DIRECTORS' REPORT Dear Members, Your Directors have pleasure in presenting the twenty-seventh Board's Report of your Company along with the audited Statement of Accounts for the financial year ended March 31, 2015. This Board's report is prepared on the basis of standalone financial statements of the Company for the year ended March 31, 2015. Consolidated Results In accordance with the Companies Act, 2013 ("the Act") and Accounting Standard (AS) -21 on Consolidated Financial Statements read with AS - 27 on Financial Reporting of Interests in Joint Ventures, the audited consolidated financial statement is provided as part ofthis Annual Report. The Board of Directors has by a resolution passed in its meeting held on August 12, 2015 given consent for not attaching the balance sheets of the subsidiaries concerned. The full balance sheet including balance sheets of subsidiaries of the Company is available on our website www.maxindia.com . These documents will also be available for inspection during business hours at the registered office of the Company. Subsidiaries & Associates During the year, Life Healthcare (Pty) Limited and International Finance Corporation have further invested in equity share capital of one of the subsidiaries of the Company, namely Max Healthcare Institute Limited (MHIL) resulting in dilution of the Company's holding from 65.86% to 45.95%. As a result of these transactions, MHIL ceased to be a subsidiary of the Company w.e.f. November 10, 2014 and became an associate Company w.e.f. November 10, 2014. As on March 31, 2015, your Company had 15 subsidiaries and 5 Associate companies, out of which 11 are wholly owned subsidiaries of the Company. Pursuant to Sec 134(3)(q) of the Act, and Rule 8(5) (iv) of the Companies (Accounts) Rules, 2014, the list of subsidiaries/ associates and the proportionate ownership of the Company in them along with names of Companies which have ceased to be subsidiaries, JVs and associates is part of Form MGT-9 attached as Annexure-1. A report on the performance and financial position of each of the subsidiaries, associates and joint venture companies included in the consolidated financial statement presented in Form AOC - 1 is attached as Annexure-2 and is part of the Annual Report as per Rule 8(1) of the Companies (Accounts) Rules, 2014. Further, a detailed update on the business achievements of your Company's key operating subsidiaries is furnished as part of Management Discussion and Analysis section which forms part of the Report. Material Changes Affecting Financial Position There are no material changes and commitments, affecting the financial position of the Company which has occurred between the end of the financial year of the Company i.e. March 31, 2015 and the date of the Directors' report i.e. August 12, 2015. Corporate Restructuring plan in the form of Scheme of Demerger of the Company The Board of Max India Limited ('the Company') in its meeting held on January 27, 2015 approved a Corporate Restructuring plan to vertically split the Company through a demerger to three companies, the existing company and the two resulting companies to be listed on demerger becoming effective. This would enable the investors in the Company to have a choice, to be associated with the underlying businesses through separate listed entities, or specifically with the relatively matured business of life insurance, and/or have a separate access to the mature manufacturing business of speciality films, and/or in the health and allied businesses which are in their relative growth phase or nascent stage of development and have higher capital requirements. In addition, the restructuring would also result in a sharper focus on underlying businesses and unlock value for shareholders. The salient details of the Scheme of Demergerare as follows: (i) The existing company, Max India Limited, is proposed to be renamed 'Max Financial Services Limited' upon demerger and will focus solely on the group's flagship life insurance activity, through its 72% shareholding in Max Life Insurance Company Limited ("Max Life"), making it the first Indian listed company exclusively focused on life insurance. The Insurance Laws (Amendment) Ordinance, 2014, recently promulgated by the President of India, and widely expected to be approved as an Act, has created renewed investor interest in the life insurance sector. (ii) Upon completion of the demerger, it is proposed to name the second vertical as Max India Limited ("Resulting Company 1"), which will continue to manage investments in the high