Directors Report To the Members, The Directors have great pleasure in presenting their 30th Report along with the audited financial statement for the financial year ended March 31, 2015. PERFORMANCE OF THE COMPANY During the year, your Company registered a total income of Rs. 2,93,909.82 lakhs representing an increase of 17.47 % over that of the previous year. The PBDIT has also increased from Rs.18,624.66 lakhs (FY2013-2014) to Rs. 20,432.87 lakhs (FY 2014-2015). The net profit during the year was Rs. 3,915.67 lakhs in comparison with previous year which stood at Rs. 8,168.57 lakhs. The decrease in net profits during the year was mainly on account of increase in the finance cost and depreciation on commissioning of Tirunelveli plant. During the year the Company has also aligned its depreciation rates in line with the New Companies Act, 2013 which also contributed to the increase in depreciation during the year. During the financial year under review, your Company registered a healthy growth in revenues from Milk, Ice creams, Curd and other Milk Products over that of the previous year. DIVIDEND During the year, your Company has declared and paid interim dividends totaling Rs. 1.80/- per equity share (180%) on equity share capital. The total cash outflow on account of dividend excluding dividend tax for the year 2014-15, would aggregate to Rs. 1,956.46 lakhs resulting in a payout of 49.96% of the net profits of the Company. During the financial year 2014-15, an amount of Rs. 92,712/-being unclaimed dividend pertaining to the financial year 2006-07 and an amount of Rs. 1,11,293/- being unclaimed interim dividend pertaining to the financial year 2007-08 were transferred to Investor Education & Protection Fund (IEPF). SHARE CAPITAL During the year, the Board of Directors of the Company at their meeting held on 18th November, 2014 had allotted 10,00,000 Equity Shares to select persons/entities belonging to Non-Promoter Group on a preferential basis in accordance with provisions specified under Chapter VII of SEBI (ICDR) Regulations, 2009. The Company has obtained the trading approval for 10,00,000 Equity Shares from both the Exchanges viz., BSE Limited and National Stock Exchange of India Limited on 24th December, 2014. Consequent to the listing approval, the Company share capital as of 31st March, 2015 stood at 10,86,91,648 Equity Shares of Re.1 each/- totaling to Rs.10,86,91,648/-. TRANSFER TO RESERVES The Company retained the entire surplus in the Profit and Loss Account and hence no transfer to General Reserve was made during the Year. FINANCE Cash and cash equivalent as at March 31, 2015 amounted to Rs. 23.34 crores. During the year, there was an increase of 56% in the finance cost on account of term loans availed towards commissioning of Tirunelveli Plant. The Company continues to focus on judicious management of its working capital and has taken care to ensure that the Company borrowings are obtained at very competitive rates. Receivables, inventories and other working capital parameters were kept under strict check through continuous monitoring. DEPOSITS The total amount of fixed deposits (excluding interest on Cumulative Deposits) from public outstanding and unclaimed as at 31st March, 2015, was Rs. 2.49 lakhs out of which a sum of Rs. 1.88 lakhs represents 7 accounts of Fixed/Non Cumulative Deposits and Rs. 0.61 lakhs represents 2 accounts of Cumulative Deposits. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 There were no loans and guarantees given by the Company falling under Section 186 of the Companies Act, 2013. Particulars of investments covered under Section 186 forms part of the notes on financial statements provided in this Annual Report. DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONNEL Appointments and Resignations The Board has appointed Shri Balaji Tammineedi and Dr. Chalini Madhivanan as Additional Directors of the Company we.f 23rd September, 2014, under the category of Non-Executive and Independent Directors. The Board of Directors seek your support in confirming the appointment of Mr. Balaji Tammineedi and Dr. Chalini Madhivanan as Independent Directors of the Company for five consecutive years for a term up to 22nd September, 2019, not liable to retire by rotation. Re-appointments As per provisions of the Companies Act, 2013, Shri R.G. Chandramogan is liable to retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The Board of Directors recommends his re-appointment. Declaration By Independent Directors The Company has received declarations from all its Independent Directors that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and clause 49 of the Listing Agreement in respect of the financial year ended March 31, 2015. BOARD MEETINGS HELD DURING THE FINANCIAL YEAR During the year 9 (nine) Board Meetings and 6 (six) Audit Committee Meetings were convened and held, the details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. BOARD COMMITTEES The primary four committees of the Board are Audit Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee and Stakeholders' Relationship Committee. Other than above said primary committees the Board also has the following additional committees viz., Sub Committee, Share Transfer Committee, Risk Management Committee and Core Committee. A detailed note on the committees is provided under the Corporate Governance Report forming part of this Board's Report. The Composition of the Primary Committees and their meeting dates are given below: Details of recommendations of Audit Committee which were not accepted by the Board along with reasons The Audit Committee generally make certain recommendations to the Board of Directors of the Company during their meetings held to consider any financial results (Unaudited and Audited) and such other matters placed before the Audit Committee as per the Companies Act, 2013 and Listing Agreement from time to time. During the year the Board of Directors has considered all the recommendations made by the Audit Committee and