To the Members of Titan Company Limited
The Directors are pleased to present the Thirty Fifth Annual Report and the AuditedFinancial Statements for the year ended 31st March 2019:
1. FINANCIAL RESULTS
(#Rs# in Crore)
| ||Standalone || ||Consolidated || |
| ||2018-2019 ||2017-2018 ||2018-2019 ||2017-2018 |
|Revenue from Operations ||19070 ||15656 ||19779 ||16156 |
|Other Income ||178 ||86 ||183 ||89 |
|Total Income ||19248 ||15742 ||19961 ||16245 |
|Expenditure ||17068 ||13922 ||17787 ||14511 |
|Profit before exceptional items finance costs depreciation and taxes ||2181 ||1820 ||2174 ||1734 |
|Finance Costs ||44 ||48 ||53 ||53 |
|Depreciation / Amortisation ||139 ||110 ||163 ||131 |
|Profit before share of profit/(loss) of an associate and joint venture and exceptional items and taxes ||1997 ||1662 ||1959 ||1549 |
|Share of profit/(loss) of an associate and Jointly controlled entity ||- ||- ||(2) ||(3) |
|Profit before exceptional items and taxes ||1997 ||1662 ||1957 ||1546 |
|Exceptional items ||70 ||92 ||- ||17 |
|Profit before taxes ||1927 ||1571 ||1957 ||1530 |
|Income taxes || || || || |
|- Current ||602 ||446 ||618 ||450 |
|- Deferred ||(49) ||(39) ||(49) ||(22) |
|Profit for the year ||1374 ||1163 ||1389 ||1102 |
|Attributable to || || || || |
|- Shareholders of the Company ||1374 ||1163 ||1404 ||1130 |
|- Non-controlling interests ||- ||- ||(16) ||(28) |
|Profit brought forward ||1903 ||1268 ||1792 ||1190 |
|Appropriations || || || || |
|Deletion on account of sale of subsidiary ||- ||- ||4 ||- |
|Acquisition of non-controlling interest in subsidiary ||- ||- ||31 ||- |
|Dividend on Equity Shares (excluding tax) ||(333) ||(231) ||(333) ||(231) |
|Tax on dividends ||(68) ||(47) ||(68) ||(47) |
|Transfer to general reserve ||- ||(250) ||- ||(250) |
|Closing Balance in Retained Earnings ||2876 ||1903 ||2759 ||1792 |
1a) STANDALONE NUMBERS:
During the year under review the Company's total revenue grew by 21.81% to D 19070compared with D 15656 crore in the previous year.
The Company had invested D 145 crore in the Inter
Corporate Deposits issued by Infrastructure Leasing & Financial Services Limited(IL&FS Group). Owing to the defaults made by the IL&FS Group effective October
2018 the Company has based on assessment made pertaining to recovery of theseinvestments in the Group has made provision for the entire investment of D 145 crore inFY 2018-19.
During the year the Company took an additional impairment of D 70 crore pertaining toinvestment in Favre Leuba AG a wholly owned subsidiary after considering the pastperformance of the brand.
Profit before tax grew by 22.7 % to D 1927 crore and the net profit increased by 18.2% to D 1374 crore despite provisions made for IL&FS and Favre Leuba AG.
The year witnessed aggressive expansion of the Company's retail network. As on 31stMarch 2019 the Company had 1595 stores with over 2.05 million square feet of retailspace delivering a retail turnover of over D 19000 crore.
The Watches division of the Company recorded revenue of D 2441 crore a growth of14.8% which was achieved through meticulous planning and execution of key initiatives. Therevenue from Jewellery division grew by 23% touching D 16030 crore. The revenue from
Eyewear division grew by 23.2 % to D 511 crore. The revenue from other divisionsrecorded a sale of D 133 crore a growth of 40.4%.
New Businesses viz Taneira and SKINN recorded revenue of D 80.59 crore a growth of40.5% over the previous year. While Taneira grew by 51% SKINN recorded a growth of 40%.
1b) CONSOLIDATED NUMBERS
At the consolidated level the revenue stood at Rs. 19779 crore as against D 16156crore in FY 2017-18.
This was primarily due to robust performance of Titan Engineering & AutomationLimited (TEAL) a wholly owned subsidiary and Carat Lane Trading Private Limited asubsidiary company. The details of the performance of the Company's subsidiaries arecovered in point 15 below of this Report.
The Management Discussion and Analysis report which is attached dwells into theperformance of each of the business division and the outlook for the current year.
