DIRECTORS' REPORT Dear Members, 1.The Board of Directors of your Company take pleasure in presenting its report on the working of the Company for the Financial Year 2014-15. 2. BUSINESS PERFORMANCE The key highlights of the Company's financial performance during the Financial Year 2014-15 are given here below: 0 Revenue increased by 21.95% to $ 1481.21 Crores from $ 1214.61 Crores in the last Financial Year. 0 EBITDA increased by 34.60% to $ 201.03 Crores; EBITDA margins increased by 128 bps to 13.57%. 0 Net Profit increased by 56.99% to $ 103.05 Crores from $ 65.64 Crores in the last Financial Year. 0 Net Profit margins increased by 155 bps to 6.96% 0 Total retail outlets increased from 179 to 207 during the Financial Year. PERFORMANCE OVERVIEW FINANCIALS Your company has been able to show a strong growth on the key financial metrics for the year, despite the market scenario being uncertain and competitive activity increasing in the year. Your Company continues its journey of profitable growth driven by the strong fundamentals of operating model, overwhelming desire to serve customers and the end consumer and continued focus on the long term business plan. (B) NON-FINANCIALS - GROWTH ACROSS THE VALUE CHAIN (i) Consumer Focus / Product Innovation Your company continued its relentless efforts to understand the consumer and design our portfolio in line with the same. Consumer insights formed the back bone of all our product development efforts. Your Company has strived to understand our consumers across regions and social & economic strata, to come out with market relevant products. Our portfolio and pricing strategy has evolved over years and last year saw a surge in innovation quotient in our portfolio. All our brands - Hawaii, Flite, Sparx and Schoolmate, have experienced tremendous growth on the back of hugely successful consumer relevant portfolio. We understand that our brands are at the forefront of bringing the value proposition of our products for our consumers. In line with our strategy, your Company continued to invest heavily behind our brands. During the year, Company engaged Sonakshi Sinha - as the brand ambassador for Flite. We believe that Sonakshi has been successful in conveying the key attributes of style, fashion and colours for our brand, Flite to our consumers. In order to ensure a comprehensive portfolio, covering all consumer needs, Company has also launched a new Bahamas collection - that conveys values of fun and fashion for our consumers. (ii) Sales Channels Development Serving our customers well, remains our top priority. To enable sales and distribution growth, regional offices have been set up. Your Company has successfully expanded its distribution footprint in many of hitherto unexplored / under-penetrated territories. Complete end-to-end distributor and retailer programs have also been put in place to improve engagement with our channel partners. Our retail network has seen a significant growth, both in terms of number of stores (28 during the year) as well as in terms of our approach towards the business. We have been focusing on account category management, a comprehensive portfolio management and capturing shopper insight to enable better and aligned product availability for our consumers. Concentrated expansion plan backed with profitable business case has resulted in significant improvement in our net margins. Your Company continues investing behind Exports, Modern Trade and E-Commerce business, as we believe that these channels will lead the growth engine from the forefront in times to come. (iii) Sourcing and Procurement Your company was able to manage the material cost well within budget owing to effective monitoring of the raw material cost and easing of prices in the international market. We increased our collaboration with key suppliers and focused on competitive bidding of prices. (iv) Manufacturing Excellence With the objective of building strong manufacturing foundation to support growth, your Company took further steps towards manufacturing transformation and excellence across key production units. The program aimed at reducing operational complexity, improving process efficiency and reducing manufacturing costs with the help of new-age concepts of Lean Six Sigma and Lean Manufacturing. We have been successful in increasing production capacities and improving efficiency levels. Operational efficiency was attained by utilizing strategies of manpower optimization, energy efficiency, rationalization of capital & operational expenses and capability development of our people. (v) Supply Chain Optimization Supply chain remains one of the key area for enabling growth of your company. Company has made significant improvements towards network expansion / utilization and inventory optimization. Efficiencies were brought in the processes of Regional Distribution Centers (RDCs) and we were able to service our channel partners faster and better. Forward looking capacity planning for both factories and warehouses were undertaken to build a platform for future growth. The close coordination between Manufacturing, Supply Chain Management and Sales ensured optimum level of inventories across the year leading to on-time fulfillment of demand. We have been able to build adaptive processes leading to fulfillment of additional requirements for our targeted channels like Modern Trade, Retail and Exports. (vi) People Focus Over the last year, the HR function in Your Company has undertaken an important transformation journey, where it has made several new strides in important areas of Recruitment, Reward s Management, Leadership Development, while at the same time taking first steps towards automating some of the key HR processes. While the journey continues into FY16, our