DIRECTORS' REPORT TO THE MEMBERS, Your Directors have great pleasure in presenting the 24th Annual Report of the Company together with the Standalone & Consolidated Audited statement of accounts for the Financial Year ended March 31, 2016 Performance of the Company Your Company, during the year under review earned revenue from operations (Gross) of Rs. 238162.13 Lakhs, achieved an increase of 14.83% over the previous year. The EBITDA was of Rs. 13732.30 (5.77% on total revenue) as against Rs. 8905.95 (4.29%on total revenue) in the previous year. The operating profit after depreciation was amounted to Rs. 10144.14 (4.26% to revenue) as against Rs. 5506.92 (2.65% of revenue) in the previous year. Dividend Your Directors have pleasure in recommending a dividend of Rs. 3.00/- (30%) per equity share of Rs. 10/- each for the financial year ended March 31, 2016, amounting to Rs. 837.65 lakhs (Rs. 695.97 Lakhs dividend and Rs. 141.68 lakhs tax on dividend). The dividend payout is subject to approval of members at the ensuing Annual General Meeting. Dividend (including dividend tax) as a percentage of net profit after tax is 15.11% as compared to 29.69% in the previous year. The Register of Members and Share Transfer Books will remain closed from Thursday August 11, 2016 to Friday August 19, 2016 (both days inclusive) for the purpose of payment of the final dividend for the financial year ended March 31, 2016, and the Annual General Meeting. The Annual General Meeting is scheduled to be held on Friday, August 19, 2016. The dividend payout for the year under review has been formulated in accordance with shareholders' aspirations and the Company's policy to pay sustainable dividend linked to long term growth objectives of the Company to be met by internal cash accruals Transfer of Un-Claimed Dividends Pursuant to Section 124(5) of the Companies Act, 2013 [Section 205C (2) of the Companies Act, 1956] read with the Investor Education and Protection Fund (awareness and protection of Investors) Rules, 2001 as amended from time to time the unclaimed/unpaid dividend amount of Rs. 5,30,250/- (Rupees Five Lakh Thirty Thousand Two Hundred Fifty Only) for the year 2007-08 was transferred to the Investor Education and Protection Fund during the financial year 2015-16. Transfer to Reserves Your Company proposes to transfer Rs. 1000 Lakhs to General Reserve. An amount of Rs. 3705.50 Lakhs is proposed to be retained in the Surplus. Share Capital The paid up Equity Share Capital as at March 31, 2016 stood at Rs. 23,19,90,000 divided into 2,31,99,000 equity shares of Rs. 10/- each. During the year under review, the Company has not issued shares with differential voting rights nor has granted any stock options or issued sweat equity share to its employees or directors. As on March 31, 2016, none of the Directors or the Company holds instruments convertible into equity shares of the Company. Fixed Deposits Your Company has not accepted any deposits from the public and as such, no amount of principal or interest was outstanding as at the Balance Sheet date. Particulars of Loans, Guarantees or Investments Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in this Annual Report. Particulars of Contract or Arrangements Made With Related Parties All related party transactions that were entered into during the financial year were at arm's length basis and were in the ordinary course of business and that the provisions of Section 188 of the Companies Act, 2013 are not attracted. Thus the disclosure in form AOC-2 is not required. Further there are no materially significant related party transactions during the year under review with Promoters, Directors, Key Managerial Personnel and their relatives, which may have potential conflict with interest of the company at large. The related party transactions, if any are placed before the audit committee as also to the Board for approval. A statement giving details of all related party transactions are placed before the Audit committee and Board for review and approval on a quarterly basis. The details of the related party transactions during the year are part of the notes on Accounts forming part of the Annual Report. Material changes and commitments affecting financial position between the end of the financial year and date of report There are no material changes and commitments affecting financial position of the company between March 31 and the date of Board's Report. Managements Discussion and Analysis In terms of the provisions of SEBI (Listing Obligation & Disclosure Requirements) Regulation, 2015, the Management's Discussion and Analysis is set out in this Annual Report. Business Review Your Company has five Divisions in operation in different States in India. Dairy Division: The dairy segment in India, which has been growing at a scorching 22% annually in the last five fiscals (2012-16) compared with 17% for the whole industry. It will do even better over the next three years as rising disposable income and increasing quality consciousness lead to greater consumer preference for branded milk and milk products. The organised dairy segment revenue is Rs. 75,000 crore in fiscal 2016, which was 19% of the total Rs. 4.3 lakh crore for the entire dairy industry. As the consumer shift accelerates, the revenue share from organised segment could rise to 25% by fiscal 2018. On their part, dairies have been sharpening focus on value-added products, investing in brand-building and scaling up operations, particularly in processing and milk-collection infrastructure. Management of logistics costs and consistent procurement is crucial to profitability and cash flows in the business. India, the leading producer of milk and milk products, is also the largest consumer, with supply barely matching demand. According to NDDB and CRISIL Research estimates, the country produces 3,800 lakh litre per day (LLPD) of milk, accounting for a fifth of the global output. About 40% of this is retained by producers (farmers) for household consumption & another 41% share is with the unorganised segment. The remaining 19% is procured, processed and sold by organised dairies. Given the rising demand for branded products and investments being made by organised sector players, CRISIL believes the share of organised segment will increase to about 25% by fiscal 2018. In term of volume, the dairy industry grew 4% annually during the last five years ended fiscal 2016, while the organised sector grew at twice as fast. With changing consumer preference, the volume of milk processed from organised sector is expected to grow 13% annually by fiscal 2018, way ahead of a 5% annual growth for the industry at large. Growth in value terms was much higher at 17% annually, signalling better realisation. This was driven by value-added products, which grew 23% annually compared with 15% for liquid milk. The small and medium-sized organised players that derive a bulk of their revenues from the liquid milk segment have faced intensifying competition from larger players who are expanding their footprint. In contrast, increased focus on value-added products and investments in processing facilities have supported steady cash flows for the large organised players. Your Dairy division of the Company is one of the leading private dairy players in India with a chilling capacity of 16.8 lakhs liters per day, processing capacity 15.3 lakhs liters per day and packaging capacity of 10.6 laksh liters per day. It produces and markets a full line of Dairy products including fresh milk, curd, butter milk, lassi, ice-cream, paneer, table butter, milk powder, flavored milk, Doodh Peda, UHT milk and dairy whitener etc. The Dairy division has a significant presence in the states of Andhra Pradesh, Delhi, Haryana, Karnataka, Kerala, Maharashrta, Odisha, Rajasthan, Tamilnadu and Telangana. Increasing presence of Corporate's in the processed milk market Of the total milk procured for processing, about 65 per cent is pasteurized and sold in liquid form packaged in pouches, tetra packs or glass and PET bottles. Emergence of the 'cooperatives model' aided growth of the milk processing segment. While co-operatives command a majority market share, corporates are gradually gaining ground on the back of shift in the consumer taste and preference towards toned milk, flavoured milk and value added products. While the co-operatives have an advantage of subsidies in terms of procurement, the corporates are attracting farmers by offering relatively higher prices for milk procurement and providing other value added services such as healthcare facilities for animals, quality fodder, creating awareness amongst farmers, etc to boost the supply of milk to their processing plants. Consumption of processed milk is expected to continue the growth momentum and record about 5 per cent CAGR until 2016-17 to reach 55 billion litres. Market size of processed milk segment to expand at a CAGR of 12-13 per cent. While demand for processed milk grew by 5.3 per cent CAGR during 2009-10 to 2015-16, realisations rose by about 9-10 per cent CAGR. Higher realisations could be attributed to rise in milk prices and growth in consumption of flavoured milk and tetra pack milk. During the financial year 2015-16, Dairy Division has increased milk Chilling capacity by 1,00,000 LPD by commissioning of 16 units which includes Bulk Mini Chilling units, Mini Chilling units, chilling centres and Franchisee Bulk Mini Chilling units. The Turnover has grown by 13.69% from Rs. 155585.71 Lakhs to Rs. 176880.13 Lakhs. Retail Division: The Indian retail industry has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players. It accounts for over 10 per cent of the country's Gross Domestic Product (GDP) and around 8 per cent of the employment. India is the world's fifth-largest global destination in the retail space. The number of food and grocery supermarkets are expected to increase from 500 in 2006 to about 8,500 by 2017. The retail space supply