BOARD'S REPORT The Members, Your Directors present the 66th Annual Report of the Company along with the audited financial statements for the year ended 31st March 2016. SO ALIVE @75 For seventy five years your Company has been a part of India's industrial development. This journey began in 1941 in the humble surroundings of the fishing village of Mora (across Mumbai's harbour). Over the years, your Company has been through several 'ups' and a few 'downs', has gained strength with each passing year and has witnessed sustained growth and success. This incredible journey was made possible by countless people and organisations who have been associated with Grindwell Norton Limited ("GNO") over the years, including its loyal customers, dealers, suppliers, service providers and, above all, its employees. GNO and its employees are energetic, innovative and spirited and this is reflected in your Company's theme for its 75th Anniversary: SO ALIVE @ 75. The Board believes that, with your continued support, your Company will sustain its growth and success and drive forward towards its centenary and beyond. DIVIDEND The Board of Directors confirmed an interim dividend of Rs. 6.50 per equity share (previous year X 6.50 per equity share), declared on 16th March 2016, as the final dividend for the financial year 2015-16.The dividend outgo, including dividend distribution of tax, was Rs. 43.31 crores (previous year Rs. 43.31crores). BONUS ISSUE On the occasion of the Company's 75th Anniversary, the Board of Directors, at its meeting held on 30th May 2016, have recommended the issue of Bonus Shares in proportion of one fully paid equity share of Rs. 5/- (Rupees Five only) each for one fully paid equity share of Rs. 5/- (Rupees Five only) each. OPERATIONS For the fifth consecutive year, growth of the Index of Industrial Production ("IIP") was under 3%. In fact between 2010-11 and 2015-16, the IIP has increased from 165.5 to 181.6 (a compounded growth rate of barely 2%). Within the IIP, the compounded growth rate of the manufacturing sector has been less than 2% over 5 years (from 175.7 to 190.4), while the index for the mining sector is still below its level in 2010-11 (from 131.0 to 129.4). Your Company's overall sales growth over the last five years has similarly been low relative to earlier years. Decline in inflation over the last two years (thanks mainly to low global oil prices) and a relatively stable Rupee continued to provide respite for the industrial economy. Against this backdrop, during the year under review, your Company's sales and operating profit registered a modest increase of 3% and 2% respectively. The workers' union of the Bengaluru plant went on strike for a period of 20 days in November 2015 due to an impasse in the wage negotiations. The management had taken all steps to meet customer requirements during the strike period and there was no major impact on the financial performance of your Company due to the strike. • Abrasives The low growth of the manufacturing and mining sectors affected domestic volumes. Exports, however, witnessed strong growth. The business continued to focus on new products and new markets. With volume growth being low and with only a small improvement in price realization, higher manpower costs (partly one-time) and expenses caused a decline in operating margin. • Ceramics & Plastics The Silicon Carbide business had a very disappointing year. While domestic demand continued to be stable, but weak, exports saw a significant decline. Production at your Company's Tirupati Plant was affected due to disruption in power supply from Andhra Pradesh Gas Power Corporation Limited (on account of reduced availability of gas). Low-priced competition from Vietnam and China intensified. Consequently, production, sales and prices witnessed a sharp fall and caused operating profit and margin to decline. The High Performance Refractories business also had a difficult year with domestic demand and order flow being weak and exports being flat. An adverse product mix led to a decline in margins and profits. The Performance Plastics business had an excellent year with strong growth in sales and profits largely due to growth of the auto and life sciences market segments. SUBSIDIARY COMPANY The Company has one subsidiary in Bhutan, Saint-Gobain Ceramic Materials Bhutan Private Limited. It is not a material subsidiary in terms of sub-regulation (1)(c) of Regulation 16 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"). The operations of your Company's subsidiary in Bhutan were stable. Despite the increase in power cost by 10% in Bhutan, the cost of electricity is still much lower than the cost at Tirupati. In accordance with Section 129(3) of the Companies Act, 2013 ("Act") and Rule 5 of the Companies (Accounts) Rules, 2014 and relevant Accounting Standards ("AS"), the Company has prepared consolidated financial statements of the Company and its subsidiary company, which forms part of the Annual Report. A statement in Form AOC-I containing salient features of the financial statements of the subsidiary company is also included in the Annual Report. In accordance with provisions of Section 136(1) of the Act, the Annual Report of the Company, containing therein the standalone and consolidated financial statements and audited financial statement of the subsidiary has been placed on the website of the Company, www.grindwellnorton.com . Shareholders interested in obtaining a copy of the audited financial statements of the subsidiary may write to the Company Secretary at the Company's Registered Office. FUTURE PROSPECTS While the long term outlook of the economy is positive, the short term outlook is uncertain. Investment demand remains low. The order inflow, across businesses, is still muted and there is no pull from the channel. With inflation expected to remain low and the Rupee expected to depreciate gradually, there are hopes of a mild recovery. Under the circumstances, your Company's management will continue to focus on growing exports, improving price realization and containing the rise in manpower costs and expenses even as it continues to invest in new products and new markets to sustain growth. As and when growth accelerates, your Company will benefit from the investments made in capacities and capabilities in recent years. MATERIAL CHANGES AND COMMITMENTS AFTER THE END OF FINANCIAL YEAR There have been no material changes or commitments, affecting the financial position of the Company, which have occurred between end of the financial year and the date of the Report. