Directors' Report To, The Members, Welspun Enterprises Limited (Formerly, known as Welspun Projects Limited) Your directors have pleasure in presenting the 21st Annual Report of your company along with the Audited Financial Statement for the financial year ended March 31, 2015. 1. Dividend & Transfer to Reserves: Considering the need to augment resources of the Company for business development, your Board does not recommend any dividend on shares of the Company for the year ended March 31, 2015.Further, no amount is proposed to be transferred to Reserves of the Company. 2. Scheme of Amalgamation: The Hon'ble High Court of Judicature at Bombay vide its order dated April 10, 2015 and the Hon'ble High Court of Gujarat at Ahmedabad vide its order dated April 23, 2015 sanctioned the Scheme of Arrangement and Amalgamation between erstwhile Welspun Enterprises Limited, Welspun Infratech Limited, Welspun Plastics Private Limited, Welspun Infra Projects Private Limited (Transferor Companies) and your Company (Transferee Company) ("Scheme"). The Scheme was made effective from May 11, 2015 with the Appointed Date being April 1, 2014. Pursuant to the Scheme, the name of your Company was changed from Welspun Projects Limited to Welspun Enterprises Limited w.e.f. May 29, 2015. Apart from addition of businesses transferred to the Company pursuant to the Scheme, there was no change in the nature of business of the Company. 3. Internal financial controls: The Board of directors has laid down internal financial controls to be followed by the Company for ensuring the orderly and efficient conduct of its business and the said internal financial controls are adequate and are operating effectively. Internal Audits are regularly carried out to review the internal financial controls and the Internal Audit Reports along with recommendations contained therein are reviewed by the Audit Committee. 4. Subsidiaries/Joint Ventures Companies: The name of the subsidiaries and joint ventures of the Company as on the date of report are as under: Subsidiaries: MSK Projects (Kim Mandvi Corridor) Private Limited, MSK Projects (Himmatnagar Bypass) Private Limited, Anjar Road Private Limited, Welspun Construction Private Limited, Welspun Natural Resources Private Limited, Anjar Water Solution Private Limited (Formerly known as Welspun Road Projects Private Limited) and ARSS Bus Terminal Private Limited. Joint Ventures: Dewas Bhopal Corridor Limited and Adani Welspun Exploration Limited. A report on the performance and financial position of each of the subsidiaries and joint venture companies included in the consolidated financial statement is presented in Form AOC-1 annexed to this Report as Annexure - 1. 5. Deposits The Company has not accepted any deposit within the meaning of Chapter V to Companies Act, 2013. Further, no amount on account of principal or interest on deposit was outstanding as at the end of the year under report. 6. Auditors a) Statutory Auditors Your Company's Auditors M/s Chandrakant & Sevantilal & J K Shah & Co, Chartered Accountants, who had been appointed up to the conclusion of the 21stAnnual General Meeting subject to ratification by the members of the Company at every Annual General Meeting, have expressed their unwillingness to continue to act as the Auditors of the Company for the financial year 2015-16. The Board has recommended appointment of M/s MGB & Co., LLP Chartered Accountants as Auditors of the Company. Members are requested to consider appointment of M/s MGB & Co., LLP Chartered Accountants as the Auditors of the Company and to fix their remuneration as per the provisions of Section 139 of the Companies Act, 2013. The Company has received consent from M/s MGB & Co., LLP Chartered Accountants for their appointment and certificate to the effect that the appointment, if made shall be in accordance with the provisions of section 139(1) of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014. b) Cost Auditors: The Board has appointed M/s Kiran J Mehta and Co. (FRN -000025) Cost Accountant for conducting audit of cost records of the Company for the year 2015-16. The remuneration payable to the Cost Auditor for the year 2015-16 is proposed for ratification by the members. c) Secretarial Auditor The Board of Directors has appointed M/s. Sanjay Risbud & Co., Company Secretaries, as the Secretarial Auditor of your Company for the year 2015-16. 7. Auditors' Report The Notes on financial statement referred to in the Auditors' Report are self-explanatory and do not call for any further comments. There are no qualifications or adverse remarks in the Auditors' Report which require any clarification or explanation. 8. Share Capital & Listing a) Issue of equity shares with differential rights. The Company does not have any equity shares with differential rights. Therefore no disclosures as required under Rule 4(4) of the Companies (Share Capital and Debentures) Rules 2014 have been made. b) Issue of sweat equity shares During the year under report, the Company did not allot any equity share as sweat equity shares. Therefore, no disclosures as required under Rule 8 (13) of the Companies (Share Capital and Debentures) Rules, 2014 have been made. c) Issue of employee stock options During the year under report, your Company has granted 7,20,000 stock options to the Managing Director under Welspun Managing Director Stock Options - 2014. Difference in employee compensation cost based on intrinsic value method and fair value: The Company has adopted intrinsic value method for valuation and accounting of the aforesaid stock options as per the SEBI (Share Based Employee Benefits) Regulations, 2014. Had the Company accounted the aforesaid stock options on the basis of the fair value determined in accordance with Black Scholes Valuation model, the proforma profit after tax as at March 31, 2015 would have been Rs. 101,524,629 instead of the