DIRECTOR’S REPORT TO THE MEMBERS Dear Shareholders, 1. We are pleased to present the 19th Annual Report, together with the Audited Standalone and Consolidated Accounts of your Company for the financial year ended March 31, 2015. 2. Business Performance The Company on a Standalone basis has achieved total income of Rs.118.72 Crore as compared to Rs.69.91 Crore during the previous year, a growth of 69.8%. The Income from Operations during the year was Rs.112.01 Crore as compared to Rs.65.09 Crore during the previous year. The Company's overall top down and bottom up approach has resulted in a Profit before Depreciation and Taxation of Rs.12.51 Crore as compared to a loss of Rs.2.09 Crore in the previous year. Interest Cost was down at Rs.1.98 Crore as compared to Rs.2.39 Crore in the previous year. The Company has posted a Net Profit of Rs.7.08 Crore as compared to Net Loss of Rs.8.20 Crore in the previous year. On a Consolidated basis, the Company's Income from Operations was Rs.119.08 Crore, as compared to Rs.75.18 Crore in the previous year, a growth of 58.4%. The Company has posted a Consolidated Net Profit of Rs.5.90 Crores as compared to a Net Loss of Rs.11.74 Crores in the previous year. 3. Reserves The Reserves & Surplus of the Company as on March 31, 2015 stood at Rs.20.43 Cr. No amount is proposed to be transferred to Reserves during the year. 4. Dividend In order to conserve cash for Company's operations, your Directors do not recommend any dividend for the year under review. 5. Share Capital The Authorised Share Capital of the Company is Rs.25 Crore. The Paid up Capital, Issued and Subscribed Capital of the Company was Rs.15.54 Crores as on March 31, 2015 consisting of 55,400,000 Equity shares of Re.1/- each and 1,000,000 8% Redeemable Non-Convertible Non-Cumulative Preference Shares of Rs.100/- each. 6. Management Discussion and Analysis The Management Discussion and Analysis Report on the operations of the Company is provided as a separate section and forms part of the Annual Report. 7. Corporate Governance Your Directors reaffirm their commitment to the corporate governance standards to the extent they are applicable to the Company. A detailed report on Corporate Governance form part of the Annual Report. 8. Board Meetings The Board of Directors of the Company met 5 (five) times during the year i.e. on April 29, 2014, July 28, 2014, November 5, 2014, January 28, 2015 and March 30, 2015. 9. Subsidiary The Company has a wholly owned subsidiary viz. Aditya Birla Commodities Broking Limited ("ABCBL"), which is engaged in the business of commodity broking. ABCBL has posted total Income of Rs.7.75 Crores as compared to Rs.11.68 Crores during previous year. The Net Loss is at Rs.1.18 Crores as compared to a Net Loss of Rs.3.53 Crores in the previous year. The Consolidated financial statements pursuant to Clause 41 of the Listing Agreement and in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India form part of the Annual Report. The statement containing the salient features of the financial statements of the Company's subsidiary is set out in the Annexure to this report. 10. Public Deposits During the year, the Company has not accepted or renewed any deposit from the public as covered under Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014. 11. Credit Rating During the year, CRISIL has re-affirmed A1 + rating for the short term debt programme. 12. Significant and Material Orders passed by the Regulators or Courts During the year, no significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status of the Company. 13. Details about adequacy of Internal Financial Controls The Company has adopted the requisite policies and procedures to ensure orderly and efficient conduct of its business, including adherence to company's policies, safeguarding of its assets, prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information. The company has the required internal financial controls in place as prescribed under Companies Act, 2013. 14. Particulars of Loans, Guarantees or Investments Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 form part of the notes to the financial statements. 15. Risk Management Policy The Company has a robust Risk Management Policy in place which includes identifying the elements of risk in the opinion of the Board that may threaten the existence of the company. The Company has a Risk Governance Committee to evaluate the significant risk exposure of the Company & assessing Management's action to mitigate the exposure in timely manner and approving the implementation of the Enterprise Risk Management Framework for the Company. During the year, the Risk Governance Committee met on March 18, 2015 and discussed on the various risk areas and mitigations initiated by the Company. 16. Corporate Social Responsibility The provisions of Corporate Social Responsibility are not applicable to the Company for the financial year 2014-15 as the criteria mentioned under Section 135 of the Companies Act, 2013 is not fulfilled. However, the provisions of the Section 135 of the Act would be applicable for the next financial year on account of Company posting net profits above Rs.5 Crores in the financial year 2014-15. The Board, at its meeting dated May 04, 2015 has constituted a CSR Committee. The constitution and the terms of reference of the Committee are more fully mentioned in the Corporate Governance Report. 17. Related Party Transactions All Related Party Transactions ('RPT') entered into during the financial year by the Company were on an arm's length basis and in the ordinary course of business. The Board has formulated a Related Party Transactions Policy for the purpose of identification and monitoring of such transactions. As per the policy, the Audit Committee may grant omnibus approval for RPTs which are repetitive in nature. The Audit Committee may further grant omnibus approval for such transactions which are unforeseen provided that the value of each such transaction shall not exceed Rs. 1 Crore. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement giving details of all Related Party Transactions are placed before the Audit Committee for its approval on a quarterly basis. Particulars of contracts or arrangements made with related parties referred to in Section 188(1) of the Companies Act, 2013, in the prescribed form AOC-2 is set out in the Annexure to this report. 18. Cost Audit The provisions of Cost audit as prescribed under Section 148 of the Companies Act, 2013 are not applicable to the Company. 19. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo The information relating to the Conservation of Energy and Technology Absorption required under Rule 8(3)(A) and 8(3)(B) of Companies (Accounts) Rules, 2014 are not applicable to the Company due to the very nature of the industry in which it operates. During the year under review, there were no foreign exchange earnings (Previous Year - Nil) and outgo (Previous Year - Nil), respectively. 20. Directors and Key Managerial Personnel As on March 31, 2015, your Board of Directors comprised of 6 Directors including 2 Independent Directors. During the year under review, Ms. Pinky A Mehta was appointed as an Additional Director of the Company with effect from March 30, 2015 and holds office as a Director upto the ensuing Annual General Meeting of the Company. The Board recommends to the shareholders, the appointment of Ms. Pinky A Mehta as a Director, liable to retire by rotation. The Company has received requisite disclosures and undertakings from all the Directors in compliance with the provisions of the Companies Act, 2013 and other applicable statutes. The Board of Directors appointed Mr. Srinivas Subudhi as the Chief Financial Officer of the Company with effect from May 15, 2014. Further, Mr. Balaji S resigned from the office of Company Secretary with effect from September 26, 2014 and Mr. Vikashh K Agarwal was appointed as the Company Secretary of the Company pursuant to Section 203 of the Companies Act, 2013, with effect from January 28, 2015. The Company has received necessary declarations from each Independent Director of the Company under Section 149(7) of the Companies Act, 2013 that the Independent Directors meet the criteria of Independence as laid down in Section 149(6) of the Companies Act, 2013. Formal Annual Evaluation of the Board a. Meeting of the Independent Directors During the year, the Independent Directors of the Company met on March 28, 2015 to review the performance of Non-Independent Directors, the Board as a whole, Chairman of the Board and the Committees of the Board. The Company has conducted a familiarisation programme for the Independent Directors of the Company and the details of such familiarisation programmes are disseminated on the website of the Company at the link <http://www.adityabirlamoney.com/about-us/investor>. b. Meeting of the Board of Directors other than Independent Director During the year, the Board of Directors of the Company other than the Independent Directors met on March 30, 2015 to evaluate the performance of the Independent Directors, Chairman of the Board, the Board as a whole and the Committees of the Board. On the basis of the performance evaluation undertaken, the Board is of the view that the contribution of the Independent Directors to the Board is remarkable and therefore the term of appointment of the Independent Directors shall be continued. 21. Composition of Audit Committee In compliance of the provisions of Section 177 of the Companies Act, 2013 and in accordance with the provisions of Clause 49 of the Listing Agreement, the Company has a qualified and independent Audit Committee of the Board. All the members of the Audit Committee are financially literate having accounting and related financial management expertise. The Audit Committee consists of the following three Directors, two-thirds of whom are Independent. 1. Mr. P. Sudhir Rao (Independent Director) — Chairman 2. Mr. G. Vijayaraghavan (Independent Director) — Member 3. Mr. Shriram Jagetiya — Member The Chairman of the Audit Committee is an Independent Director. During the year under review, the Board of Directors of the Company have accepted all the recommendations as put forth by the Audit Committee. 22. Policy on Remuneration to Directors, Key Managerial Personnel and Other Employees The Nomination and Remuneration Committee has recommended to the Board a policy on remuneration for the Directors, Key Managerial Personnel and other employees. The key highlights of the policy are reproduced herein below: Objectives of the Executive Remuneration Program: Our executive compensation program is designed to attract, retain, and reward talented executives who will contribute to our long-term success and thereby build value for our shareholders. Our executive compensation program is intended to: 1. Provide for monetary and non-monetary remuneration elements to our executives on a holistic basis. 2. Emphasise "Pay for Performance" by aligning incentives with business strategies to reward executives who achieve or exceed Group, business and individual goals. Business and Talent Competitors We benchmark our executive pay practices and levels against peer companies in similar industries, geographies and of similar size. Executive Pay-mix Our executive pay-mix aims to strike the appropriate balance between key components: (i) Fixed Cash compensation (Basic Salary + Allowances) (ii) Annual Incentive Plan (iii) Long-Term Incentives (iv) Perks and Benefits Performance Goal Setting We aim to ensure that for both annual incentive plans and long term incentive plans, the target performance goals shall be achievable and realistic. Performance Measurement & Executive Benefits Our executives are eligible to participate in our broad-based retirement, health and welfare, and other employee benefit plans. In addition to these broad-based plans, they are eligible for other benefits plans commensurate with their roles. These benefits are designed to encourage long-term careers with the Group. 23. Disclosure pursuant to Section 62(1)(b) of the Companies Act, 2013 read with Rule 12 of Companies (Share Capital and Debentures) Rules, 2014 & SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 as amended by Securities Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 During the year, the Company had formulated the ABML Employee Stock Option Scheme - 2014 (ABML ESOP Scheme - 2014) with the approval of the shareholders at the Annual General Meeting dated September 09, 2014. A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted-average information: ) Risk-free interest rate (%) The Company has complied with and shall comply with the applicable provisions under the Companies Act, 2013, the SEBI (Share Based Employee Benefits) Regulations, 2014 / SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Accounting Standards. 24. Internal Audit Framework The Company has in place a robust internal audit framework to monitor the efficacy of internal controls with the purpose of providing to the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance on the adequacy and effectiveness of the organisation's risk management, control and governance processes. The framework is commensurate with the nature of the business and the size of its operations. Internal auditing, of the Company, involves the utilisation of a systematic methodology for analysing business processes or organisational problems and recommending solutions to add value and improve the processes. The audit approach verifies compliance with the regulatory, operational and system related procedures and controls. As per the provisions of Section 138 of the Companies Act, 2013, M/s PKF Sridhar & Santhanam. Chartered Accountants have been appointed as the Internal Auditors by the Board of Directors of the Company. The audit scope and plans are approved by the Board every year. Internal Audit Process followed by the Company is as follows: • Establish and communicate the scope and objectives of audit to the management. • Develop an understanding of the business area under review. • Identify control procedures used to ensure each key transaction type is properly controlled and monitored. • Develop and execute a risk-based sampling and testing approach to determine whether the key controls are operating as intended. • Report the key audit findings and recommendations made by the auditors to the Board of Directors of the Company. • Monitor the implementation of audit recommendations and ensure periodic reporting to the Board of Directors of the Company. • Audit findings are used as a key input in the risk management process and all the key risks of the Company are mapped to the audit processes to ensure a risk- based audit approach. • The internal audit activity is monitored on an ongoing basis. 25. Particulars as per Rule 5(1) of Companies (Appointment and Remuneration) Rules, 2014 Ratio of Remuneration to each Director The details of ratio of remuneration of each Director to the median employee's remuneration are not applicable since no remuneration is paid to the Managing Director / Non-Executive Directors of the Company Increase in Median Remuneration of the employees in the financial year There was an increase of 11.10% in the Median Remuneration of Employees of the Company in the financial year 201415 as compared to 2013-14. Number of permanent employees of the Company There were 650 permanent employees on the rolls of the Company as on March 31, 2015. Relationship between average increase in remuneration and company performance The Company has posted an increase of 182% in its Profit after Tax in comparison to an increase of median remuneration of 11% which was as per the industry benchmarks. Variations in Market Capitalisation of the Company The market capitalisation of the Company increased by 80.83% to Rs.133.24 Crores as of March 31, 2015 from Rs.73.68 crores as of March 31, 2014. Variations in Price Earnings Ratio as on March 31, 2015 and March 31, 2014: The Price Earnings Ratio was 18.79 as of March 31, 2015 as compared to 8.99 as of March 31, 2014. Variations in market quotations of the shares of the Company in comparison to the rate at which the Company came out with the last public offer: The Company has not made any offer to the public in the past, hence the comparison of the market quotations of the shares of the Company in comparison to the last public offer rate are not applicable. In the year 2001, Om Sindhoori Capital Investments Limited, OSCIL ("Transferor Company") merged with Apollo Sindhoori Capital Investments Limited (ASCIL - erstwhile name of the Company), vide Court order dated March 12, 2001. The Transferor Company was a listed company with Madras and Mumbai Stock Exchanges. Accordingly, on completion of merger, ASCIL became listed as per the SEBI (Disclosure and Investor Protection) Guidelines, 2000. OSCIL had made a public issue of equity shares in the year 1995. Average % increase in Employee salaries other than Managerial Personnel in the last financial year and its comparison with % increase in Managerial Remuneration There was an increase by 10.79% in the Median Remuneration of Employees of the Company in the financial year 201415 excluding the remuneration of the Directors and the Key Managerial Personnel as compared to 2013-14. Key Parameters for any variable component of remuneration availed by the Directors and ratio of remuneration of the highest paid director to that of the employees who are not directors but receive the remuneration in excess of highest paid director during the year The Directors do not receive any remuneration from the Company. However, the Independent Directors receive sitting fees for attending the meetings of the Company. Compliance with the Remuneration Policy of the Company The Remuneration paid to the Directors (only in the form of sitting fees paid to Independent Directors) is as per the remuneration policy of the Company as well as the provisions of Section 196 and 197 of the Companies Act, 2013. 