2. INTERNATIONAL OPERATIONS
Business Environment in the international markets remained unfavourable in Q4 anddeclining trends were witnessed in the category across countries. For Titanhigh-contributing Middle East markets continued to decline while younger markets like thePhilippines Thailand and the US stayed on the plan to deliver impressive retail growthson the back of several sales & marketing initiatives. The business delivered thebudgeted bottom-line for FY18-19 but steep declines in Middle East markets left theoverall business with a 10% decline for the year. FY19-20 plans will continue the journeyof reducing dependence on Middle East markets and continue with investments in newerconsumer bases (locals across Middle East) markets (US EU) and channels (e-commerce).
The Directors are pleased to recommend the payment of dividend on equity shares at therate of 500% (i.e. D 5 per equity share of D 1 each) subject to approval by theshareholders at the ensuing Annual General Meeting (AGM).
4. TRANSFER TO GENERAL RESERVE
The Board of Directors has decided to retain the entire amount of profits for FY2018-19 in the Retained Earnings.
Excellent top line growth and good working capital management helped the Companygenerate significantly higher levels of cash in the financial year. This resulted insubstantially higher interest and other income from the surplus cash generated. Howeveras part of the treasury operations which were in line with the Investment Policy approvedby the Board the Company during the year had also invested D 145 crore in the 6 monthinter corporate deposits with the IL&FS Group based on the high credit ratingsassigned to them and assessment of risk profile at the time of investing. Unfortunatelythe financial distress of the IL&FS Group was made evident after credit ratingagencies downgraded the ratings to default status from the AAA they had assigned earlierwhen the Company had invested. The Company has therefore as a measure of prudence fullyprovided for this investment. The Company has also revisited its Investment Policy andcreated an Investment Committee of the Board to monitor investments going forward.
The Reserve Bank of India issued a circular in 2018 stopping companies from hedgingtheir gold exposures in commodity exchanges outside the country effective July 2018. TheCompany had to therefore revert to hedging its gold exposure which has also gone upsignificantly with the Company's gold exchange programs doing very well in the localcommodity exchanges. Given the current status of development of the market the Company isnot able to hedge gold for longer periods as required making the process inefficient. TheCompany is working with authorities to remedy this situation as early as possible
6. PUBLIC DEPOSITS
The Jewellery Division of the Company was successfully operating customer schemes forjewellery purchases for many years. When the Companies Act 2013 (the "Act")became substantially effective from 1st April 2014 the Company had aroundseven lakh subscribers contributing to these schemes. However these schemes were exemptunder the Companies Act 1956 relating to acceptance of public deposits as such schemeswere not covered in the definition of deposits. Under the Act and Rules made there under(Deposit Regulations') the scope of the term "deposit" was enlarged andtherefore a view was taken that the jewellery purchase schemes offered by the Company toits customers would be treated as public deposits. Thereupon the Company discontinuedfresh enrolment of subscribers and initiated steps to close the erstwhile customerschemes which were wound down by 31st August 2014.
Under the Deposit Regulations as amended from time to time a company is permitted toaccept deposits subject to applicable provisions to the extent of 10% of the aggregate ofthe paid-up share capital securities premium account and free reserves from its Members& 25% of the aggregate of the paid-up share capital securities premium account andfree reserves from the Public after prior approval by way of special resolutions passed bythe Members in this regard. Requisite approval was obtained from the Members of theCompany and a new customer scheme for jewellery purchase was launched in November 2014 incompliance with the Deposit Regulations.
The details relating to deposits covered under Chapter V of the Companies Act 2013are as under: (a) accepted during the year: D 2175.37 crore (b) remained unpaid orunclaimed as at the end of the year: D 1273.32 crore (c) whether there has been anydefault in repayment of deposits or payment of interest thereon during the year and if sonumber of such cases and the total amount involved- (i) at the beginning of the year: Nil(ii) maximum during the year: Nil (iii) at the end of the year: Nil There are no depositsthat have been accepted by the Company that are not in compliance with the requirements ofChapter V of the Act.
7. MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN END OF THEFINANCIAL YEAR AND DATE OF REPORT
There have been no material changes and commitments affecting financial positionbetween end of the financial year and the date of the report.
8. SIGNIFICANT AND MATERIAL ORDERS
There are no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and Company's operations in future.
9. PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
Details of loans guarantees and investments covered under the provisions of Section186 of the Act are given in the notes to the financial statements.
