company has obtainedvarious insurance policies such as Directors & Officer's Liability Insurance etc. TheProfessional Indemnity policies are intended to protect the Directors and executives fromlegal action. The policy normally covers legal costs for defending civil suits.
ANNEXURE D: PERFORMANCE EVALUATION PROCESS & CRITERIA
Nomination and Remuneration Committee (the Committee) of Board of Directors appointedan external agency and availed their assistance in designing implementing analyzing andreporting of performance evaluation of the Board and its committees and the membersthereof in compliance with the statutory requirements.
With their assistance the Committee has formulated criteria and questionnaires toevaluate the performance of Board its committees and Individual Directors including theIndependent Directors.
The performance evaluation criteria is determined by the Committee taking intoconsideration the composition of the board role of the Directors and committees etc. Italso includes Board's culture stewardship of the board participation and contribution bythe individual Directors during Board Meetings interface with the senior management teamand independence of behaviour and judgement etc.
Based on the feedback received on the questionnaires the performance of every Directorwas evaluated. Independent Directors at their separate meeting carried out evaluation onthe performance of Non Independent Directors and Board as a whole. Chairman's evaluationwas carried out by entire Board of Directors including the Independent Directors.
PARTICULARS PURSUANT TO SECTION 197(12) AND THE RELEVANT RULES:
1. Total Remuneration entitled (paid/payable) for the entire Financial year 2017-18 isconsidered.
2. The remuneration received by Directors from the Company is only considered.
A. The ratio of the remuneration of each Director to the median remuneration of theemployees of the Company for the financial year;
* Resigned from the Board on September 28 2017.
B. The percentage change in remuneration of each Director Chief Executive OfficerChief Financial Officer Company Secretary or Manager if any in the financial year:
* Ms. Suchitra Rajagopalan resigned from the Board w.e.f. September 28 2017. Henceremuneration is not comparable.
Mr. Raj Shankar Managing Director of the Company is being paid remuneration from theoverseas wholly owned subsidiary of the Company. Hence the same is not considered here.
C. Percentage increase in median remuneration of employees in the financial year: 5.5%
D. Number of permanent employees on the rolls of Company as on March 31 2018: 1774
E. Average percentile increase already made in the salaries of employees other than themanagerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration;
Average percentile increase made in the salaries of employees other than the managerialpersonnel in the last financial year
i.e. 2017-18 was 10.6%. Increase in managerial remuneration (Whole Time Director) isgiven above.
F. It is affirmed that the remuneration is as per the remuneration policy of theCompany.
G. Particulars of Employees:
Details of Top 10 employees as on March 31 2018 in terms of remuneration drawn duringFY 17-18:
* Employed throughout the financial year 2017-18 and in receipt of remuneration notless than Rs. 1.02 Crore.
Details of employees who were employed for a part of the financial year and were inreceipt of remuneration for any part of that year at a rate which in the aggregate wasnot less than Rs. 8.5 Lakhs per month: