DIRECTORS' REPORT TO THE MEMBERS, WELSPUN INDIA LIMITED Your Directors have pleasure in presenting the 31st Annual Report of your Company along with the Audited Financial Statements for the financial year ended March 31, 2016. 2. PERFORMANCE AND OUTLOOK: During the year under review, your Company's revenue from operations on standalone basis increased to Rs. 48,679 million, a growth of 10.55% and on consolidated basis it increased to Rs. 59,795 million, a growth of 12.77% over the previous year. Substantial portion of this revenue is replenishment orders from majority of the customers. The EBITDA Margin on standalone basis increased to 27.27%, a growth of 6.03% and on consolidated basis it increased to 27.58%, a growth of 6.82% over the previous year. The business delivered a remarkable growth of 17.96% in Profit after taxation on standalone basis and a growth of 30.21% on consolidated basis over the previous year. You may refer to 'Management Discussion & Analysis' Section of this Report for further details of your Company's performance. 3. DIVIDEND: Considering your Company's performance during the Financial Year ("FY") 2015-16, the Board of Directors has recommended for approval of the members a final dividend of Rs. 0.05 per share for FY 2015-16. The dividend, if approved by the members, would result in cash outflow of Rs. 50.24 million excluding Dividend Distribution Tax. During FY 2015-16, your Company declared and paid 1st interim dividend of Rs. 6.50 per equity share having nominal value of Rs. 10/- and 2nd interim dividend of Rs. 0.60 per equity share having nominal value of Rs. 1/- each. The final dividend, if approved by the members, would result, together with the interim dividends already paid, in total dividend payment of Rs. 1,306.14 million (i.e. Rs. 1.30 per share of Rs. 1/-each excluding Dividend Distribution Tax). Dividend will be paid to those members, who will hold shares on the last day of book-closure i.e. June 28, 2016. Your Company has a dividend policy to pay 25% dividend on Profit after Tax. A snapshot of the dividend payout by your Company in the FY 2015-16 (considering final dividend excluding Dividend Distribution Tax) vis-a-vis FY 2014-15 is as under: 4. SUB-DIVISION OF EQUITY SHARES: The Board of Directors, at its meeting held on February 02, 2016, considered and approved sub-division of each equity share of your Company having face value of Rs. 10/- into 10 (Ten) equity shares of face value Rs. 1/- and consequential alteration in the relevant clause of the Memorandum of Association of the Company. The sub-division of equity shares was approved by the Members of your Company through Postal Ballot on March 04, 2016, the equity shares of face value of Rs. 1/- each were issued to all the Members who were holding equity shares of Rs. 10/- each on the record date i.e. March 22, 2016, fixed for this purpose. 5.SUBSIDIARIES: Welspun Captive Power Generation Limited ("WCPGL"), a subsidiary of your Company has issued Rated, Secured, Redeemable, Non-Convertible Taxable Debentures of face value of Rs. 1 million each for cash at par aggregating Rs. 2.20 billion. These Debentures have been listed on National Stock Exchange of India Limited with effect from April 13, 2016. A report on the performance and financial position of each of the subsidiary companies of your Company included in the consolidated financial statement is presented in Form AOC-1 annexed as Annexure - 1 to this Report. Your Company's policy on Material Subsidiary as approved by the Board is hosted on your Company's website and the web link thereto is: <http://www.welspunindia.com/policy/material_> subsidiary_policy.pdf. During the year, your Company formed a Company named "Welspun Flooring Limited" ("WFL") as a wholly owned subsidiary with the objective to set-up a business of carpet manufacturing. AUDITORS AND AUDITOR'S REPORT: i. Statutory Auditors: Your Company's Auditors, Price Waterhouse Chartered Accountants LLP who were appointed up to the conclusion of the 32nd Annual General Meeting subject to ratification by the Members of your Company at every Annual General Meeting, have given their consent to continue to act as the Auditors of your Company for the remaining tenure. The Auditors are holding a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. Members are requested to ratify their appointment as the Auditors of your Company by passing an ordinary resolution under Section 139 of the Companies Act, 2013 ("the Act"). The Auditor's observation read with Notes to Accounts are self-explanatory and therefore do not call for any comment. ii. Cost Auditors: As per Section 148 and other applicable provisions, if any, of the Act read with Companies (Audit and Auditors) Rules, 2014, the Board of Directors of your Company has appointed M/s. Kiran J. 7. Mehta, Cost Accountants as the Cost Auditors of your Company for FY 201617 on the recommendations made by the Audit Committee. Members are requested to ratify their remuneration by passing an ordinary resolution in the forthcoming Annual General Meeting. iii. Secretarial Auditor: Pursuant to the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Company has appointed Mr. Uday Sohoni, Practicing