During the year under review the Company had invested C 99.99 crore in purchase ofadditional equity stake in Carat Lane Trading Private Limited (Carat Lane). In additionthe Company has during the year provided corporate guarantees amounting to C 40 crore tobanks on behalf of Carat Lane.
The Company has not given any loans during the year under review.
10. INTEGRATED REPORT
Last year the Company has taken its first step to move towards Integrated Reporting inline with its commitment to voluntarily disclose more information to the stakeholders onall aspects of the Company's business. Accordingly the Company had introduced key contentelements of Integrated Reporting <IR> aligned to the International IntegratedReporting Council Framework (IIRC) in the Annual Report of the previous year and hasdisclosed more qualitative data in the Annual Report of this year. Similar to last yearthe relevant information has been provided in this year's Annual Report as well.
11. ADEQUACY OF INTERNAL CONTROLS AND COMPLIANCE WITH LAWS
The Company during the year has reviewed its Internal Financial Control (IFC) systemsand has continually contributed to establishment of more robust and effective IFCframework prescribed under the ambit of Section 134(5) of Companies Act 2013. Thepreparation and presentation of the financial statements is pursuant to the controlcriteria defined considering the essential components of Internal Control - as stated inthe "Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI)".
The control criteria ensures the orderly and efficient conduct of the Company'sbusiness including adherence to its policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information.
Based on the assessment carried out by the Management and the evaluation of the resultsof the assessment the Board of Directors are of the opinion that the Company has adequateInternal Financial Controls system that is operating effectively as at 31stMarch 2019.
There were no instances of fraud which necessitates reporting of material misstatementto the Company's operations.
There has been no communication from regulatory agencies concerning non-compliance withor deficiencies in financial reporting practices.
12. AUDIT COMMITTEE
The details pertaining to the composition of the audit committee and its role isincluded in the Corporate Governance Report which is a part of this report.
13. RISK MANAGEMENT
Pursuant to the requirement of Regulation 21 of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 (the "LODR Regulations") the Companyhas constituted a Risk Management Committee (RMC) consisting of Board members and seniorexecutives of the Company. The Company has in place a Risk Management framework toidentify evaluate business risks and challenges across the Company both at corporatelevel as also separately for each business division. The top tier of risks for the Companyis captured by the operating management after extensive deliberations on the nature of therisk being a gross or a net risk and thereafter in a prioritized manner presented to theBoard for their inputs on risk mitigation/ management efforts. Based on this framework aRisk Management policy has been adopted. The RMC engages in the Risk Management processand has set out a review process so as to report to the Board the progress on theinitiatives for the major risks of each of the businesses that the Company is into.
The Risk Register of each Business gets updated on an annual basis and is placed fordue discussions at Board meetings and appropriateness of the mitigation measures to ensurethat the risks remain relevant at any point in time and corresponding mitigation measuresare optimized.
Further as mandated under the amendments to the LODR Regulations in December 2018 theRisk Management Committee specifically covers cyber security risk assessment as part ofits review at periodic intervals.
14. RELA PARTY TRANSACTIONS TED
There are no materially significant related party transactions made by the Company withPromoters Directors Key Managerial Personnel or other designated persons which may havea potential conflict with the interests of the Company at large. All related partytransactions are placed before the Audit Committee and the Board for approval ifapplicable. Prior omnibus approval of the Audit Committee is obtained for the transactionswhich are of a foreseen and repetitive nature. The transactions entered into pursuant tothe omnibus approval so granted are verified by the Internal Auditor and a statementgiving details of all related party transactions is placed before the Audit Committee andthe Board of Directors for their approval if applicable on a quarterly basis. TheCompany has developed an Internal Guide on Related Party Transactions Manual andprescribed Standard Operating Procedures for purpose of identification and monitoring ofsuch transactions. The Policy on Related Party Transactions as approved by the Board isuploaded on the Company's website. None of the Directors has any pecuniary relationshipsor transactions vis--vis the Company. There were no transactions during the year whichwould require to be reported in Form AOC-2.