has accepted and carried on the recommendations suggested by the Committee to its satisfaction. DETAILS OF POLICIES DEVELOPED BY THE COMPANY (i) Nomination and Remuneration Policy The Company has formulated the Nomination and Remuneration Policy in compliance with Section 178 of the Companies Act, 2013 read along with the applicable rules thereto and Clause 49 of the Listing Agreement, as amended from time to time. The objective of this policy is to ensure: - The level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Directors of the quality required to run the company successfully; - Relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and - Remuneration to Directors, Key Managerial Personnel and Senior Management involves a balance with short- and long-term performance objectives appropriate to the working of the Company and its goals This policy is being governed by the Nomination and Remuneration Committee comprising of three members of the Board, all of whom are Non-Executive and Independent Directors. The policy lays down the standards to be followed by the Nomination and Remuneration Committee with respect to the appointment, remuneration and evaluation of Directors and Key Management Personnel. The Nomination and Remuneration Policy is annexed herewith marked as Annexure A and forms part of this report. Affirmation that the remuneration is as per the remuneration policy of the Company The Company has formulated the Nomination and Remuneration Policy in compliance with Section 178 of the Companies Act, 2013 read along with the applicable rules thereto and Clause 49 of the Listing Agreement, as amended from time to time. This policy governs the criteria for deciding the remuneration for Directors and Key Management Personnel. It is affirmed that the remuneration to Directors and Key Management Personnel is being fixed based on the criteria and parameters mentioned in above mentioned policy of the Company. Board Diversity The Company recognises and values the importance of a diverse Board as part of its corporate governance and success. The Company believes that a truly diverse Board will leverage differences in ideas, knowledge, thought, perspective, experience, skill sets, age, ethnicity, religion and gender which will go a long way in retaining its competitive advantage. The Board has on the recommendation of the Nomination and Remuneration Committee, adopted a Board Diversity Policy which sets out the approach to diversity of the Board of Directors. (ii) Corporate Social Responsibility (CSR) Policy Your Company recognizes that its business activities have wide impact on the societies in which it operates, and therefore an effective practice is required giving due consideration to the interests of its stakeholders including shareholders, customers, employees, suppliers, business partners, local communities and other organisations. Your Company endeavours to make CSR an important agenda and is committed to its stakeholders to conduct its business in an accountable manner that creates a sustained positive impact on society. Our Company satisfying the threshold as stipulated under Section 135 of the Companies Act, 2013 has established the CSR Committee comprising of three members of the Board and the Chairman of the Committee is Non-Executive and Independent Director. The said Committee has formulated and approved the CSR policy for the Company with its major focus on:- Devising meaningful and effective strategies for carrying out CSR activities and engaging with all stakeholders towards implementation and monitoring. - Make sustainable contributions to communities. - Identify socio-economic opportunities to perform CSR activities. - Focus on social welfare activities as envisaged in Schedule VII of Companies Act, 2013. The Policy also focuses on the constitution of CSR Committee, roles and responsibilities of CSR Committee, CSR activities to be undertaken and allocation of funds for carrying out such CSR activities, implementation and monitoring the execution of CSR activities for the Company. The CSR Committee shall recommend to the Board of Directors to implement the CSR activities covering any of the areas as detailed under Schedule VII of Companies Act, 2013. Annual Report on CSR activities as required under the provisions of Companies Act, 2013 is annexed herewith marked as Annexure B and forms part of this report. (iii) Risk Management Policy The Board of Directors of your Company has adopted a Risk Management Policy which details on the procedures to be followed by the Company with regard to risk management. The Company has formed a Risk Management Committee comprising of three members of the Board who shall evaluate and review the risk factors associated with the operations of the Company and recommend to the Board the methods to mitigate the risk and advise from time to time various measures to minimising the risk and monitor the risk management for the Company. The policy broadly defines the scope of the Risk Management Committee which comprises of:- Review and approve the Risk Management Policy and associated frameworks, processes and practices of the Company. - Ensuring that the Company is taking the appropriate measures to achieve prudent balance between risk and reward in both ongoing and new business activities. - Evaluating significant risk exposures of the Company and assess management's actions to mitigate the exposures in a timely manner (including one-off initiatives, and ongoing activities such as business continuity planning and disaster recovery planning & testing). - Co-ordinating its activities with the Audit Committee in instances where there is any overlap with audit activities (e.g internal or external audit issue relating to risk management policy or practice). - Reporting and making regular recommendations to the Board. (iv) Whistle Blower Policy — Vigil Mechanism The Company is committed to adhere to the highest standards of ethical, moral and legal conduct of business operations. To maintain