achievements in these areas give us a firm footing to make strategic contributions towards business growth. a) Recruitment - We have been focused on getting the best talent from the market to enable organization growth. During the year in mention we have enhanced the talent pipeline for open positions by tapping new sources, both internal and external while enhancing our Employee Value Proposition. b) Rewards Management - We believe that the good organizational performance is driven by its employees. Our journey towards ensuring a lucrative rewards package to our top performing executives was taken forward this year through introduction of Employee Stock Option Plan (ESOP) for senior and top executives. c) Leadership Development - Your Company launched a Leadership Development Program (LDP) called Crucibles for employees with high leadership potential. Various opportunities provided as part of the program helped the participants to solve complex business problems and provided them an environment to experiment with their ideas. d) Employee Engagement - Your Company conducted a structured exercise to measure employee engagement levels and are taking steps towards improving employee experience in various areas. (vii) ISO Certification As an additional step of our commitment towards environment, your Company has achieved a prestigious certification on ISO 14001:2004 for its four manufacturing plants and will continue to roll it out to the other manufacturing plants. By implementation of ISO 14001:2004 we are now capable to : • Quantify, monitor and control the impact of operations on the environment, now and in the future. • Ensure legislative awareness and compliance in better way. • Improve environmental performance of supply chain. • Grow access to business partners and potential customers. (viii) Standard Operating Procedure (SOPs) To enhance operational efficiencies and day to day working, formal SOPs (Standard Operating Procedure) preparation was initiated by engaging external professional agency and were successfully implemented during the Financial Year. These SOPs will further yield in future operational benefits, streamline internal processes, enhance efficiencies, optimize utilization of resources along with cost. 4. MANAGEMENT DISCUSSION & ANALYSIS REPORT The Management Discussion & Analysis forms an integral part of this Report and gives details of the overall industry structure, developments, performance and state of affairs of the Company's business, internal controls and their adequacy, risk management systems and other material development during the Financial Year. 5. DIVIDEND Board of Directors in their meeting held on 9th May, 2015 have recommended a final dividend of 100% i.e $ 1.00 per equity share (equivalent to $ 0.50 per share post 1:1 bonus issue) for the Financial Year ended March 31, 2015. The bonus issue was subsequently approved by the Shareholders through the postal ballot on 22nd June, 2015. The proposed dividend is subject to the approval of shareholders at the Annual General Meeting to be held on 24th September, 2015. 6. BONUS ISSUE Board of Directors in their meeting held on 9th May, 2015 have declared bonus issue in the ratio of 1:1 i.e one bonus share of $ 1.00 to every shareholder holding equity Share of $ 1.00. The bonus issue was approved by the Shareholders through the Postal Ballot on 22nd June, 2015. The allotment of the bonus issue has been made in the Board Meeting held on 3rd July, 2015 to all the shareholders of the Company holding shares on the record date i.e 2nd July, 2015. 7. TRANSFER TO RESERVE We propose to transfer Net Profit of $100.00 Crores to the General Reserve. An amount of $1.06 Crores is proposed to be retained in profit and loss account. 8. PUBLIC DEPOSITS Your Company has not invited or accepted any Deposits within the meaning of Sections 73 & 74 of the Companies Act, 2013 read together with the Companies (Acceptance of Deposits) Rules, 2014 from Public during the year under review. 9. CORPORATE GOVERNANCE The Company is committed to maintain the highest standard of Corporate Governance and adhere to the Corporate Governance requirements set out by SEBI. The Report on Corporate Governance as stipulated under listing agreement forms an integral part of the Report. The requisite certificate from the Statutory Auditors of the Company M/s Gupta & Dua, Chartered Accountants, confirming compliance with the conditions of corporate governance is attached to the report of Corporate Governance. 10. DISCLOSURE RELATING TO REMUNERATION OF DIRECTORS, KEY MANAGEMENT PERSONNEL & PARTICULARS OF EMPLOYEES In accordance with Section 178 of the Companies Act, 2013 read with rules issued thereunder and Clause 49 of the Listing Agreement, the Board of Directors at their meeting held on 10th May, 2014 formulated the Nomination & Remuneration Policy of your Company. The salient aspects covered in the Nomination and Remuneration Policy, covering the policy on appointment and remuneration of Directors and other matters have been outlined in the Corporate Governance Report which forms part of this Report. The Nomination and Remuneration Policy is available on the website of the Company at the following link <http://www.relaxofootwear.com/pdf/Nomination-and->remuneration-policy.pdf. The information required under Section 197 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of Directors / employees of your Company is set out in Annexure -A to this report. 