15. SUBSIDIARIES / JOINT VENTURE / ASSOCIATE COMPANY
As on 31st March 2019 the Company had the following subsidiaries/Associate/ Joint Venture:
|Name of the Subsidiary/ Associate/ Joint Venture || |
|1 Favre Leuba AG Switzerland ||Wholly-owned Subsidiary |
|2 Titan Watch Company Limited Hong Kong ||Wholly-owned Subsidiary |
|3 Titan Engineering & Automation Limited (TEAL) ||Wholly-owned Subsidiary |
|4 Carat Lane Trading Private Limited ||Subsidiary |
|5 Green Infra Wind Power Theni Limited ||Associate |
|6 Montblanc India Retail Private Limited ||Joint Venture |
Titan TimeProducts Limited (TTPL) ceased to be a subsidiary of the Company with effectfrom 18th June 2018 consequent upon the Company transferring its entire stakein TTPL.
During the year 2018-19 Favre Leuba AG had registered a turnover of CHF 1 million i.eD 6.82 crore against the previous year's figures of CHF 0.9 million i.e. D 6.05 crore andloss of CHF 7.37 million i.e. D 52.01 crore (2017-18: 7.5 million i.e. D 50.21 crore).During the year FY 2018-19 the Company has invested CHF 7 million in Favre Leuba AG.
Titan Watch Company Limited is a subsidiary of the Company's subsidiary Favre Leuba AGand hence is a subsidiary of the Company. It has a capital of HK
$ 10000 and no Profit and Loss account has been prepared as it has not yet commencedbusiness.
During the year 2018-19 TEAL generated sales income of D 343.21 crore against theprevious year's figures of
D 252.13 crore and the profit before tax was D 58.06 crore against the previous year'sfigures of D 19.70 crore.
Carat Lane Trading Private Limited (Carat Lane) is engaged in the business ofmanufacture of jewellery products and has significant online presence. During the year2018-19 Carat Lane has registered a turnover of D 416.39 crore (previous year: D 290.18crore) and the loss amounted to D 46.13 crore against the previous year's figures (loss)of D 83.88 crore. During the year FY
2018-19 the Company had invested D 99.99 crore in purchase of additional equity stakein Carat Lane and accordingly increased its holding to 69.47%.
The annual accounts of these subsidiary companies/JV were consolidated with theaccounts of Titan Company Limited for 2018-19. None of these subsidiary companies declareda dividend in 2018-19.
The Company holds a 49% equity stake in Montblanc India Retail Private Limited(Montblanc) a joint venture entered into with Montblanc Services B.V. the Netherlandsfor operation of retail boutiques in India for Montblanc products. Montblanc registered aturnover of D 57.04 crore and the loss amounted to D 1.22 crore
(Profit After Tax).
The Company holds 26.79% stake in Green Infra Wind Power Theni Limited which suppliesenergy to the Company.
The statement containing salient features of the financial statement ofsubsidiaries/associate company/joint ventures in Form AOC-1 forms part of the AnnualReport.
16. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
The particulars as prescribed under sub-section (3) (m) of Section 134 of the Act readwith Rule 8 of the Companies (Accounts) Rules are furnished in Annexure-I to the
17. CORPORATE SOCIAL RESPONSIBILITY (CSR)
In compliance with Section 135 of the Act the Company has undertaken CSR activitiesprojects and programs as provided in the CSR policy of the Company and as identified underSchedule VII to the Act and excluding activities undertaken in pursuance of its normalcourse of business. In addition to the projects specified as CSR activities under Section135 of Act the Company has also carried out several other sustainability / responsiblebusiness initiatives and projects.
A report on CSR is attached in Annexure-II.
18. EXTRACT OF ANNUAL RETURN
As provided under Section 92(3) of the Act the extract of annual return is given inAnnexure-III in the prescribed
Form MGT-9 which forms part of this Report.
19. DIVIDEND DISTRIBUTION POLICY
The Dividend Distribution Policy is annexed as
20. VIGIL MECHANISM
The Company has a whistle blower mechanism wherein the employees can approach theManagement of the Company (Audit Committee in case where the concern involves the SeniorManagement) and make protective disclosures to the Management about unethical behaviouractual or suspected fraud or violation of the Company's Code of Conduct and InsiderTrading Code. The Whistle Blower Policy requires every employee to promptly report to theManagement any actual or possible violation of the Code or an event an employee becomesaware of that could affect the business or reputation of the Company. The disclosuresreported are addressed in the manner and within the time frames prescribed in the policy.A mechanism is in place whereby any employee of the Company has access to the Chairman ofthe Audit Committee to report any concern. No person has been denied access to the
Chairman to report any concern. Further the said policy has been disseminated withinthe organisation and has also been posted on the Company's website.