potential health and allied businesses including in: - Max Healthcare Institute Limited, Max Bupa Health Insurance Company Limited, Antara Senior Living Limited and supported by a corporate management services team. The demerger will provide these businesses, which are currently in their growth and development phases, sharpened focus to fulfill their tremendous potential. The corporate management services team will manage shared services facilities and provide functional support toall3 verticals. (iii) The third vertical will house the investment activity in the group's manufacturing subsidiary, Max Speciality Films Limited - an innovation leader in the speciality packagingfilms business - and will be named Max Ventures and Industries Limited ("ResultingCompany2"). (iv) The Company's shareholders whose name will appear in the register of members on a 'Record Date', to be specified for the said purpose once the demergerscheme is effective, will retain one equity share of Rs. 2/- in Max Financial Services Limited (existing Max India, as renamed). In addition, the shareholders will getshares in the new companies as detailed below: 1. one equity share of Rs. 2/- each of Resulting Company 1 for every one equity share of Rs. 2/- each held in the Company; and 2. one equity share of Rs. 10/- each of Resulting Company 2 for every 5 equity shares of Rs. 2/- each held in the Company. (v) The Company has a Treasury Corpus of Rs. 572 Cr. as at March 31, 2015 It is proposed to split the cash reserves as on Appointed Date of April 1, 2015 between the 3 listed companies such that the Company will hold Rs. 150 Cr., Resulting Company 2 will hold Rs. 10 Cr. and the balance, Rs. 412 Cr., will be held by Resulting Company 1. (vi) The Appointed Date for the demerger is April 1, 2015. Current status on the Scheme of Demerger The Company has received approvals from SEBI and CCI for the proposed scheme of demerger. Pursuant to the order of Hon'ble High Court of Punjab and Haryana at Chandigarh, the court convened meeting of shareholders of the Company was held on July 4, 2015 at 11:00 A.M. at the Registered Office of the Company at Bhai Mohan Singh Nagar, Railmajra, Tehsil Balachaur, District Nawanshahr, Punjab - 144 533 and the report of the Court appointed Chairman was filed with the Hon'ble High Court. 99.99% of the total voting of the shareholders of the Company at the meeting and by e-voting, voted in favour of the Scheme of Demerger. The Company has filed the second petition before the Hon'ble High Court seeking its approval forthe Scheme of Demerger. Dividend Your Directors had approved payment of Interim Dividend of 200%, i.e., Rs.4.00/- per equity share of Rs.2/- each for the financial year 2014-15. Your Company made the payment of the aforesaid interim dividend to shareholders on December 4, 2014. The Board of Directors of your Company have further recommended a final dividend of 50% amounting to Re.1.00 per equity share (on face value of Rs.2/- each) to the Shareholders for their approval at the ensuing Annual General Meeting scheduled to be held on September 23, 2015 and if approved, the same will be paid to the shareholders, in compliance with the applicable legislations. For shares held in electronic form, the dividend will be paid on the basis of beneficial ownership furnished by Depositories, viz., NSDL and CDSL for this purpose. Transfer to Reserves The company has not transferred any amount to reserves. Share Capital The Authorized share capital of the Company as on March 31, 2015 was Rs. 100,00,00,000/- (Rupees One Hundred crores only) comprising of 46,00,00,000 equity shares of Rs. 2/- each and 8,00,000 preference shares of Rs. 100/- each. The Paid up capital of the Company as on March 31, 2015 was Rs. 53,30,05,546/- (Rupees Fifty three crores thirty lacs five thousand five hundred and forty six only) comprising of 26,65,02,773 equityshares of Rs. 2/- each. During the year under review; 2,75,516 equity shares were allotted under 'Employee Stock Plan 2003' ('2003 Plan') as Employee Stock Options. Employee Stock Option Plan Your Company has an employee stock option plan viz., 'Max India Employee Stock Plan 2003' ('2003 Plan'). The 2003 Plan provides for grant of stock options aggregating not more than 5% of number of issued equity shares of the Company to eligible employees and directors of the Company. The 2003 Plan is administered by the Nomination and Remuneration Committee appointed by the Board of Directors. During the year under review, upon exercise of options, 2,75,516 equityshares of Rs. 2/-each for cash