11. DIRECTORS AND KEY MANAGERIAL PERSONNEL During the year Mr. Umesh Nath Kapur Independent Director of the Company expressed his inability to continue as Director and ceased to be Director w.e.f 29th July, 2014. During Financial Year 2014-15, members approved appointment of Mr. Pankaj Shrimali, Mr. Vivek Kumar, Mr. Kuruvila Kuriakose and Ms. Deepa Verma as Independent Directors for a period of five years till 31st March, 2019 who are not liable to retire by rotation. Ms. Deepa Verma was also appointed as Woman Director during the year pursuant to the provisions of Companies Act, 2013 & Listing Agreement. During the year Mr. Sushil Batra, Chief Financial Officer (CFO) of the Company was designated as Key Managerial Person pursuant to the Provisions of Companies Act, 2013. Mr. Ramesh Kumar Dua Managing Director and Mr. Mukand Lal Dua Whole Time Director of the Company retire by rotation at the ensuing Annual General Meeting and, being eligible, offered themselves for re-appointment. Your Directors recommend their appointment as the Directors of the Company. Mr. Deval Ganguly was appointed as Whole Time Director for a term of 3 years w.e.f 5th November, 2012. He is to be reappointed for another term of 3 years w.e.f 5th November, 2015 if approved by shareholders in the forthcoming Annual General Meeting. 12. ANNUAL EVALUATION OF BOARD'S PERFORMANCE In terms of provisions of Companies Act, 2013 read with Rules issued thereunder and Clause 49 of Listing Agreement, the Board of Directors on recommendation of the Nomination and Remuneration Committee, have evaluated the effectiveness of the Board/ Director(s) for the Financial Year 2014-15. 13. NUMBER OF MEETINGS OF THE BOARD The Board met five 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. 14. DECLARATION BY INDEPENDENT DIRECTORS The Company has received necessary declaration from each Independent Director under Section 149(7) of the Companies Act, 2013 that he/she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and clause 49 of Listing Agreement. 15. TRAINING OF INDEPENDENT DIRECTORS Every new Independent Director of the Board is briefed about the Company background, its vision and goals. The Company executive make presentation to the new inductee about the Company's strategy, operations, products, organization structure, finance, human resource and facilities. The Company had arranged presentations for the Independent Directors, on the Company law and other applicable laws on the Company. Further at the time of appointment of an independent Director, the Company issued a formal letter of appointment outlining his/ her role function, duties & responsibilities as a Director. The format of the letter of appointment is available on our website <http://www.relaxofootwear.com/terms->conditions.aspx 16. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 134 of the Companies Act, 2013 with regard to Directors' Responsibility Statement, it is hereby confirmed: a) in the preparation of the annual accounts for the year ended 31st March, 2015, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same; b) the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2015 and of the profit of the Company for the year ended on that date; c) the Directors have 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 have prepared the annual accounts on a 'going concern' basis; e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. 17. AUDITORS The Statutory Auditors of the Company M/s. Gupta & Dua, Chartered Accountants hold office till the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received letter from them to the effect that their re appointment, if made, would be within the prescribed limits under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for re-appointment. 18. AUDITORS' REPORT The observation of the Auditors on the Accounts for the year under report have been suitably explained in the Notes to Accounts and do not require any further clarification. 19. SECRETARIAL AUDITORS Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Company has appointed M/s Vivek Arora, Company Secretaries, to conduct the secretarial audit of the Company for the Financial Year 2014-15. The secretarial audit report for the Financial Year 2014-15 forms part of the Annual Report as Annexure-B to the Board's Report. 20. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in Form MGT-9 in accordance with Section 92(3) of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, are set out herewith as Annexure - C to this Report. 21. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES All contracts / arrangements / transactions entered by the Company during the Financial Year with related parties were in the ordinary course of the business and on the arm's length basis. During the year the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of Related Party Transactions. The policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link <http://www.relaxofootwear.com/pdf/Policy-for-Transactions->with-related Parties.pdf Your Directors draw attention of the members to Note No. 31 to the financial statements which sets out related party disclosures. The form AOC-2 pursuant to section 134(3)(h) of the Companies Act, 2013 read with Rule 8 (2) of the Companies (Accounts) Rules, 2014 is set out as Annexure-D to this report. 22. DETAILS OF LOANS & GUARANTEES The details of loans, guarantees and investments under Section 186 of the Companies Act, 2013 read with Companies (Meeting of Board and its Powers) Rules, 2014 are as follows :- a) Details of investments made by the Company as on 31st March, 2015 (including investments made in previous years). (i) Investment in equity shares $ 0.06 Crores in Relaxo Rubber Private Limited (ii) Investment in debt instruments : NIL b) Details of loans given by the Company : NIL c) There are no guarantees issued by your Company in accordance with Section 186 of the Companies Act, 2013 read with the Rules issued thereunder. 