in India is projected to grow from 6.3 million sqft to 7.6 million sqft over 2016-17. In the coming years, about 70 per cent of world's growth is likely to come from emerging markets, with 40 per cent contribution from India alone. These forecasts and industry prospects suggest that emerging markets are likely to gain investor interest in the future. One of the biggest opportunities and challenges that characterise the Indian retail sector is its structure. While it has matured over the years, it is still highly fragmented, with an estimated 15 million outlets. Its overall size is estimated to be INR 41 trillion in 2015-16, with a CAGR of 15 per cent over the last five years, which is much higher than the growth of the Indian GDP in the same period. Going forward, the overall retail sector growth is likely to witness a CAGR of 12-13 per cent, which would be worth INR 55 trillion in 2018-19. E-commerce is expanding steadily in the country. Customers have the ever increasing choice of products at the lowest rates. E-commerce is probably creating the biggest revolution in the retail industry, and this trend would continue in the years to come. E-commerce, as a retail channel, has seen phenomenal growth over the last couple of years. It is driven by demand factors such as substantial rise in internet penetration, increasing speed of broadband connections, increasing use of smart phones, etc. in the urban areas, and by supply factors such as increased proliferation of venture capitalists/private equity-funded e-commerce startups. India has about one million online traders - small and large that sell their products through various e-commerce portals. Your Retail Division of the Company is unique chain of retail stores designed to meet the needs of the modern Indian consumer. For us, retail business is all about creating an engaging experience for customers while offering great deals that make them feel privileged and cared for. Not a single opportunity is missed to delight the customers. The Retail division of your Company is having 110 stores operational with 60 stores operating in Hyderabad, Telangana, 16 in Bangalore, Karnataka and 34 in Chennai, Tamil Nadu as on March 31, 2016. The Company has also initiated e-commerce through Heritage fresh online as a pilot in one store now and planning to activate all the stores during 2016-17. During the Financial year 2015-16, Retail Division turnover has grown by 18% from Rs. 49397 Lakhs to Rs. 58286.49 Lakhs. The Institutional sales segment achieved sale of Rs. 4053.53 Lakhs in FY 2015-16 against Rs. 3239.45 Lakhs in FY 2014-15 with 25.13% growth. Agri Division: Agriculture plays a vital role in India's economy. Over 58 per cent of the rural households depend on agriculture as their principal means of livelihood. Agriculture, along with fisheries and forestry, is one of the largest contributors to the Gross Domestic Product (GDP). Over the recent past, multiple factors have worked together to facilitate growth in the agriculture sector in India. These include growth in household income and consumption, expansion in the food processing sector and increase in agricultural exports. Rising private participation in Indian agriculture, growing organic farming and use of information technology are some of the key trends in the agriculture industry. The Agri Division of your Company was started with an aim of sourcing fresh Fruits and Vegetables from Farmers, and ensuring stable and enhanced income for them by disintermediating the supply chain. The team of Agriculturists closely work with Farmers to transform agricultural lands into productive farms in terms of output per unit of land and energy. Company has established a couple of advanced, fully Integrated Pack Houses to handle fresh products. Apart from acting as a supply chain arm for Heritage Fresh Stores, Agri division also supplies animal feed to Dairy Farmers. The Agri division of your Company, during the year under review apart from the sourcing the fruits & vegetables, started the Veterinary care business with an aim to provide the quality feed to increase the productivity of the animals. Agri Division of your Company had achieved the turnover of Rs. 9567.72 Lakhs and handled 60198 MT including Custom Ripening with respect to Value & Volume. There is an improvement in Volume of 12% over the financial year 2014-15. Bakery Division: The Bakery division of your Company armed with world-class Bakery Equipment and Cold Storage facilities, supplies high quality Bakery Products to leading multinational chains, top star Hotels, as well as to Heritage Fresh Stores. The product range includes breads, cakes, pastries, desserts, savories and cookies. The division is also equipped to handle a wider range of Bakery Products and is open to contract manufacturing and private label opportunities. During the Financial year 2015-16, Bakery Division turnover has grown by 37.88% from Rs. 588.92 Lakhs to Rs. 812.03 Lakhs. Renewable Energy Division: The Renewable Energy Division of your Company strongly recognizes the responsibility towards protecting the environment. As a forward-looking enterprise, it is strongly committed to extending the 'Green' footprint. In line with this thinking, the Division has set up with 2.34 MW Solar Power Plant which was commissioned at Adavi Masjid Village, Mulugu Mandal, Medak Dist, Telangana and commissioned 2.1MW Wind Power Project at Vajrakarur, Anantapur Dist, Andhra Pradesh for captive consumption of Dairy Division of the Company. The above plants are expected to supply 3.75 million units of clean and green energy annually and expected to displace nearly 3,300 MT of CO annually. Renewable Energy Division of your Company had achieved the turnover of Rs. 304.30 Lakhs during the year under review. Subsidiary / Associate Companies Your Company is having two Subsidiaries Company's namely M/s. Heritage Foods Retail Limited (CIN:U15400TG2008PLC062054) & M/s. Heritage Conpro Limited (CIN:U52100TG2011PLC072132) and one Associate Company M/s SKIL Raigam Power (India) Limited (CIN:U40102TG2009PLC063671). During the year, the Board of Directors reviewed the activities of the subsidiaries, associate Companies and noted that these companies are yet to start the commercial productions. However in accordance with Section 129(3) of the Companies Act, 2013 and SEBI (Listing Obligation & Disclosure Requirements) Regulation, 2015, the Company has prepared consolidated financial statements of all its Subsidiaries & Associates in accordance with relevant Accounting Standards Viz. AS-21, AS-23 & AS-27 issued by the Institute of Chartered Accountants of India and form part of the Annual Report. Further, a statement containing the salient features of the financial statement of the Subsidiaries & Associate Companies in the prescribed format AOC-1 is appended in financial statement of the report. The statement also provides the details of financial positions of each of the subsidiaries & Associate. In accordance with Section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and audited accounts of each of its Subsidiaries & Associate, are available on the website of the Company i.e. www.heritagefoods.in These documents will also be available for inspection during the business hours at our registered office in Hyderabad, India. During the year, Company has not made any investment in the Subsidiaries & Associate Companies. Quality Your Company continues the journey of delivering value to consumers/customers through significant investments in quality programs. While sustaining existing external benchmarks and certifications, your Company have added new certifications and further enhanced the programs and initiatives to renew the commitment to the culture of quality. Your Company adheres to international quality standard certifications such as ISO 22000:2005, (OHSAS) ISO 18001:2007, ISO 14001:2004, (ENMS) ISO 50001:2011 and HALAL Certification HFC 15-101 & 102. Your Company has also received an independent auditor's assurance report on compliance to ISO 14001 & 18001 (EMS & OHSAS) 2nd Cycle Re-registration and same was submitted to certification body (SGS, Hyderabad). The Quality department of your Company handles large change management initiatives to drive quality and productivity improvements across the Company, using various techniques. Branding The Heritage brand is a key intangible asset of your Company. The branding initiative is designed to reposition the Company as the next-generation company. Marketing reach of your Company extends nationally through advertisements (such as hoarding, wall paint, vehicle brandings, Newspaper ads and radio ads etc.), public relations and digital marketing initiatives. Your Company also organizes several events in various localities to create awareness about the products of the Company. Awards & Recognitions During the financial year 2015-16 the Company has received the following awards and recognition. O Two dairy packing stations of your Company had won the Prestigious National Energy Conservation Awards (NECA) in Dairy Sector for the year 2015 at All India Level. Gokul Dairy Plant, Tirupathi, Andhra Pradesh has been awarded the 1st Prize NECA - 2015 and the Uppal Dairy Plant, Hyderabad, Telangana has been awarded the 2nd Prize NECA - 2015 by the Ministry of Power, Government of India during December, 2015. This is the 5th time that the Company has been recognised with this award (previously the Company won the award, 1st prize in the years-2014, 2012 & 2008, 2nd prize in the year-2010). O The Retail Division of your Company was awarded most prestigious 'COCA COLA Golden Spoon Award' 2016 for being the IMAGES Most Admired Food & Grocery Retailer of the Year - Regional Chain' at India Food Forum, Mumbai, during the month of January, 2016 O Your Dairy Division of the Company has been awarded in four categories at the "The Great Indian Ice Cream Contest 2016 - Season 5" conducted by Indian Dairy Association and