at par were allotted. Details of Options granted up to March 31, 2015 and other disclosures as required under SEBI Regulations are enclosed as Annexure-3 to this Report. The Company is seeking the approval of the shareholders in the ensuing Annual General Meeting for amendment to the '2003 Plan' to align with the provision of SEBI (Share Based Employee Benefits), Regulations, 2014 and for certain administrative convenience. Directors Your Company has fourteen (14) Directors consisting of eight (8) Independent Directors, (2) Executive Directors and four (4) Nonexecutive Directors as on March 31, 2015. During the year under review, the following changes took place. • Dr. Subash Bijlani, who did not offer himself for re-appointment as a Director at the Annual General Meeting held on September 30, 2014 ceased to be a Director of the Company w.e.f. September30, 2014. • Mr. Dinesh Kumar Mittal and Mrs. Nirupama Rao were appointed as Additional Directors to act as Independent Directors of the Company on January 1, 2015. Their term of office expires on the date of ensuing Annual General Meeting. The Company has received notices under Section 160 of the Act from members proposing the candidature of Mr. Dinesh Kumar Mittal and Mrs. Nirupama Rao for being appointed as Directors of the Company. The Board of Directors recommend to the shareholders fortheir appointment as Independent Directors of the Company. In terms of Section 152 of the Act and the Articles of Association of the Company, Mr. Ashwani Windlass, Mr. Sanjeev Mehra and Mr. Mohit Talwar are liable to retire by rotation at the ensuing Annual General Meeting. Mr. Ashwani Windlass, Mr. Sanjeev Mehra and Mr. Mohit Talwar being eligible, offer themselves for re-appointment at the ensuingAnnual General Meeting. The Board met six times during the financial year 2014-15, viz., on May 28, 2014, July 22, 2014, August 13, 2014, November 12, 2014 January 27, 2015 and February 12, 2015. The details regarding the number of meetings attended by each Director during the period under review are part of the information furnished in the Corporate Governance Report attached as part of this Annual Report. Statement of Declaration by Independent Directors In terms of Section 149(6) of the Act and Clause 49 of the Listing agreement and based on the confirmation/ disclosures received from the Directors, the following Non-Executive Directors are Independent Directors of the Company: Mr. N.C. Singhal, Mr. Rajesh Khanna, Mr. Aman Mehta, Prof. Dipankar Gupta, Dr. Ajit Singh, Mr. Ashok Kacker, Mrs. Nirupama Raoand Mr. Dinesh Kumar Mittal. The Company is in receipt of declaration of independence from all the above mentioned Independent Directors as per Section 149(7) of the Act. Committee of Board of Directors The Company has the following committees which have been established as a part of the best corporate governance practices and are in compliance with the requirements of the relevant provisions of applicable laws and statutes. A detailed note on the same is provided under the Corporate Governance Report attached elsewhere in this Annual Report. 1. Audit Committee: The Audit Committee consists of Mr. N.C. Singhal, Mr. Ashwani Windlass, Mr. Rajesh Khanna and Mr. Ashok Kacker. The Committee met six times during the financial year 2014-15, viz., on May 28, 2014, August 12, 2014, October 6, 2014, November 11, 2014, January 27, 2015 and February 12, 2015. . 2. Nomination and Remuneration Committee: The Nomination and Remuneration consists of Mr. Rajesh Khanna, Mr. N.C. Singhal, Mr. Aman Mehta and Mr. Ashwani Windlass. This Committee met eight times duringthe financial year 2014-15, viz., on August 4, 2014, August 13, 2014, November 11, 2014, November 20, 2014, December 12, 2014, January 27, 2015, February 12, 2015 and March 27, 2015. 3. Investment & Finance Committee: This Committee consists of Mr. Ashwani Windlass, Mr. N.C. Singhal, Mr. Sanjeev Mehra, Mr. Rahul Khosla and Mr. Mohit Talwar. The Committee met eight times during the financial year 2014-15, viz., on May 28, 2014, July 22, 2014, August 12, 2014, October 6, 2014, November 11, 2014, January 27, 2015, February 12, 2015 and March 25, 2015. 4. Corporate Social Responsibility Committee: In compliance with Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Corporate Social Responsibility Committee was formed w.e.f. August 13, 2014. The Committee consists of Mr. N.C. Singhal, Mr. Ashwani Windlass, Mr. Rajesh Khanna, Mr. Aman Mehta, Dr. Ajit Singh, Mr. Dipankar Gupta and Mr. Ashok Kacker. This Committee met two times during the financial year 2014-15, viz., on November 12, 2014 and February 12, 2015. 