reported profit after tax of Rs. 101,580,882. However, the diluted earnings per share would have remained unchanged (Re. 0.59 per share). d) Provision of money by company for purchase of its own shares by employees or by trustees for the benefit of employees. The Company has not made any provision of money for the purchase of, or subscription for, shares in the Company or its holding company, to be held by or for the benefit of the employees of the Company and hence the disclosure as required under Rule 16(4) of The Companies (Share Capital and Debentures) Rules, 2014 is not required. e) Disclosure of Shares held in suspense account under Clause 5A of the Listing Agreement. As on date of this Report, there are no unclaimed shares and hence no suspense account is required to be opened and credited with such shares and there is no freeze on voting rights of any shares. f) Listing with the stock exchanges. The Company's equity shares are listed on the BSE Limited (BSE), National Stock Exchange of India Limited (NSE) and Vadodara Stock Exchange Limited(VSE). Annual listing fees for the year 2015-16 have been paid to BSE, NSE and VSE. 9. Extract of the annual return Pursuant to Section 92(3) of the Companies Act, 2013, extract of the annual return in Form MGT-9 of the Companies (Management and Administration) Rules, 2014 is attached to this report as Annexure- 2. 10. Conservation of energy, technology absorption and foreign exchange earnings and outgo. The operations of the Company are not energy intensive and therefore there is nothing to report on conservation of energy, technology absorption, as required under section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules 2014. Within the limited scope available for saving energy in construction contracts, every effort is being made for conserving and reducing its consumption. Details of Foreign exchange earnings and outgo are as under: Foreign exchange earnings : Nil Foreign exchange outgo : Rs 6,65,374 11. Corporate Social Responsibility (CSR) The Company has complied with all the applicable provisions of the Companies Act, 2013 with regard to CSR. 12. Directors and Key Managerial Personnel: Your Company's Board comprises of mix of executive and non-executive directors with considerable experience and expertise across a range of fields such as finance, accounts, legal, and general management and business strategy. The details of the directors and their meetings held during the year has been given in the Corporate Governance Report, which forms part of this report. a) Changes in Directors and Key Managerial Personnel Since the last report, following changes took place in the Board of Directors and the Key Managerial Personnel of the Company: 0 Mr. Atul Desai (DIN: 00019443) resigned as director of the Company w.e.f. October 01, 2014. 0 Ms. Mala Todarwal (DIN: 06933515) was appointed as an independent director of the Company w.e.f. August 05, 2014. 0 Mr. Balkrishna Goenka (DIN: 00270175) was appointed as Chairman (executive) of the Company, Mr. Ram Gopal Sharma (DIN: 00026514) as independent director and Mr. Mintoo Bhandari (DIN: 00054831) as Nominee Director of Insight Solutions Limited [with Mr. Utsav Baijal (DIN: 02592194) as an alternate director to Mr. Mintoo Bhandari] w.e.f. May 29, 2015. 0 Mr. Nilesh Javker resigned from the office of Company Secretary of the Company w.e.f. May 26, 2015 and Mr. Rajendra Sawant was appointed as Company Secretary of the Company w.e.f. May 29, 2015. 0 Mr. Shriniwas Kargutkar was appointed Chief Financial Officer of the Company in place of Mr. Lalit Jain w.e.f. May 29, 2015. In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Sandeep Garg is retiring by rotation at the forthcoming Annual General Meeting and being eligible, has been recommended for his re-appointment. Details about the directors being appointment / re-appointed are given in the Notice of the 21stAnnual General Meeting being sent to the members along with the Annual Report. b) Declaration by Independent Director(s) The independent directors on the Board of the Company have given declaration that they meet the criteria of independence as provided under Section 149(6) of the Companies Act, 2013 at the time of their respective appointment and there is no change in the circumstances as on the date of this report which may affect their status as an independent director. c) Board Evaluation Evaluation of the directors is done on an annual basis. The process is led by the Nomination and Remuneration Committee with specific focus on the performance vis-a-vis the plans, meeting challenging situations, performing leadership role within, and effective functioning of the Board. The evaluation process also considers the time spent by each of the directors, accomplishment of specific responsibilities and expertise, conflict of interest, integrity of the director, active participation and contribution during discussions. d) Policy on directors' appointment and remuneration and other details The salient features of Company's policy on directors' appointment and remuneration and other matters provided in Section 178(3) of the Act has been disclosed in the corporate governance report, which forms part of this report. e) Committee of the Board of Directors Information on the Audit Committee, the Nomination and Remuneration Committee, the Share Transfer and Investor Grievance and Stakeholders Relationship Committee and meetings of those committees held during the year is given in the Corporate Governance Report. 13. Particulars of contracts or arrangements with related parties: All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in ordinary course of business and on arm's length basis. The Policy on related party transactions as approved by the Board may be accessed on the Company's website at www.welspunenterprises.com . Disclosures as required under the Companies Act, 2013 are given in Form AOC-2 annexed as Annexure - 3 to this report. 