21. SECRETARIAL STANDARDS
The Directors state that the applicable Secretarial Standards i.e SS-1 and SS-2 issuedby the Institute of Company Secretaries of India relating to Meeting of Board ofDirectors and General Meetings respectively have been duly complied with.
22. DISCLOSURES AS PER THE SEXUAL
HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION AND REDRESSAL) ACT 2013
The Company has been at the forefront in ensuring a safe and secure work place for allits employees. In particular as per the mandated policy of Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013 and the rules thereunderprevention and redressal of complaints of sexual harassment at workplace are activelycascaded. The Company has adopted a zero tolerance for sexual harassment at workplace.
The selection and training of Internal Complaints Committee (ICC) members follows astringent process to ensure that the most suitable person is part of the committee. Thisyear the Company has also empaneled its unionized employees at each of its manufacturingunits for a better representation and reach of the employees. All members undergo thePrevention of Sexual Harrasment (POSH) training and are equipped to handle communicationas well as redressal.
During the year under review the total number of ICC members was at 64 as against 43in 2016-17 and 2017-18.
All stakeholders viz. employees contract and agency hires vendors and associates arepart of the communication cascades. The cascades are designed in a simple but effectivemanner by the use of regional theatre to demonstrate violations and the consequences. Thecore Ethics team comprising of the ICC Chairperson the Chief Ethics Counsellor (CEC) andthe regional heads or manufacturing heads are part of the Q&A at the end of thesession at their respective locations. This has impacted positively with more and morestakeholders becoming familiar with the policy and gaining confidence to raise concernswith the respective office bearers. About 24 such events were held across the countrycovering over 10000 stakeholders.
In terms of engagement a short film competition was launched for the employees toparticipate and share their understanding of policies and unique situations of violationsthat may arise in their eco-systems in the form of a 2 minute silent film. This has gainedpopularity with an increased participation over last year. The details of the short filmcompetition are as under:
|Year ||Registrations ||Submissions Ethical Violation Films ||Submissions POSH _lms ||Winners |
|2017-18 ||100 ||13 ||10 ||8 |
|2018 -19 ||148 ||22 ||13 ||7 |
During the financial year 2018-19 the Company had received 8 complaints on sexualharassment 6 were disposed-off with appropriate action taken and 2 complaints remainpending as of 31st March 2019.
23. DETAILS IN RESPECT OF FRAUDS REPORTED BY AUDITORS UNDER SUB-SECTION (12) OF SECTION143 OTHER THAN THOSE WHICH ARE REPORTABLE TO THE CENTRAL GOVERNMENT
The Statutory Auditors of the Company have not reported any fraud as specified underthe second proviso of Section 143(12) of the Companies Act 2013 (including any statutorymodification(s) or re-enactment(s) for the time being in force).
24. CORPORATE GOVERNANCE
As per LODR Regulations Management Discussion and Analysis Corporate GovernanceReport and Practicing Company Secretary's Certificate regarding compliance of conditionsof Corporate Governance forms part of this Report.
25. BUSINESS RESPONSIBILITY REPORT
As per LODR Regulations a Business Responsibility Report is attached and forms part ofthis Report.
26. DIRECTORS AND KEY MANAGERIAL PERSONNEL
Mr. T.K. Balaji Mrs. Hema Ravichandar Mrs. Ireena Vittal Mr. Ashwani Puri Mr. BSanthanam and Mr. Pradyumna Vyas were the Independent Directors during the Financial Year2018-19 and all have given declarations that they continue to meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 & Regulation16(1)(b) of the LODR Regulations and that they are not debarred from holding the office ofdirector by virtue of any SEBI order or any other such authority.
Prof. Das Narayandas Independent Director resigned from the Board effective 25thJanuary 2019 due to his increased pre-occupation with his academic assignments at HarvardBusiness School.
Mr. Pradyumna Vyas was appointed as an Additional
Director and Independent Director on the Board of the Company with effect from 25thMarch 2019.
In accordance with the provisions of the Act and in terms of the Memorandum andArticles of Association of the Company Mr. Harish Bhat retires by rotation at the AnnualGeneral Meeting.
Ms. Shilpa Prabhakar Satish was appointed as an Additional Director on the Board of theCompany on 29th March 2018 but subsequently resigned effective 10thMay 2018.
Mr. Arun Roy was appointed as an Additional Director on the Board of the Company witheffect from 26th November 2018.
Mr. N Muruganandam was appointed as an Additional Director on the Board of the Companyon 14th March 2019 in place of Mr. K Gnanadesikan whose nomination waswithdrawn on 14th March 2019 by TIDCO.