5. Committee of Independent Directors: The Committee of Independent Directors consists of Mr. N.C. Singhal, Mr. Rajesh Khanna, Mr. Aman Mehta, Prof. Dipankar Gupta, Dr. Ajit Singh, Mr. Ashok Kacker, Mrs. Nirupama Rao and Mr. Dinesh Kumar Mittal. The Committee met once on February 12, 2015 during the financial year 2014-15. Later the Committee met on August 12, 2015. The meeting was conducted to: (a) Review the performance of non-independent directors and the Board as a whole; (b) Review the performance of the Chairperson of the Company, taking into account the views of executive directors and non-executive directors; (c) Assess the quality, quantity and timeliness of flow of information between the Company management and the Board that is necessary for the Board to effectively and reasonably perform their duties. 6. Stakeholders' Relationship Committee: The Committee consists of Mr. Ashwani Windlass, Mr. N.C. Singhal, Mr. Rahul Khosla and Mr. Mohit Talwar. The Committee met Ave times during the financial year 2014-15, viz., May 28, 2014, August 12, 2014, September 29, 2014, February 12, 2015 and March 25, 2015. 7. Risk & Compliance Review Committee: The Committee was formed on August 13, 2014. The Committee consists of Mr. N.C. Singhal, Mr. Ashwani Windlass, Mr. Rajesh Khanna, Mr. Aman Mehta, Dr. Ajit Singh, Prof. Dipankar Gupta and Mr. Ashok Kacker. The Committee met twice during the financial year 2014-15, viz., November 12, 2014 and February 12, 2015. Performance Evaluation of the Board As perthe requirements of the Act, formal Annual Evaluation process has been carried out for evaluating the performance of the Board, the Committees of the Board and the Individual Directors. The performance evaluation was carried out by obtaining feedback from all directors through a confidential online survey mechanism through Board Link, a secured electronic medium through which the Company interfaces with its Directors. The outcome of this performance evaluation was placed before the Nomination and Remuneration Committee and Independent Directors' Committee meetings and the Board meeting for the consideration of the members. The review concluded by affirming that the Board as a whole as well as its Chairman, all of its members, individually and the Committees of the Board continued to display commitment to good governance by ensuring a constant improvement of processes and procedures. It was further acknowledged that every individual member and Committee of the Board contribute their best in the overall growth of the organization. Key Managerial Personnel During the financial year 2014-15, Mr. Rahul Khosla, Managing Director, Mr. Mohit Talwar, Dy. Managing Director, Mr. Rahul Ahuja, Chief Financial Officer and Mr.V. Krishnan, Company Secretary were designated as Key Managerial Personnel of the Company pursuant to Section 203 of the Act. Arising from the transition in the roles, Mrs. Sujatha Ratnam, Senior Director - Corporate Finance was appointed as a Key Managerial Personnel designated as Chief Financial Officer of the Company effective June 1, 2015, in place of Mr. Rahul Ahuja. Mr. Rahul Ahuja has assumed the role of Chief Financial Officer of Max Bupa Health Insurance Company Limited, a subsidiary of the Company effective June 1, 2015. Nomination & Remuneration Committee Policy In adherence to the provisions of Section 134 (3)(e) and 178 (1) & (3) of the Act, the Board of Directors on the recommendation of the Nomination and Remuneration Committee, approved a policy on Director's appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided and the same is attached as Annexure-4. Corporate Social Responsibility The Board of Directors has adopted a CSR policy as approved by the Corporate Social Responsibility Committee which is available on the website of the Company at www.maxindia.com. The Annual Report on CSR as per the Companies (Corporate Social Responsibility Policy) Rules, 2014 is attached as Annexure-5. Human resources We are a multi-business corporate in the 'Businesses of Life' focusing on life insurance, healthcare, health insurance and other related businesses. We endeavor to be the most preferred solution provider in life's many moments of truth for the millions of lives that we aspire to positively impact and are driven by our core values -Sevabhav, Excellence and Credibility. The health and performance of the group has improved steadily over the last three years and is reflected in our results. The remuneration of our