Company Secretary, as the Secretarial Auditor of your Company for the FY 2016-17. The Secretarial Audit Report is annexed as Annexure - 2 to this Report and it does not contain any qualification, reservation or adverse remark. SHARE CAPITAL & LISTING i. Issue of equity shares with differential rights, sweat equity shares: During the year, no share with differential rights was issued by your Company nor did your Company issue any equity share as sweat equity share. ii. Issue of employee stock options: The particulars of ESOP Scheme of your Company required to be disclosed pursuant to SEBI (Share Based Employee Benefits) Regulations, 2014 and Rule 12(9) of the Companies (Share Capital and Debentures) Rules, 2014 are given below: Voting rights, in respect of equity shares issued on exercise by an employee, of stock options referred to above, are exercised only by such employee. Your Company has adopted intrinsic value method for the valuation and accounting of the stock options granted by the Company as per SEBI Regulations. No options were granted during the year. Refer Note 36 of the audited financial statements for details. 9. LISTING WITH THE STOCK EXCHANGES: Your Company's equity shares are listed on Bombay Stock Exchange Limited (BSE) and The National Stock Exchange of India Limited (NSE). Annual listing fees for the year 2016-17 have been paid to BSE and NSE. 10. FINANCE: i. Credit Rating: During the year, your Company's long term credit rating has been upgraded two notches to AA- by CARE and highest short term credit rating of A1+ has been reaffirmed by CARE. Your Company's long-term issuer rating is IND AA- by India Ratings & Research, a Fitch Group company. ii. Non-convertible Debentures: During the year, your Company has redeemed 1,000 Secured, Redeemable Non-Convertible Debentures at par on May 21, 2015, of face value of Rs. 1 million each. iii. Deposits: Your Company has not accepted any deposit within the meaning of the Chapter V of the Act. Further, no amount on account of principal or interest on deposit was outstanding as at the end of the year under Report. 11. BOARD OF DIRECTORS: 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, management and business strategy. Except the nominee appointed by IDBI Bank and the independent directors, all other directors are liable to retire by rotation as per the provisions of the Act. It is confirmed that, except for Mr. Balkrishan Goenka and Ms. Dipali Goenka who are husband and wife, there is no relationship between the directors inter-se. The details of the Directors, their meetings held during the year and the extracts of the Nomination and Remuneration Policy has been given in the Corporate Governance Report, which forms part of this Report. i. Changes in Directors and Key Managerial Personnel: Ms. Padma Betai has been nominated by IDBI Bank Limited as the Nominee Director on the Board of your Company with effect from August 22, 2015 in place of Mr. Ajay Sharma. The Board placed on records its appreciation of the valuable contribution and guidance provided by Mr. Ajay Sharma to your Company. Your Board of Directors has elevated the designation of Ms. Dipali Goenka as Joint Managing Director & CEO of your Company. Further, the Board re-appointed her as Joint Managing Director for a term of 5 years effective from April 01, 2016, subject to the members' approval. Your Board of Directors has confirmed that Mr. Arvind Singhal is an Independent Director of your Company. In accordance with the provisions of Section 152 of the Act and the Articles of Association of your Company, Mr. Rajesh Mandawewala 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 appointed / re-appointed is given in the Notice of the forthcoming Annual General Meeting. ii. Declaration by an Independent Director(s) and re- appointment, if any: Your Company has received declarations from all the Independent Directors as per the provisions of Section 149(7) of the Act, confirming that they meet the criteria of Independence as prescribed under the provisions of Section 149(6) of the Act and that there is no change in the circumstances as on the date of this Report which may affect their respective status as an Independent Director. iii. Directors' Evaluation: In compliance with the Act and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors, as per the process recommended by the Nomination and Remuneration Committee, has evaluated the effectiveness of the Board, its Committees and Directors and all the results were satisfactory. iv. Familiarization programme for Independent Director(s): The familiarization programme aims to provide the Independent Directors with the scenario within the textile industry, the socio-economic environment in which the Company operates, the business model, the operational and financial performance of the Company, significant development so as to enable them to take well-informed decisions in timely manner. The familiarization programme also seeks to update the Directors on the roles, responsibilities, rights and duties under the Act and other statutes. The policy on Company's familiarization programme for Independent Directors is hosted on your Company's website and a web link thereto is: <http://www>. elspunindia.com/policy/familiarisation_ program.pdf. v. Committees of the Board of Directors: Information on the Audit Committee, the Nomination and Remuneration Committee, the Stakeholders' Relationship, Share Transfer and Investor Grievance Committee, the Corporate Social Responsibility Committee and meetings of those committees held during the year is given in the Corporate Governance Report forming part of this Report. 