DuPont Nutrition & Health on February 11, 2016, in Gurgaon, Delhi. * GOLD Award in Kool Kids i.e 1st prize on All India level. * The Best in Class in Kool Kids i.e Award for Excellent product. * Silver Award for VANILLA i.e 2nd prize on All India level. * Silver Award for CHOCOLATE i.e 2nd prize on All India level. Human Resources and Industrial Relations Your Company takes pride in the commitment, competence and dedication shown by its employees in all areas of business. To ensure good human resources management, your Company focus on all aspects of the employee lifecycle. This provides a holistic experience for the employee as well. During their tenure at the Company, employees are motivated through various skill-development and engagement programs. Your Company has a structured induction process at all locations and management development programs to upgrade skill of managers. Objective appraisal systems based on Key Result Areas are in place for senior management members. Your Company is committed to nurturing, enhancing and retaining top talent through superior Learning & Development Programmes. This is a part of Corporate HR function and is a critical pillar to support the organization's growth and its sustainability in long run. The total strength of your Company at the end of financial year 2015-16 was 5077, with an increase of 833 as compared with the end of the previous financial year. Particulars of Employees The table containing the names and other particulars of employees in accordance with the provisions of Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in Annexure-1A to the Board's report. A statement containing the names of every employee employed throughout the financial year and in receipt of remuneration of Rs. 60 lakh or more PA, or employed for part of the year and in receipt of Rs. 5 lakh or more in a month, under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is enclosed as Annexure-1B to the Board's report. Corporate Governance Corporate governance is an ethically driven business process that is committed to values aimed at enhancing an organization's brand and reputation. This is ensured by taking ethical business decisions and conducting business with a firm commitment to values, while meeting stakeholders' expectations. It is imperative that your company affairs are managed in a fair and transparent manner. This is vital to gain and retain the trust of the stakeholders. Your Company complies with the Securities and Exchange Board of India (SEBI)'s Regulations on corporate governance. Your Company has documented internal policies on corporate governance. Company Corporate governance report for financial year 2015-16 forms part of this Annual Report. All Corporate policies are available in Company website i.e. www.heritagefoods.in—Corporate—Policies Auditors' certificate on Corporate Governance As required by SEBI (Listing Obligation & Disclosure Requirements) Regulation, 2015, the auditors' certificate on corporate governance is forming part of the Annual Report. Board Diversity Your Company recognizes and embraces the importance of a diverse board in its success. Company believes that a truly diverse board will leverage differences in thought, perspective, knowledge, skill and industry experience, cultural and geographical background, age and gender, which will help the Company retain its competitive advantage. The Board has adopted the Board Diversity Policy which sets out the approach to diversity of the Board of Directors. The Policy is available in the Company website www.heritagefoods.in corporate- policies- BD Meetings of the Board The Board met six times during the financial year, the details of which are given in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act, 2013 and SEBI (Listing Obligation & Disclosure Requirements) Regulation, 2015. Policy on Director's Appointment and Remuneration The current policy is to have an appropriate mix of Executive and Non-executive & Independent and Women Directors to maintain the independence of the Board, and separate its functions of governance and management. As on March 31, 2016, the Board consists of 8 members, two of whom are women Executive/Whole- time directors and six are Non-Executive directors as on March 31, 2016. The Board periodically evaluates the need for change in its composition and size. The policy of your Company on directors' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Sub-section (3) of Section 178 of the Companies Act, 2013, and SEBI (Listing Obligation & Disclosure Requirements) Regulation, 2015 adopted by the Board. It is affirmed that the remuneration paid to the directors is as per the terms laid out in the nomination and remuneration policy of the Company. Declaration by Independent Directors Your Company has received necessary declaration from each independent director under Section 149 of the Companies Act, 2013, that he/she meets the criteria of independence laid down in Section 149 of the Companies