employees is competitive with the market and rewards high performers across levels. The remuneration to Directors, Key Managerial Personnel and Senior Management are a balance between fixed, incentive pay and long-term equity program based on the performance objectives appropriate to the working of the Company and its goals and is reviewed periodically and approved by the Nomination and Remuneration Committee of the Board. The remuneration of the Whole-time directors is within the limits approved by the shareholders of the Company at the Extra Ordinary General Meeting of Max India Limited held on December 5, 2013. Details pursuant to Section 197 (12) of the Act, read with the Rule 5(1) and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as Annexure-6 (a) & (b). Prevention of Sexual Harassment of women at workplace Max India Limited has requisite policy for prevention of Sexual Harassment of Women at workplace. The comprehensive policy ensures gender equality and the right to work with dignity. The Internal Complaints Committee has been constituted as per provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. No case under the said Act has been reported to the Committee during the year under review. Loans, Guarantees or Investments in Securities The Company has pursuant to the provisions of Section 186 of the Act, given loans, made guarantees and investments duringthe year under review. The details of Loans, guarantees and investments are provided in Notes 11, 14, 15, 39 and 40 to the financial statements of the Company for the FY 2014-15. Management Discussion & Analysis In terms of Clause 49 of the Listing Agreement, a review of the performance of businesses, including those of your Company's joint ventures and subsidiaries, is provided in the Management Discussion & Analysis section which is attached elsewhere in this Annual Report. Report on Corporate Governance The Company has complied with all the mandatory requirements of Corporate Governance specified by the Securities and Exchange Board of India through clause 49 of the Listing Agreement. As required by the said Clause, a separate Report on Corporate Governance forms part of the Annual Report of the Company. A certificate from M/s Sanjay Grover & Associates, Practicing Company Secretaries regarding compliance with the conditions of Corporate Governance and a certificate from the Managing Director and Chief Financial Officer on compliance of Clause 49 of the Listing Agreement form part of the Corporate Governance Report. Public Deposits During the year under review, the Company has not accepted or renewed any deposits from the public. Contracts or Arrangements with Related Parties All Related Party Transactions (RPTs) as per the provisions of the Act, that were entered during the financial year were in the ordinary course of the business of the Company and were on arm's length basis. There was no materially significant related party transaction entered by the Company with Promoters, Directors, Key Managerial Personnel or other persons which may have a potential conflict with the interest of the Company. Since all RPTs entered into by the Company were in the ordinary course of business and were on an arm's length basis, form AOC-2 is not applicable to the Company. However, the details of all the RPTs have been elaborately disclosed in the Notes to the Accounts of the Company for the financial year ended March 31, 2015 attached to this Annual Report. Auditor & Auditors' Report Pursuant to Section 139 & 142 of the Act, M/s S R Batliboi & Co. LLP, Chartered Accountants, were appointed as the Statutory Auditors of the Company at the Annual General Meeting held on September 30, 2014 for a period upto the date of the next annual general meeting of the Company. There are no audit qualifications or reporting of fraud in the Statutory Auditors Report given by M/s. S R Batliboi & Co. LLP, Statutory Auditors of the Company for the financial year 2014-15 as annexed elsewhere in this Annual Report. M/s. S R Batliboi & Co. LLP, have expressed their unwillingness to be reappointed as Statutory Auditors of the Company. It is proposed to appoint M/s. Deloitte Haskins & Sells, LLP, in place of M/s SR Batliboi & Co.LLP as Statutory Auditors of the Company, till conclusion of Annual General Meeting to be held in financial year 2020. Your Company received a written consent from M/s. Deloitte Haskins & Sells, LLP, Chartered Accountants, as required under Section 139 of the Act and a certificate to the effect that their appointment, if may, would be in accordance