these standards, the Company encourages its employees who have concerns about suspected misconduct to come forward and express these concerns without fear of punishment or unfair treatment. A Vigil (Whistle Blower) mechanism provides a channel to the Employees and Directors to report to the management concerns about unethical behaviour, actual or suspected fraud or violation of the Code of Conduct or Policy. The mechanism provides for adequate safeguards against victimisation of employees and Directors to avail of the mechanism and also provide for direct access to the Chairman of the Board/Chairman of the Audit Committee in exceptional cases. In line with the statutory requirements, the Company has formulated a Whistle Blower Policy/Vigil Mechanism, which covers malpractices and events which have taken place/suspected to have taken place, misuse or abuse of authority, fraud or suspected fraud, violation of company rules, manipulations, negligence causing danger to public health and safety, misappropriation of monies, and other matters or activity on account of which the interest of the Company is or is likely to be affected and formally reported by whistle blowers concerning its employees. The Managing Director is responsible for the administration, interpretation, application and review of this policy. The Managing Director is also empowered to bring about necessary changes to this Policy, if required at any stage with the concurrence of the Audit Committee. The mechanism also provides for access to the Chairman of the Audit Committee in required circumstances. EVALUATION OF BOARD, COMMITTEE AND DIRECTORS Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, an annual performance evaluation of the performance of the Board, the Directors individually as well as the evaluation of the working of the Board Committees was carried out based on the criteria and framework adopted by the Board. The evaluation process for measuring the performance of Executive/Non-Executive and Independent Directors is being conducted through a survey which contains a format of a questionnaire capturing each Board and Committee Member's response to the survey which provides a comprehensive feedback to evaluate the effectiveness of the Board and its Committees as a whole and also their independent performance. The methodology adopted by each Director who responded to the survey has graded their peers against each survey item from P1 to P3 with P1 marking the lower efficiency and P3 the highest efficiency which revealed more realistic data on measuring the effectiveness of the Board dynamics, flow of information, decision making of Directors and performance of Board and Committee as a whole. The Independent Directors evaluation was done with main focus on their adherence to the Corporate Governance practices and their efficiency in monitoring the same. They are also being evaluated on various parameters viz., active participation in strategic planning, fiduciary responsibilities, participation in Board and Committee meetings, etc. Apart from the above, the performance of Non Independent Directors and the Board as a whole in terms of prudent business practices adopted by them towards governance of the operations of the Company, adherence to the highest standards of integrity and business ethics, exercising their responsibilities in bona fide manner in the best interest of the Company and not allowing any extraneous consideration that shall impede their decision making authority in the best interest of the Company was also carried out to evaluate their performance The performance evaluation of the Non Independent Directors was carried out by the entire Board of Directors (excluding the Director being evaluated) and they have expressed their satisfaction with the evaluation process which considered their commitment and the exercise of their responsibilities in the best interest of the Company. The performance of the Chairman of the Company was reviewed by the Independent Directors who ensured during their review, that the Chairman conducted the Board proceedings in unbiased manner without any conflict with his personal interest at any point of time. It was further ascertained by the Independent Directors that the Chairman allowed the Board Members to raise any concerns on any businesses of the Board during their Meetings and addressed them at the best interest of the Company. Training and familiarisation programme for Independent Directors Every Independent Director on being inducted into the Board attends an orientation programme. To familiarise the new Directors with the strategy, operations and functions of our Company, the Executive Directors/Senior Managerial Personnel make presentations to the inductees about the Company's strategy, operations, product offerings, organisation structure, human resources, technologies, facilities and risk management. Further, at the time of appointment of Independent Directors, the Company issues a formal letter of appointment outlining his/her role, functions, duties and responsibilities as a Director. The detailed familiarisation programme for Independent Directors is hosted on the website of the Company and the web link for same is http://www.hatsun.com/investors-policies.html NAMES OF COMPANIES WHICH HAVE BECOME OR CEASED TO BE ITS SUBSIDIARIES, JOINT VENTURES OR ASSOCIATE COMPANIES DURING THE YEAR. Your Company has no subsidiaries, joint ventures or associate companies and hence the disclosure does not arise. AUDITORS Statutory Auditors At the Annual General Meeting held on 31st July, 2014, M/s. S.R.Batliboi & Associates LLP, Chartered Accountants, were appointed as Statutory Auditors of the Company to hold office till the conclusion of the Annual General Meeting to be held in the calendar year 2017. In terms of the first proviso to Section 139 of the Companies Act, 2013, the matter of appointment of the Auditors shall be placed for ratification at every Annual General Meeting of the Company. Accordingly, the appointment of