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENT Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes forming part of the financial statements. HUMAN RESOURCES Employee relations were cordial at all sites of your Company, with one exception. The workers' union at your Company's plant at Bengaluru went on strike in November 2015 due to an impasse in the wage negotiations. The workers unconditionally resumed normal operations after 20 days and, subsequently, a new productivity-enhancing wage agreement was concluded. Earlier in the year, a new wage agreement was also concluded with the workers' union at Tirupati. At the end of the financial year, there were 1793 employees. Your Directors place on record their appreciation for the contribution made by all employees in the progress of your Company. The Company follows best practices in hiring and on-boarding of employees. The Company adopts a fair and transparent performance evaluation process. In order to improve organizational efficiency and employee engagement, various process change initiatives were undertaken during the year. Your Company believes in conducting its business in a highly transparent and ethical way. To ensure this and also to improve skill levels, employees participate in various training programmes and complete mandatory e-learning courses. Your Company is committed to creating and maintaining a healthy working environment that enables employees to work without fear of prejudice, gender bias and sexual harassment. The Company believes that all employees have a right to be treated with respect and dignity and has zero tolerance towards violations of its Code of Conduct, in general, and its sexual harassment policy, in particular. During the year, no complaint under the sexual harassment policy has been received by the Compliance Committee. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO AND ENVIRONMENT The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is set out in Annexure 1 to this Report. Your Company is committed to ensure a clean and green, pollution-free environment as well as a safe and healthy work place at all plant locations and work sites. Your Company strictly abides by the Saint-Gobain Group's Environment, Health and Safety Charter and the policies and procedures framed under it. All the plants of your Company are certified under ISO-14001 and OHSAS-18001. These certification and various awards are recognition of the efforts made and results achieved by your Company in improving Environment, Health and Safety at all its work sites. PARTICULARS OF EMPLOYEES Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) and 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 form part of the Annual Report. Having regard to the provisions of the first proviso to Section 136(1) of the said Act, the Annual Report excluding the aforesaid information is being sent to the Members of the Company. The said information is available for inspection at the Registered Office of the Company during working hours and any Member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request. The full Annual Report including the aforesaid information is available on the website of the Company, www.grindwellnorton.com PUBLIC DEPOSITS The Company has not accepted any public deposits and, as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet. DIRECTORS AND KEY MANAGERIAL PERSONNEL In terms of the provisions of the Companies Act, 2013, Mr. Pradip Shah, Mr. Keki M. Elavia and Mr. Shivanand Salgaocar have been appointed as Independent Directors at the Annual General Meeting held on 23rd July 2014 for a term of five consecutive years commencing from 23rd July 2014. Consequent to their transfers to new positions within the Saint-Gobain Group, Mr. Guillaume Texier and Mr. Benoit d'Iribarne (Alternate Director to Ms. Marie-Armelle Chupin), resigned with effect from 2nd February 2016. The Directors place on record their appreciation of the valuable contribution made by them during their tenure as Directors. In accordance with the Companies Act, 2013 and the Articles of Association of the Company, Mr. Patrick Millot, Director, retires by rotation and being eligible, has offered himself for re-appointment. Mr. Anand Mahajan was first appointed as the Managing Director of the Company on 1st April 1991. The Members had approved the last re-appointment of Mr. Anand Mahajan as the Managing Director of the Company for a period of five years from 1st April 2011 to 31st March 2016. The Board, on the recommendations of the Nomination and Remuneration Committee, re-appointed Mr. Anand Mahajan as the Managing Director of the Company for a further period of five years with effect from 1st April 2016, subject to the approval of the Members. On 2nd February 2016, Mr. Laurent Guillot, President, High Performance Materials Sector, was appointed as an Additional Director of your Company. Mr. Laurent Guillot is a graduate of Ecole Polytechnique and Ecole Nationale des Ponts et Chaussees, with a post-graduate degree in Macroeconomics from Universite Paris I. After serving the Government for a few years, Mr. Guillot joined Compagnie de Saint-Gobain in 2002 as Vice-President, Corporate Planning. Between 2004 and 2007, he held various positions within the High Performance Materials Sector of Saint-Gobain, In 2007, he was