Act, 2013 and SEBI (Listing Obligation & Disclosure Requirements) Regulation, 2015. Board Evaluation SEBI (Listing Obligation & Disclosure Requirements) Regulation, 2015 mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated. The evaluation of all the directors and the Board as a whole was conducted based on the criteria and framework as suggested by Nomination & Remuneration Committee adopted by the Board. The Board approved the evaluation results as collated by the nomination and remuneration committee. None of the independent directors are due for re-appointment. Training of Independent Directors Every new independent director of the Board attends an orientation program and have to visit the Company manufacturing facilities and other locations. To familiarize the new inductees with the strategy, operations and functions of your Company, the executive directors / senior managerial personnel make presentations to the inductees about the Company's strategy, operations, product and service offerings, markets, organization structure, quality and risk management etc. Appointment/Re-Appointment Dr. V Nagaraja Naidu (DIN: 00003730) Non-Executive Director of the Company retire by rotation and being eligible offer himself for re-appointment at the ensuing Annual General Meeting as per the provisions of the Article of Association of the Company and Section 152 of the Companies Act 2013 and rules made thereof and SEBI (Listing Obligation & Disclosure Requirements) Regulation, 2015. During the year Mr. Rajesh Thakur Ahuja (DIN: 00371406) was appointed as Non-Executive Independent Director w.e.f. March 23, 2016 in accordance with Section 149,152,161(1) read with Schedule IV and other applicable provisions of the Companies Act, 2013 rules made thereof. Retirements and Resignations During the year Mr. N. P. Ramakrishna (DIN: 00003751) Non-Executive Director of the Company retired by rotation and being eligible for re-appointment but he expressed his intention not to seek re-appointment. The vacancy in the Board caused by his retirement shall not be filled up for the time being. The members of the Board place on record their deep sense of appreciation for services rendered by Mr. N P Ramakrishna during his tenure as member of the Board. Mr. K Durga Prasad Rao (DIN:06888949) Whole-time Director of the Company had resigned from the Board w.e.f. November 1, 2015 due to his personal reasons and other commitments. The Board placed on record the invaluable contribution made by him, towards the progress of the company from the date of appointment until his resignation. Mr. M Siva Rama Vara Prasad (DIN: 00170919) Non-Executive Independent Director of the Company had resigned from the Board w.e.f. May 12, 2016 due to his personal reasons and other commitments. The Board placed on record the invaluable contribution made by him, towards the progress of the Company from the date of appointment until his resignation. Committees of the Board Currently, the Board has Six committees: the Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Corporate Social Responsibility Committee, Risk Management Committee and Management Committee. Policies The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandated the formulation of certain policies for all listed companies. All the corporate policies are available in the Company website (www.heritagefoods.in/Corportate/ policies). The policies are reviewed periodically by the Board and updated based on need and new compliance requirement. Auditors & Auditors Report Statutory Auditors At the Annual General Meeting held on September 26, 2014, M/s. Raju & Prasad, Chartered Accountants (F No: 003475S), Hyderabad were appointed as statutory auditors of the Company to hold office till the conclusion of the 25th Annual General Meeting to be held in the calendar year 2017. In terms of the first provision to Section 139 of the Companies Act, 2013, the appointment of the auditors shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s. Raju & Prasad, Chartered Accountants, (FRN: 003475S) as statutory auditors of the Company, is placed for ratification by the shareholders. In this regard, the Company has received a certificate from the auditors to the effect that if they are reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013. The notes on Standalone & Consolidated Financial statement referred to in the Standalone & Consolidated Auditor's Report are self-explanatory and do not call for any further comments. Secretarial Auditor: M/s. Savita Jyoti, Practicing Company Secretary (CP No:1796), was appointed to conduct the Secretarial Audit of the Company for the financial year 2015-16, as required under Section 204 of the Companies Act, 2013 and Rules made thereunder. The secretarial audit report for financial year 2015-16 issued by M/s. SavitaJyoti, Practicing Company Secretary in form MR-3 is provided in the Annexure-2 to the Board's report. The Secretarial Auditor's Report is self-explanatory and do not