The Board on the basis of the recommendations made by the Nomination &Remuneration Committee has recommended for your approval appointment of Mrs. HemaRavichandar upto 31st July 2020 and
Mrs. Ireena Vittal upto 29th January 2023 as Independent Director for asecond term.
Member's attention is drawn to Item No. 5 of the Notice for the appointment of Mr. NMuruganandam as a Director of the Company to Item No. 6 of the Notice for the appointmentof Mr. V Arun Roy as a Director of the Company to Item No. 7 of the Notice forappointment of Mr. Pradyumna Vyas as an Independent Director of the Company to Item No. 8of the Notice for re-appointment of Mrs. Hema Ravichandar upto 31st July 2020and to Item No. 9 for re-appointment of Mrs. Ireena Vittal for a period upto 29thJanuary 2023.
Mr. T K Balaji was appointed at the Annual General Meeting of the Company held on 1stAugust 2014 for a period of 5 years and will be holding his office till 31st July2019.
None of the Directors is related to each other within the meaning of the term"relative" as per Section 2(77) of the Act.
27. DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONNEL WHO WERE APPOINTED OR HAVE
RESIGNED DURING THE YEAR
Details of directors who were appointed or resigned during the year are covered inpoint No. 26 of the Board's Report.
During the year Mr. A R Rajaram - Vice President - Legal
& Company Secretary retired from the services of the Company effective 30thJune 2018 and Mr. Dinesh Shetty was appointed as the General Counsel & CompanySecretary effective 3rd August 2018. Pursuant to the provisions of Section 203of the Act Mr. Bhaskar Bhat-Managing Director Mr. S. Subramaniam - Chief FinancialOfficer and Mr. Dinesh Shetty - General Counsel & Company Secretary are the KeyManagerial Personnel of the Company.
28. DIRECTORS' RESPONSIBILITY STATEMENT
Based on the framework of Internal Financial Controls and compliance systemsestablished and maintained by the Company the work performed by the internal statutoryand secretarial auditors and external consultants including audit of internal financialcontrols over financial reporting by the statutory auditors and the reviews performed byManagement and the relevant Board Committees including the Audit Committee the Board isof the opinion that the Company's internal financial controls are adequate and operatingeffectively. Accordingly pursuant to the requirements of Section 134 (5) of the Act theDirectors hereby confirm that: i. in the preparation of the annual accounts theapplicable accounting standards have been followed and there are no material departures;ii. they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year and of the profitof the Company for that period; iii. they have taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; iv. they have prepared the annual accounts on a going concern basis;v. they have laid down internal financial controls to be followed by the Company and thatsuch internal financial controls are adequate and are operating effectively; vi. they havedevised proper systems to ensure compliance with the provisions of all applicable laws andthat such systems were adequate and operating effectively.
29. BOARD EVALUATION
The performance evaluation of the Board its Committees and individual Directors wasconducted and the same was based on questionnaire and feedback from all the Directors onthe Board as a whole its Committees and self-evaluation.
Based on the questionnaire and feedback the performance of every Director wasevaluated by the Board Nomination and Remuneration Committee (BNRC).
Some of the key criteria for performance evaluation as laid down by the BNRC were asfollows:
Performance evaluation of Directors:
Contribution at Board / Committee meetings & Guidance/ support to Managementoutside Board/ Committee Meetings.
Performance evaluation of Board and Committees:
Board structure and composition Degree of fulfillment of key responsibilities Establishment and delineation of responsibilities to Committees Effectiveness of BoardProcesses Information and Functioning Board Culture and Dynamics Quality ofrelationship between the Board and Management Efficacy of communication with ExternalStakeholders & Committees strengths and areas of improvement.
30. INDEPENDENT DIRECTORS
A separate meeting of the independent directors ("Annual ID Meeting") wasconvened which reviewed the performance of the Board (as a whole) the non-independentdirectors and the Chairman. Post the Annual ID Meeting the collective feedback of each ofthe Independent Directors was discussed by the Chairperson of the BNRC with the Boardcovering performance of the Board as a whole performance of the non-independent directorsand performance of the Board Chairman.
31. REMUNERATION POLICY
The Board has on the recommendation of the BNRC framed a policy for selection andappointment of Directors Senior Management and their remuneration. The RemunerationPolicy is stated in the Corporate Governance Report.
32. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION AND OTHER DETAILS
In accordance with the agreement between the promoters three Directors each may benominated by Tata Sons Private Limited and Tamilnadu Industrial Development CorporationLimited.
The guidelines for selection of Independent Directors are as set out below: The BoardNomination and Remuneration Committee ("Committee") oversees the Company'snomination process for Independent Directors and in that connection to identify screenand review individuals qualified to serve as an Independent Director on the Board.
Process for selection
The Committee may act on its own in identifying potential candidates. The Committeeshall review and discuss details pertaining to candidates and will conduct evaluation ofcandidates in accordance with the process that it sees fit and appropriate and thereafterpass on its recommendation for nomination to the Board based on the following guidelines:
Attributes i) The Committee shall seek candidates who is not a nominee or related toeither Promoter of the Company. Such candidates shall possess integrity leadershipskills managerial qualities foresight abilities and competency required to direct andoversee the Company's management in the best interest of its stakeholders i.e.shareholders customers employees and communities it serves.
ii) The candidate must be willing to regularly attend the meetings of the Board anddevelop a strong understanding of the Company it's businesses and it's needs tocontribute his/ her time and knowledge to the Company and to be prepared to exercisehis/her duties with skill and care. Besides these the candidate should have anunderstanding of governance concepts and legal duties of a Director. iii) It is desirablethat the candidate should have expertise to fill in the gap(s) identified by the Companyin the current composition of the Board. iv) Ideally the candidate should possessexperience of 5 years on the board of a listed company. v) The candidate's age shall notexceed 70 years at the time of joining the Board. vi) Forthrightness and ability topossess foresight abilities in the Governance of a Corporate.
Keeping in mind that women constitute a majority of the Company's customers it would bedesirable to have one-third of the Board's strength represented by woman members.
1. The Committee may retain search firms or advisors as it deems appropriate toidentify candidates.
2. Develop a list of potential candidates of Independent Directors which may berefreshed every year. The Committee to create a list of probable candidates from knownsources or from the database of Ministry of Corporate Affairs Government of India orStock Exchanges.
3. The Committee may also consider profiles of suitable expatriates.
4. The candidate considered by the Committee as potentially qualified will be contactedto determine their interest in being considered to serve on the Board and if interestedwill be interviewed. As and when a candidate is shortlisted the Committee will make aformal recommendation to the Board.
33. OTHER DISCLOSURES
The information required under Section 197 of the Act read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are givenbelow: i) The ratio of the remuneration of each director to the median remuneration of theemployees of the Company and the percentage increase in remuneration of each DirectorManaging Director Chief Financial Officer and Company Secretary in the financial year
|Name of the director ||Ratio (times) ||% Change |
|Director's remuneration || || |
|1 Chairman (nominated by TIDCO)1 ||6.69 ||-22 |
|2 Mr. Ramesh Chand Meena ||7.71 ||617 |
|3 Ms. Shilpa Prabhakar Satish2 ||0.59 ||100 |
|4 Mr. Arun Roy3 ||1.40 ||- |
|5 Mr. N. N. Tata4 ||0.49 ||55 |
|6 Mr. Harish Bhat4 ||0.79 ||43 |
|7 Mr. T. K. Balaji ||11.35 ||32 |
|8 Mrs. Ireena Vittal ||10.04 ||2 |
|9 Mrs. Hema Ravichandar ||10.04 ||17 |
|10 Prof. Das Narayandas5 ||1.19 ||- |
|11 Mr. Ashwani Puri ||9.72 ||4 |
|12 Mr. B Santhanam6 ||5.58 ||- |
|13 Mr. Pradyumna Vyas7 ||0.55 ||- |
|14 Mr. Bhaskar Bhat (Managing Director)8 ||99.00 ||15 |
|15 Mr. S.Subramaniam Chief Financial Officer ||- ||44 |
|16 Mr. Dinesh Shetty General Counsel & Company Secretary9 ||- ||- |
|17 Mr. A R Rajaram10 ||- ||- |
1 Commission to the Chairman of the Company (the Chairmanship was held by Mr. KGnanadesikan upto 14th March 2019 and currently Mr. N Muruganandam is theChairman).
2 Ms. Shilpa Prabhakar Satish IAS nominee of TIDCO was appointed on the Board witheffect from 29th March 2018 and resigned effective 10th May 2018.
3 Mr. Arun Roy IAS nominee of TIDCO was appointed effective 26th November2018.
4 In line with the internal guidelines no payment is made towards commission to Mr.Harish Bhat and Mr. N N Tata Non-Executive Directors of the Company who are in full-timeemployment with other Tata companies.