appointed General Delegate for Brazil, Argentina and Chile. He was the Saint-Gobain Group's Chief Financial Officer from 2009 to the end of 2015. In January 2016, Mr. Guillot was appointed as the President of High Performance Sector of Saint-Gobain. The resolutions seeking approval of the Members for the appointment of Mr. Anand Mahajan and Mr. Laurent Guillot have been incorporated in the notice of the forthcoming Annual General Meeting of the Company along with brief details about them. The Company has received a notice under Section 160 of the Act along with the requisite deposit proposing the appointment of Mr. Laurent Guillot. None of the Directors or Key Managerial Personnel has any pecuniary relationships or transactions with the Company, other than salaries, commission and sitting fees. DECLARATION GIVEN BY INDEPENDENT DIRECTORS The Company has received declarations from all Independent Directors confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 and Regulation 16 of the Listing Regulations. FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS The familiarisation programmes are aimed to familiarise the Independent Directors with the Company, nature of industry in which the Company operates and business model of the Company. The details of the familiarisation programme imparted to Independent Directors are available on the Company's website at <http://grindwellnorton.co.in/Familiarisation_Programme.htm>. The Independent Directors are regularly briefed with respect to the developments that are taking place in the Company and its operations. NUMBER OF MEETINGS OF THE BOARD The Board meets at regular intervals to review the Company's businesses and to discuss strategy and plans. A tentative annual calendar of meetings is circulated to the Directors in advance to enable them to plan their schedule and to ensure effective participation. During the year, six board meetings were held. The maximum interval between the meetings did not exceed the period prescribed under the Companies Act, 2013 and the Listing Regulations. COMMITTEES OF THE BOARD During the year, in accordance with the Companies Act, 2013 and Regulations 18 to 21 of the Listing Regulations, the Board has constituted or reconstituted its Committees. Currently, the Board has the following Committees: • Audit Committee • Nomination and Remuneration Committee • Stakeholders Relationship Committee • Corporate Social Responsibility Committee • Risk Management Committee • Share Transfer Committee Details of the Committees, their constitution and other details are provided in the Corporate Governance Report. DIRECTORS' RESPONSIBILITY STATEMENT To the best of their knowledge and belief and according to the information and explanations obtained, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013: i. that in the preparation of the annual financial statements for year ended 31st March 2016, the applicable accounting standards have been followed along with proper explanations relating to material departures, if any; ii. that such accounting policies have been selected and applied consistently and judgments and estimates have been made, 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 year on 31st March 2016, and of the profit of the Company for the year ended on that date; iii. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. that the annual financial statements have been prepared on a 'going concern' basis; v. that proper internal financial controls are in place and that such internal financial controls are adequate and are operating effectively; vi. that proper systems to ensure compliance with the provisions of all applicable laws are in place and that such systems are adequate and are operating effectively. With reference to the point number (v), the Board believes the Company has sound Internal Financial Controls ("IFC") commensurate with the nature and size of its business. However business is dynamic and IFC are not static, and evolve over time as the business, technology and fraud environment changes in response to competition, industry practices, legislation, regulation and current economic conditions. There will therefore be gaps in the IFC as business evolves. The Company has a process in place to continuously identify such gaps and implement newer and/or improved controls wherever the effect of such gaps would have a material effect on the Company's operations. DIRECTORS' APPOINTMENT AND REMUNERATION The Nomination and Remuneration Committee has laid down the criteria for Directors' appointment and remuneration. These are set out in the Nomination and Remuneration Policy which is annexed as Annexure 3 to this Report. ANNUAL EVALUATION OF PERFORMANCE BY THE BOARD The Board, on recommendation of the Nomination and Remuneration Committee, has adopted a framework for performance evaluation of the Board, its Committees, individual directors and the chairperson through a survey questionnaire. The survey questionnaire broadly covers various aspects of board functioning, composition of Board and its committees, culture, execution and performance of specific duties, obligation and governance. RELATED PARTY TRANSACTIONS All related party transactions entered during the financial year were in the ordinary course of business and on an arm's length basis. During the year, the Company has not entered into any contract/arrangement/transaction with related parties which would be considered material as prescribed under the Companies Act, 2013 and Regulation 23 of the Listing Regulations. The related party transactions are approved by the Audit Committee through an omnibus resolution. The Audit Committee monitors, on a quarterly basis, the related party transactions entered vis-a-vis the related party transactions approved by the omnibus resolution. The policy on related party transactions, as approved by the Board, is available on the website of the Company, www.grindwellnorton.com . There are no