26. Particulars of Employees The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is set out in the Annexure to this report. In terms of Section 136 of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, including the information on employees' particulars which is available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in this regard. 27. Vigil Mechanism / Whistle Blower Policy The Company has implemented a whistle blower policy / vigil mechanism for Directors / Employees and every Employee / Director has the right to report to the Value Standards Committee (VSC) genuine concerns or grievances about unprofessional conduct, malpractices, wrongful conduct, fraud, violation of the Company's policies & values, violation of law without any fear of reprisal. The Company Secretary of the Company acts as the Secretary to the Values Standard Committee. On a quarterly basis, an update on the issues reported under this policy is placed before the Audit Committee of the Board of Directors, for its review and perusal. 28. Policy for Prevention of Sexual Harassment at Workplace The Company has implemented an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Woman at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. An Internal Complaints Committee (ICC) presided by a senior level woman employee has been set up to redress complaints received on sexual harassment. All employees (including permanent, contractual, temporary, trainees) are covered under this policy. During the year, no complaints on sexual harassment were received by the Company. No. of complaints received : None No. of complaints disposed off : Not Applicable 29. Directors' Responsibility Statement Pursuant to Section 134(5) of the Companies Act, 2013, your Directors confirm that, to the best of their knowledge and belief: • in the preparation of the annual accounts, the applicable standards have been followed along with proper explanation relating to material departures, if any; • appropriate accounting policies have been selected and applied consistently and such 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 as at March 31, 2015 and of the profit of the Company for the year ended on that date; • proper and sufficient care has been taken 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; • the attached Statement of Accounts for the period ended March 31, 2015 have been prepared on a "going concern basis"; • proper internal financial controls were in place and that the financial controls were adequate and were operating efficiently. • proper systems are in place to ensure compliance of all laws applicable to the Company and that such systems were adequate and operating efficiently; 30. Extract of Annual Return The details forming part of the extract of the Annual Return in Form MGT 9 is set out in the Annexure to this report. 31. Auditors and Auditors' Report M/s. S.R. Batliboi & Co. LLP, (Registration No. 301003E) Chartered Accountants, Mumbai, hold office as the Statutory Auditors of the Company upto the conclusion of the ensuing Annual General Meeting and have offered themselves for reappointment. A certificate from them has been received to the effect that their re-appointment as Statutory Auditors of the Company, if made, would be within the limits prescribed under Section 139 of the Companies Act, 2013. The Auditors have subjected themselves for the peer review process of the Institute of Chartered Accountants of India (ICAI) and they hold a valid certificate issued by the "Peer Review Board" of ICAI. The Board proposes the re-appointment of M/s. S.R. Batliboi & Co. LLP, Chartered Accountants, Mumbai as the Statutory Auditors of the Company, on the recommendation of the Audit Committee. The observations, if any, made by the Auditors of the Company in their report read with relevant notes to the Accounts are self-explanatory and therefore do not call for any further comments. The observations reported under Emphasis of Matter by the Auditors of the Company in their report with relevant notes to the Accounts are self-explanatory and do not call for any further explanation / comments. 32. Secretarial Audit Report The Secretarial Audit Report as submitted by M/s. BNP & Associates, Practising Company Secretaries who were appointed as the Secretarial Auditors of the Company by the Board is set out in the Annexure to this report. There are no qualifications, reservations or adverse remarks or any disclaimer that have been made by the Secretarial Auditor. 33. Appreciation Your Directors wish to place their sincere appreciation for the valuable advice, guidance and support provided by the regulators and statutory authorities from time to time. Your Directors express their gratitude to the clients, bankers and all business associates for their continuous support and patronage to the Company. Your Directors take this opportunity to recognise and place on record their deep sense of appreciation for the exemplary commitment and contribution made by employees at all levels. Your involvement as Shareholders of the Company is greatly valued. Your Directors look forward to your continuing support. For and on behalf of the Board Sudhakar Ramasubramanian Managing Director Gopi Krishna Tulsian Director Date : May 04, 2015 Place : Chennai |