call for any further comments. The Board has appointed M/s. Savita Jyoti (CP.No. 1796), Practicing Company Secretaries, as Secretarial Auditor of the Company for the financial year 2016-17 as per the provisions of the Companies Act, 2013 and Rules made thereof and SEBI (Listing Obligation & Disclosure Requirements) Regulation, 2015. Significant of Material Orders Passed by the Regulators There is no order passed by the regulators or Courts during the year under review. Extracts of Annual Return In accordance with Section 134(3)(a) of the Companies Act, 2013 an extract of the annual return is prescribed in form MGT-9 is provided in Annexure-3 to this report. Listing Agreement The Securities and Exchange Board of India (SEBI), on September 2, 2015, issued SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 with the aim to consolidate and streamline the provisions of the Listing Agreement for different segments of capital markets to ensure better enforceability. The said regulations were effective from December 1, 2015. Accordingly, all listed entities were required to enter into the Listing Agreement within six months from the effective date. Your Company entered into Listing Agreement with BSE Limited and the National Stock Exchange of India Limited during December 2015. Internal financial control and its adequacy The Board has adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures. Internal Audit & Control Systems Your Company has a well-defined and documented internal control system, which is adequately monitored. Checks & balances and control systems have been established to ensure that assets are safe guarded, utilized with proper authorization and recorded in the books of account. The Internal control systems are improved and modified continuously to meet the changes in business conditions, statutory and accounting requirements. These are supplemented by internal audit of all divisions of your Company carried out by reputed firms of Chartered Accountants across India. Your Company has an Audit Committee consisting of Five Directors in whom all are Non Executive and three are independent Directors. The Audit Committee of the Board of Directors and Statutory Auditors are periodically apprised of the internal audit findings and corrective actions taken. The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of internal control system and suggests improvements if any for strengthening them. Your Company has a robust Management Information System which is an integral part of the control mechanism. The Board of Directors on the recommendation of the Audit Committee has appointed Internal Auditors for the financial year 2016-17 as per the provision of Section 138 of the Companies Act, 2013 and Rules made thereof and as per the SEBI (LO&DR) Regulation, 2015 Corporate Social Responsibility (CSR) Your Company has been an early adopter of corporate social responsibility (CSR) initiatives. Along with sustained economic performance, environmental and social stewardship is a key factor for holistic business growth. CSR activities, as per the provisions of the Companies Act, 2013 and rules made thereof, may be undertaken by the Company or through a registered trust or a registered society. The CSR Committee of the Board evaluated the various options to implement the CSR activities and decided to transfer the mandated CSR amount to the NTR Memorial Trust, Hyderabad, to carry out the activities such as promoting education, enhancing the vocational skills & supply of clean drinking water etc., as part of the CSR activities of the Company. As the NTR Memorial Trust is operating since 1997 towards the improvement of health, education of the needy people in the society and running the school for the poor people and lot more other initiatives for the up-liftment of the backward and needy population in the society. The Company works with NTR Memorial Trust, Hyderabad towards promoting education, enhancing vocational skills and supply of clean water, apart from its own trust's namely Heritage Farmers Welfare Trust and Heritage Employee Welfare Trust. These projects are in accordance with Schedule VII of the Companies Act, 2013 and the Company's CSR Policy. The Report on CSR activities as required under Companies (Corporate Social Responsibility Policy) Rules, 2014 is set out as Annexure-4 forming part of the Board's Report. i. Heritage Farmer Welfare Trust (HFWT) Apart from the CSR activities under the Companies Act, 2013 your Company continues to voluntarily support the following social initiatives through Heritage Farmers Welfare Trust (HFWT). O Veterinary care and cattle management practices through Heritage Mobile Veterinary Clinic, (equipped with necessary tools and trained human resources for providing door-step veterinary services to the Milch Animals and empowering cattle owners with advanced technology and knowledge on best cattle management and feeding practices. The Mobile veterinary vans reach needy places for educational