transactions that are required to be reported in Form AOC-2. The details of the transactions with related parties are provided in the accompanying financial statements. CORPORATE SOCIAL RESPONSIBILITY It is your Company's belief that its primary goal is to serve the needs of its customers and, in the process of doing so, to generate employment, livelihood and income for all its stakeholders (suppliers, vendors, service providers, employees, lenders, shareholders etc.) and, at the same time, to contribute to the revenues of Government. Further, it is your Company's belief that by pursuing its primary goal and by ensuring that its business practices meet the highest standards of corporate governance and ethics, it best fulfills its obligations and responsibility to society. Against the backdrop of this belief, your Company is committed to implementing the agenda set out in its CSR policy. The CSR policy and the initiatives taken during the year, in the format prescribed under the Companies (Corporate Social Responsibility Policy) Rules, 2014, are set out in Annexure 4 to this Report. In accordance with Section 135 of the Companies Act, 2013, a Corporate Social Responsibility ("CSR") Committee of the Board, having an Independent Chair, has been constituted to monitor the CSR policy and programs. The amount spent on eligible CSR activity for the financial year 2015-16 is around 0.52% of the average net profit of the Company during the three immediately preceding financial years. RISK MANAGEMENT POLICY AND INTERNAL FINANCIAL CONTROLS Your Company recognizes that managing risk is an integral part of good management practice and an essential element of good corporate governance. It aims to have a common, formalized and systematic approach for managing risk and implementing a risk management process across the Company. The intent of the policy is to ensure the effective communication and management of risk across all risk categories. The Company has identified elements of risk, which may threaten the existence and financial position of the Company, which are set out in Management Discussion and Analysis Report. The Company's Internal Financial Control systems are commensurate with the nature of its business, financial statements and the size and complexity of its operations. These are routinely tested and certified by the Statutory as well as Internal Auditors. Significant audit observations and follow up actions thereon are reported to the Audit Committee. WHISTLE BLOWER POLICY AND VIGIL MECHANISM Your Company has adopted and disseminated its Whistle Blower Policy to provide a secure environment and encourage employees to report unethical, unlawful or improper practices, acts or activities and to prohibit any adverse personnel action against those who report such practices, acts or activities, in good faith. The Whistle Blower Policy is available on the website of the Company, www.grindwellnorton.com . AUDITORS a. Statutory Auditors M/s. Kalyaniwalla & Mistry, Chartered Accountants, (Registration No 104607W), Statutory Auditors of your Company, who hold office till the conclusion of 66th Annual General Meeting, are eligible for re-appointment. They have confirmed their eligibility under Section 141 of the Companies Act, 2013 and Rules framed thereunder, for re-appointment as Statutory Auditors of the Company. Your Directors on recommendation of the Audit Committee, seek approval of the Shareholders, for appointment of M/s. Kalyaniwalla & Mistry, Chartered Accountants, as the Statutory Auditors of the Company, from the conclusion of the forthcoming Annual General Meeting till the conclusion of the next Annual General Meeting of the Company, on such remuneration as may be mutually agreed between Board of Directors of the Company and the Auditors, as set out in the resolution included in the Notice convening the Annual General Meeting of the Company. b. Cost Auditor In accordance with Section 148 of the Companies Act, 2013 and Rules framed thereunder, the cost audit records are maintained by the Company in respect of the products which are required to be audited. Your Directors, on recommendation of the Audit Committee, appointed M/s. Rao, Murthy & Associates, Cost Accountants, to audit the cost accounting records maintained by the Company for the financial year ended 31st March 2016. c. Secretarial Auditor In accordance with Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. Parikh & Associates, Practicing Company Secretaries, to undertake the Secretarial Audit of the Company for the financial year ended 31st March 2016. The Secretarial Audit Report for the financial year ended 31st March 2016 in Form No. MR-3 is set out in Annexure 5 to this Report. COMMENTS ON AUDITORS' REPORT There are no qualifications, reservations or adverse remarks or disclaimers made by M/s. Kalyaniwalla & Mistry, Statutory Auditors, in their Auditors' Report and by M/s. Parikh & Associates, Secretarial Auditor, in their Secretarial Audit Report. The Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review. EXTRACT OF ANNUAL RETURN The extract of annual return in Form No. MGT-9 is attached as Annexure 6 to this Report. MANAGEMENT DISCUSSION AND ANALYSIS REPORT AND CORPORATE GOVERNANCE REPORT As per Regulation 34, Schedule V of the Listing Regulations, the Corporate Governance Report with the Auditors' Certificate thereon and the Management Discussion and Analysis Report are annexed and forms part of this Report. ACKNOWLEDGMENTS Your Directors take this opportunity to acknowledge with sincere gratitude the support of its esteemed customers, the strength it derives from its association with Compagnie de Saint-Gobain and its subsidiaries, the continued support and co-operation from its Bankers and the loyalty of the large family of the Company's Dealers, Suppliers and valued Shareholders. For and on behalf of the Board of Directors PRADIP SHAH ANAND MAHAJAN Chairman Managing Director Mumbai, 30th May 2016 |