14. Managerial Remuneration: a) Details of the ratio of the remuneration of each director to the median employee's remuneration and other details as required pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are as under: i. The ratio of remuneration to Mr. Sandeep Garg, Managing Director, to the median remuneration of the employees of the Company was 1:181 (excluding the value of ESOPs granted to him) ii. the percentage increase in remuneration in the financial year of Managing Director was 10%, of Chief Financial Officer was 15% and of Company Secretary was 20%. iii. the percentage increase in the median remuneration of employees in the financial year was 11.69% iv. 513 permanent employees were on the rolls of the Company as on March 31, 2015. v. The remuneration to employees is fixed on an annual basis considering various factors like employee performance and his potential, company performance, business scenario /prospects, remuneration levels in the market for related job description. There is no variable remuneration linked to the Company performance. vi. Market Capitalization of the Company as on March 31, 2015 was Rs. 1,24,60,00,000 (pre-merger) and Rs. 5,39,89,34,665 (post-merger). As on March 31, 2014 the market capitalization of the Company (premerger) was Rs. 43,36,00,000. vii. Price / Earnings Ratio as at the closing of March 31, 2015 was 12.27 (pre-merger) and 52.80 (post-merger). Price / Earnings Ratio as at the close of March 31, 2014 was (0.74) viii. The share price increased to Rs. 31.15 (BSE closing Price) as on March 31, 2015 in comparison to Rs. 30 (the rate at which the Company came out with the public issue in the year 2004). ix. Average percentage increase in the salary of employees other than the managerial personnel in the financialyear was 6.97%. The percentage increase in Managerial Remuneration was 10.00%. x. The Profit before Tax of the Company for FY2014-15 was Rs. 23,73,52,862 whereas MD's, CFO's and Company Secretary's remuneration were Rs. 2,20,00,000; Rs. 60,95,000 and Rs. 12 09,000 respectively. xi. None of the employees, who is not a director, received remuneration in excess of the highest paid director during the year. xii. None of the directors was paid any variable component in the remuneration in the financial year. xiii. We affirm that the remuneration is as per the remuneration policy of the Company. 15. Secretarial Audit Report The Board had appointed JMJA and Associates, LLP, a firm of Company Secretaries in Practice to conduct the Secretarial Audit for the year 2014-15. Secretarial Audit Report for the year ended March 31, 2015 is annexed with the report as Annexure - 4. There is no qualification, reservation or adverse remark or disclaimer made by the company secretary in practice in the secretarial audit report. 16. Corporate Governance Certificate The Compliance certificate obtained from M/s. S. S. Risbud and Co. Company Secretaries, regarding compliance of conditions of corporate governance as stipulated in Clause 49 of the Listing Agreement is annexed to the Corporate Governance Report. 17. Risk Management policy The Company recognizes that risk management is of concern to all levels of the businesses and requires a structured risk management policy and process involving all personnel. With this objective the Company has formulated structured Risk Management Policy thereby to effectively address such risks namely, strategic, business, regulatory and operational risks. For the key business risks identified by the Company please refer to the Management Discussion and Analysis annexed to this Report. 18. Familiarization programme for Independent Directors The details of familiarization program (for independent directors) are disclosed on the Company's website www.welspunenterprises.com and a web link thereto is: <http://www.welspunenterprises.com/> userfiles/file/Familiarisation%20program.pdf 20 . Directors' Responsibility Statement Pursuant to Section 134(3)(c) & 134(5) of the Companies Act, 2013, your directors hereby confirm that: a. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; b. 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 and of the profit and loss of the Company for that period; c. 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; d. they have prepared the annual accounts on a going concern basis; e. being a listed company, the directors have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and are operating effectively; and f. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. 21. Miscellaneous: • During the year under report, no significant and material order was passed by the regulators or courts or tribunals which would have impacted the going concern status and your Company's operations in future. • Particulars under section 186 of the Companies Act, 2013 and the rules made thereunder, of loans given, investments made, guarantees given or securities provided alongwith the purpose for which loan or guarantee or security is proposed to be utilized by the recipient of the loan or guarantee or security are not required to be made. • The Board of your Company has approved Policy on Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace and formed Internal Complaints Committee for each locations of your Company. No case of sexual harassment was reported to the Internal Complaints Committee during the year under review 22. Acknowledgements Your directors thank the Government Authorities, Financial Institutions, Banks, Customers, Suppliers, Shareholders, Employees and other business associates of the Company, who through their continued support and co-operation, have helped as a partner in your company's progress and achievement of its objectives. For and on behalf of the Board of Directors Balkrishan Goenka Chairman DIN: 00270175 Place: Mumbai Date : May 29, 2015 |