23. RISK MANAGEMENT Your Company recognizes that risk is an integral part of business and is committed to manage the risks in a pro-active and efficient manner. Your Company periodically assesses risks in the internal and external environment, along with the cost of treating risks and incorporates risk treatment plans in its strategy. The Internal Audit Department facilitates the execution of Risk Management Practices in the Company, in the areas of risk identification, assessment, monitoring, mitigation and reporting. The Company has laid down procedures to inform the Audit Committee as well as the Board of Directors about risk assessment & management procedure and status. The Company has policy to hedge payment of foreign currency in order to reduce risk of volatile international market of foreign exchange. All properties, including building, plant, machinery, furniture, fixture, stock and stock in transit of the Company have been properly insured against all kind of risks. 24. CORPORATE SOCIAL RESPONSIBILITY (CSR) The Corporate Social Responsibility Committee has recommended to the Board a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board. The CSR Policy may be accessed on the Company's website at the link <http://www.relaxofootwear.com/pdf/Corporate->SocialResponsibility-Policy.pdf. The CSR Policy outlines the CSR vision of your Company which is based on embedded tenets of trust, fairness and care. The Company is also in the process of formation of society for the purpose of CSR activities and is planning to take all CSR initiatives through the society. The Annual Report of the CSR activities is annexed herewith marked as Annexure-E. 25. VIGIL MECHANISM Your Company is committed to highest standards of ethical, moral and legal business conduct. Accordingly, the Board of Directors have formulated a Whistle Blower Policy which is in compliance with the provisions of Section 177(10) of the Companies Act, 2013 and Clause 49 of Listing Agreement. The copy of the policy is available at Company's website at link at <http://www.relaxofootwear.com/pdf/Vigil->Mechanism-Policy.pdf. 26. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 Your Company has always believed in providing a safe and harassment free workplace for every individual working at Relaxo Footwears Limited. The Company always tries to create and provide an environment that is free from discrimination and harassment including sexual harassment. A policy on Prevention of Sexual Harassment at workplace was released during the last Financial Year ended 31st March 2015. The policy aims at prevention of harassment of employees and lays down the guidelines for identification, reporting and prevention of undesired behaviour. An Internal Complaints Committee (ICC) was set up at each of the units and offices of the Company as per the requirements of the law. The ICC is responsible for redressal of complaints related to sexual harassment. Moreover, your Company has been regularly conducting sensitization sessions for all its employees so as to create awareness about the subject and the law governing the same including their rights of redressal and the punishments applicable in case of any misconduct. Your Directors are happy to report that there has been no complaint of Sexual Harassment and it is our constant endeavour to ensure that we provide harassment free, safe and secure working environment to all employees specially for women. 27. SIGNIFICANT MATERIAL ORDERS PASSED BY THE REGULATORS There are no significant / material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of your Company and its operation in future. 28. CREDIT RATING The ICRA has reaffirmed Long term rating of the Company as ICRA A+ and the outlook for long term rating has been upgraded from stable to positive. The short term rating of your Company has been upgraded from ICRA A1 to ICRA A1+ which is top notch rating and reflects strong credit quality of the Company. 29. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUT GO The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, are provided in Annexure-F to this Report. 30. EMPLOYEES STOCK OPTION PLAN The Nomination & Remuneration Committee of the Board of Directors of the Company interalia, administers and monitors the Employees Stock Option Plan of the Company in accordance with the applicable SEBI Guidelines. The Company instituted the Employee Stock Option Plan 2014 ("RFL ESOP PLAN-2014") for employees of the Company by granting shares thereunder. Accordingly, the ESOP Plan was formulated in accordance with the SEBI Guidelines. The ESOP Plan was approved by the members on 5th, August 2014, through a postal ballot. The approved ESOP plan authorizes the committee to create, offer and grant 900090 (Nine lac and Ninety only) options of face value of $1.00 to the eligible employees of the Company from time to time in one or more tranches. The details as per the requirements of SEBI Guidelines are annexed and form part of this Report as Annexure-G. 31. CEO AND CFO CERTIFICATION Pursuant to the requirement of Clause 49 of the Listing Agreement, the CEO and CFO certification is attached herewith, the Annual Report. The Managing Director and the Chief Financial Officer also provide quarterly certification on financial results while placing the financial results before the Board in terms of Clause 41 of the Listing Agreement. 32. ACKNOWLEDGMENT Your Directors express their gratitude to the Company's shareholders, business partners and suppliers for their understanding and support. The Directors also take this opportunity to thank Banks, Government & Regulatory Authorities and Stock Exchanges, for their continued support. Finally, your Directors acknowledge the dedicated services rendered by all employees of the Company. For and on behalf of the Board of Directors Ramesh Kumar Managing Director Mukand Lal Dua Whole Time Director Delhi, 25th July, 2015 |