with the limits prescribed under Section 141 of the Act. Secretarial Auditors and Secretarial Audit Report Pursuant to Section 204 of the Act, your Company had appointed M/s Chandrasekaran Associates, Company Secretaries, New Delhi as its Secretarial Auditors to conduct the secretarial audit of the Company for the FY 2014-15. The Company provided all assistance and facilities to the Secretarial Auditor for conducting the audit. The Report of Secretarial Auditor for the FY 2014-15 is annexed to this report as Annexure-7. There is no Audit Qualifications in the said Secretarial Audit Report. Risk Management Policy The Board has formed a Risk Management Committee to identify the risks impacting the business, formulate strategies/ policies aimed at risk mitigation as part of risk management. Further, a core team comprising of senior management has also been formed to identify and assess key risks, risk appetite, tolerance levels and formulate strategies for mitigation of risks identified in consultation with process owners. On the recommendation of the Risk and Compliance Review Committee in its meeting held on February 12, 2015, the Board of Directors, in its meeting held on May 27, 2015 has adopted a Risk Management policy for the Company, whereby, risks are broadly categorized into Strategic, Operational, Compliance, and Financial & Reporting Risks. The Policy outlines the parameters of identification, assessment, monitoring and mitigation of various risks which are keyto business performance. Internal Financial Control The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed. The Control Assurance & Risk Management Department of the Company have reviewed the existence of various risk-based controls in the Company and also tested the key controls towards assurance for compliance forthe present fiscal. Further, the testing of such controls shall also be carried out independently by the Statutory Auditors from the financial year 2015-16 onwards as mandated underthe provisions of theAct. In the opinion of the Board, the existing internal control framework is adequate and commensurate with the size and nature of the business of the Company. Vigil Mechanism The Company has a vigil mechanism pursuant to which a Whistle Blower Policy is in place. The Policy ensures that strict confidentiality is maintained whilst dealing with concerns and also that no discrimination will be meted out to any person for a genuinely raised concern. The said Policy is hosted on the Company's website at www.maxindia.com. Particulars of Conservation Of Energy, Technology Absorption & Foreign Exchange Earning and Outgo As your Company does not carry on any manufacturing operations, information in accordance with the provisions of Section 134 (3)(m) of the Act read with Rule (8) (3) of the Companies (Accounts) Rules, 2014 is not furnished herewith. Extracts of Annual Return Pursuant to sub-section 3(a) of Section 134 and sub-section (3) of Section 92 of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014 the extracts of the Annual Return as at March 31, 2015 forms part of this report as Annexure 1. Directors' Responsibility Statement Pursuant to the requirement under Section 134(5) of the Act, it is hereby confirmed that: (a) In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (b) The Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial yearand of the profit of the Companyforthat period; (c) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (d) The Directors had prepared the annual accounts on a going concern basis; (e) The Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and (f) The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Cautionary Statement Statements in this Report, particularly those which relate to Management Discussion and Analysis describing the Company's objectives, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied in the statement depending on the circumstances. Acknowledgements Your Directors would like to place on record their appreciation of the contribution made by its management and its employees who through their competence and commitment have enabled the Company to achieve impressive growth. Your Directors acknowledge with thanks the co-operation and assistance received from various agencies of the Central and State Governments, the Regulatory Authorities, Financial Institutions and Banks, Shareholders, Joint Venture partners and all other business associates. For and on behalf of the Board of Directors Max India Limited Analjit Singh Chairman Place : New Delhi Date : August 12, 2015 |