video film in the evening and free health camp on the next day morning in a village. O Extending Insurance coverage for accidental death of farmer members, Incentive for fodder development & reward for Meritorious Students. O The HFWT impact during the year through Mobile Veterinary clinic as follows: ii. Heritage Employee Welfare Trust (HEWT) Heritage Employees Welfare Trust is a trust formed by Heritage Foods Limited for the welfare of employees in the field of Health, Medical Service, Education Facilities, Financial Needs, common development needs and major objectives of the trust are as follows: - O To extend financial assistance to the needy Employees and their dependents to pursue medical treatment, higher education, social functions and other needed assistance. O Providing non-statutory Medical Insurance Packages to members and their dependents. O To address any other employee needs (Includes employees, their family members and other dependents) Energy Conservation, Technology Absorption & Foreign Exchange Earnings & Outgo The particulars as prescribed under Sub-section (3)(m) of Section 134 of the Companies Act 2013, read with the Companies (Accounts) Rules, 2014 are provided in the Annexure-5 to the Board Report. Risk Management Your Company have constituted a Risk Management Committee pursuant to Section 134 (3) (n) of the Companies Act, 2013 & Regulation 21 of SEBI (Listing Obligation & Disclosure Requirements) Regulation 2015, which has been entrusted with the responsibility to assist the Board in (a) Overseeing and approving the Company's enterprise risk management framework; and (b) Overseeing that all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks. The Committee had formulated a Risk Management Policy for dealing with different kinds of risks which it faces in day to day operations. Risk Management Policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board. The Risk Management Procedure shall be reviewed by the Risk Management Committee and Board of Directors on a half-yearly basis. The policy is available in the Company website: www. heritagefoods.in- corporate- policies- RMPolicy Policy on Sexual Harassment Your Company has in place an Anti Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. The following is a summary of sexual harassment complaints received and disposed off during the year 2015-16 No of complaints received : Nil No of complaints disposed off : Nil Director's Responsibility Statement as required under Section 134 (3)(c) of the Companies Act, 2013. The financial statements are prepared in accordance with the Generally Accepted Accounting Principles (GAAP) under the historical cost convention on accrual basis except the sale proceeds received under REC Mechanism of the Renewable Energy. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 ('the Act'), read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). There are no material departures from prescribed accounting standards in the adoption of these standards. The Directors confirm that: O In the preparation of the annual accounts for the financial year 2015-16, applicable accounting standards have been followed along with proper explanation relating to material departures. O They have 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 year 2015-16 and of the profit and loss of the Company for that period. O They have taken Proper and sufficient care 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, O They have prepared the annual accounts of the company on a going concern basis. O They have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and O They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Green Initiatives The Company started a sustainability initiative with the aim of going green and minimizing our impact on the environment. Electronic copies of the Annual Report 2015-16 and Notice of the 24th Annual General Meeting will be sent to all members whose email addresses are registered with the Company / Depository Participant(s). For members who have not registered their email addresses, physical copies of the Annual Report 2015-16 and the Notice of the 24th Annual General Meeting will be sent in the permitted mode. Members requiring physical copies can send a request to the Company. Acknowledgement The Board takes this opportunity to thank all customers, farmers, vendors, investors, bankers and Statutory Authorities for their continued support during the year. The Board also wishes to place on record its sincere appreciation of the effort/ contribution made by its employees at all levels. The Company's consistent growth was made possible by their hard work, solidarity, cooperation and support and look forward to their continued support in the future. For and on behalf of HERITAGE FOODS LIMITED D SEETHARAMAIAH Chairperson DIN: 00005016 Registered Office: #6-3-541/C, Punjagutta, Hyderabad - 500 082 CIN : L15209TG1992PLC014332 Ph : 040-23391221/2 E-mail : hfl@heritagefoods.in Date : May 23, 2016 |