5 Prof. Das Narayandas resigned from the Board effective 25th January 2019.
6 Mr. B Santhanam was appointed as an Independent Director on the Board effective 10thMay 2018.
7 Mr. Pradyumna Vyas was appointed as an Independent Director on the Board effective 25thMarch 2019.
8 Inclusive of salary perquisites commission (relates to FY ended 31stMarch 2019 which will be paid during FY 2019-20) and retiral benefits.
9 Mr. Dinesh Shetty was appointed as the Company Secretary and Compliance Officer ofthe Company effective 3rd August 2018.
10 Mr. A R Rajaram retired from the Company effective 30th June 2018.
ii) The percentage increase in the median remuneration of employees in the financialyear: 10.5% iii) The number of permanent employees on the rolls of company: 7213 iv)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: The averagepercentage increase this year has been 10.5% across all levels. Increase in the managerialremuneration is based on market trends and performance criteria as determined by the Boardof Directors and on the recommendation of the Board Nomination & RemunerationCommittee.
v) Affirmation that the remuneration is as per the Remuneration Policy of the Company:The Company's Remuneration Policy is based on the principle of internal equity competenceand experience of the employee and industry standards. Through its compensation programmethe Company endeavours to attract retain develop and motivate a high performance andengaged workforce. The Company follows a compensation mix of fixed pay benefits andperformance based variable pay. Individual performance pay is determined by businessperformance and the performance of the individuals measured through the annual appraisalprocess. The Company affirms remuneration is as per the Remuneration Policy of theCompany.
34. INFORMATION AS PER RULE 5(2) OF THE CHAPTER XIII THE COMPANIES (APPOINTMENT ANDREMUNERATION OF MANAGERIAL PERSONNEL) RULES 2014
The statement containing names of top ten employees in terms of remuneration drawn andthe particulars of employees as required under Section 197(12) of the Act read with Rule5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is provided in a separate annexure forming part of this report. Further the report andthe accounts are being sent to the members excluding the aforesaid annexure. In terms ofSection 136 of the Act the said annexure is open for inspection at the Registered Officeof the Company. Any shareholder interested in obtaining a copy of the same may write tothe Company Secretary.
35. AUDITORS a) Statutory Auditors
Pursuant to the provisions of Section 139 of the Act read with applicable Rules framedthereunder M/s. BSR & Co. LLP have been appointed as Auditors for a term of fiveyears subject to ratification by the shareholders from the conclusion of the 33rd AnnualGeneral Meeting till the conclusion of the 38th Annual General Meeting.
The Ministry of Corporate Affairs vide Notification dated 7th May 2018notified several Sections of the Companies (Amendment) Act 2017. In view of the saidnotification the requirement of ratification of appointment of auditors under Section139 of the Companies Act 2013 at each AGM is no longer required. Hence the resolutionto this item is not being included in the Notice to the AGM.
b) Secretarial Audit
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies
(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Mr. KT Vijayakrishna Practicing Company Secretary to undertake the SecretarialAudit of the Company. The Report of the Secretarial Audit is annexed herewith as(Annexure-V).
36. AUDITOR'S REPORT AND SECRETARIAL AUDITOR'S REPORT
There are no disqualifications reservations adverse remarks or disclaimers in theauditor's report and secretarial auditor's report.
37. DISCLOSURES OF TRANSACTIONS OF THE LISTED ENTITY WITH ANY PERSON OR ENTITYBELONGING TO THE PROMOTER/PROMOTER GROUP WHICH HOLD(S) 10% OR MORE SHAREHOLDING IN THELISTED ENTITY IN THE FORMAT PRESCRIBED IN THE RELEVANT ACCOUNTING STANDARDS FOR ANNUALRESULTS. Related Party Transactions with Promoter/ Promoter Group holding 10% or moreshares Tamilnadu Industrial Development Corporation Limited and Tata Sons Private Limitedhold 10% or more shares in the Company. The details of transactions with promoter/promotergroup holding 10% or more shares have been disclosed in the accompanying financialstatements.
Your Directors wish to place on record their appreciation of the support which theCompany has received from its promoters shareholders lenders business associatesvendors customers media and the employees of the Company.
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On behalf of the Board of Directors
|Bengaluru ||N N Tata ||Bhaskar Bhat |
|8th May 2019 ||Vice Chairman ||Managing Director |