M/s. S.R.Batliboi & Associates LLP Chartered Accountants, 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 their appointment is ratified by the shareholders, it would be in accordance with the provisions of Section 141. As regard the delay in remittance to IEPF as mentioned in the Auditor's Report the same has occurred inadvertently and was regularised immediately. Secretarial Auditor Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. S Dhanapal & Associates, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report for the financial year 2014-2015 is annexed herewith as marked as Annexure C and forms part of this report. As regard the delay in remittance to IEPF as mentioned in the Secretarial Auditor's Report the same has occurred inadvertently and was regularised immediately. Cost Auditor Pursuant to the provisions of clause (g) of sub-section (3) of Section 141 read with sub section (3) of Section 148 of the Companies Act, 2013, the Company has appointed M/s. STR & Associates, Cost Accountants (Firm Registration No.000029) as Cost Auditor of the Company to conduct the audit of the cost accounting records maintained by the Company relating to Milk Powder in respect of all the units of the Company for the financial year 2015-16. As per the notification published by the Ministry of Corporate Affairs on 31st December, 2014 to amend the Companies (Cost Records and Audit) Rules 2014, the aggregate turnover from Milk Powder was less than the prescribed threshold notified under the above said notification during the financial year 2014-2015 and hence the cost audit was not mandatory applicable to our Company for the financial year 2014-2015. ADEQUACY OF INTERNAL FINANCIAL CONTROLS The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board and to the Joint Managing Director: The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and recommendations along with corrective actions thereon are presented to the Audit Committee of the Board. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 The 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 Company has not received any complaint on sexual harassment during the financial period ended 31st March, 2015. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE During the year there are no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and Company's operations in future MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH HAS OCCURRED SINCE 31.03.2015 TILL THE DATE OF THIS REPORT There are no material changes and commitments affecting the financial position of the company which has occurred since 31.03.2015 till the date of this report. EXTRACT OF ANNUAL RETURN An extract of the Annual Return in form MGT-9 is annexed herewith as marked as Annexure D and forms part of this report. RELATED PARTY TRANSACTIONS As required under clause 49 of the Listing Agreement, the company has developed a policy on dealing with Related Party Transactions and such policy is disclosed on the company's website. The web link for same is http://www.hatsun.com/investors-policies.html There were no related party transactions entered into during the financial year by the company with its Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the company at large other than the remuneration paid to the Executive Directors and Dividend received by them from the Company in proportion to the shares held by them. The details of Related Party Transactions are provided in the Notes to the Accounts. CORPORATE GOVERNANCE REPORT The Company has complied with the corporate governance requirements under the Companies Act, 2013 and as stipulated under the listing agreement with the Stock Exchanges. A report on Corporate Governance including Management Discussion and Analysis report under the Listing Agreement along with a certificate from M/s. S Dhanapal & Associates, a firm of Practising Company Secretaries, confirming the compliance is annexed herewith marked as Annexure E and forms part of this report. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The details on conservation of energy, technology absorption, foreign exchange earnings and outgo is annexed herewith as marked as Annexure F and forms part of this report. DIRECTOR'S RESPONSIBILITY STATEMENT In terms of Section 134 (5) of the Companies Act, 2013, the Directors would like to state that: 1. In the preparation of the annual accounts, the applicable accounting standards have been followed. 2. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were 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 and of the profit or loss of the Company for the year under review 3. The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. 4. The Directors have prepared the annual accounts on a going concern basis. 5. The Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively. 6. The Directors had devised proper system to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively. DEPOSITORY SYSTEM As the members are aware, your Company's shares are tradable in electronic form and the Company has established connectivity with both the Depositories i.e., National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). In view of the advantages of the Depository System, the members are requested to avail of the facility of dematerialisation of the Company's shares. INDUSTRIAL RELATIONS Industrial relations in all the units and branches of your Company remained cordial and peaceful throughout the year. ACKNOWLEDGMENTS The Directors wish to convey their appreciation to business associates for their support and contribution during the year. The Directors would also like to thank the employees, members, customers, bankers, farmers and channel partners for the continued support given by them to the Company and their confidence reposed in the management. The Directors appreciate and value the contributions made by every member of Hatsun. For and On behalf of the Board of Directors Sd/- R.G. Chandramogan Chairman & Managing Director Place: Chennai Date: 17th June, 2015 |