12. LOANS, GUARANTEES AND INVESTMENTS: Information of aggregate amounts of loans, guarantees given, or investments made, or security provided by your Company as on March 31, 2016 is as given under: Corporate Guarantee of Rs. 2.20 billion was given to holders of non-convertible debentures (NCDs) issued by WCPGL. Proceeds of NCDs were used by WCPGL in refinancing loan of Rs. 2.20 billion which was availed for setting up of captive power plant. Other corporate guarantees were given to secure working capital facilities availed by other subsidiaries of your Company. Disclosures pursuant to the Regulation 34(3) read with Para A of Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 are given at Note 46 of the audited financial statements. * Provision for doubtful loans and advances of Rs. 15.56 million (March 31, 2015: Rs. 15.56 million) has been made w.r.t. loan given to BESA Developers and Infrastructure Private Limited, 100% subsidiary of your Company. 13. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES: All related party transactions that were entered into during the year under report were on an arm's length basis and were in the ordinary course of business, to serve mutual need and mutual interest. There were no materially significant related party transactions made by your Company. The Audit Committee has given its omnibus approval which is valid for one financial year. Your Company's policy on Related Party Transactions as approved by the Board is hosted on your Company's website and a web link thereto is: <http://www.welspunindia.com/policy/related_> party_transaction_policy.pdf. Disclosures as required under the Act are given in Form AOC-2 as Annexure - 3 to this Report. The details of the related party transactions as required under Accounting Standard - 18 are set out in Note 44 to the Standalone financial statements forming part of this Report. 14.DETAILS OF MANAGERIAL REMUNERATION TO DIRECTORS AND KEY MANAGERIAL PERSONNEL: i. Details as required pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below: (b) The percentage increase in the median remuneration of employees in FY 2015-16 was 15.00%. (c) Your Company had 19,156 permanent employees on its payrolls as on March 31, 2016. (d) The turnover of your Company increased by 10.55% and EBIDTA of your Company increased by 17.22% during FY 2015-16. Median remuneration increased by 15%. Increase in median remuneration was in line with the performance of your Company. (e) The remuneration of the Key Managerial Personnel is 1.70% of EBIDTA of your Company for FY 2015-16. (f) Market Capitalisation of your Company as on March 31, 2016 was Rs. 99.42 billion and as on March 31, 2015, it was Rs. 35.74 billion. (g) Price earnings ratio as at the close of March 31, 2016 was 16.52 and at the closing of March 31, 2015, it was 7.00. (h) The share price increased by 19.79 times (Rs. 98.95 as on March 31, 2016 after sub-division of equity shares to Rs. 1 per share) in comparison to the rate at which the Company came out with the public issue in April, 1993 i.e. Rs. 50 per share (face value was Rs. 10 per share). (i) Average percentage increase in the salaries of employees other than the managerial personnel in FY 2015-16 was 8.30%. The percentage increase in the managerial remuneration was 15.59%. (j) The key parameters for any variable component of remuneration availed by the directors are as per the Nomination and Remuneration Policy Chairman, Managing Director and Joint Managing Director are being paid commission of 1% of profits as approved by the members of your Company. (k) We affirm that the remuneration is as per the Nomination and Remuneration Policy of your Company. ii. Details of the employees of your Company as required pursuant to Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below: Name, Designation, Age, DOJ, Current CTC (Rs. million), Qualification, Previous Company Nature of Employment, % of Equity Shares held in the Company, Relative of any Director/ Manager of the Company. Anil Channa, Executive Director* - Operations, 66, 03.10.2014, 10.66, BE, B.Tech , MBA, PGDM, S. Kumars Nationwide Limited, Permanent, 0, No; Asim Chakraborty, Director* - Civil, 54, 23.01.2003, 11.22, BE (Civil), Welspun Corp Limited, Permanent, 0, No; Dipali Goenka, Joint Managing Director & CEO, 46, 01.04.2013, 98.96, B.A. (Psychology),N.A., Contractual, 0.07, Yes; Milind Hardikar, Executive Director* - Textile Park, 54, 24.04.2012, 13.28, BE (Mech), MMS, Arvind Limited, Permanent, 0, No; Altaf Jiwani, Chief Financial Officer, 49, 02.02.2015, 22.40, B.TECH/MMS, RPG Group, Permanent, 0, No; Ashok Kumar Joshi, Executive Director* - Operations, 56, 26.07.2001, 16.30, B.TECH, Donear Industries Limited, Permanent, 0, No; D.S Kalra, President - Projects, 46, 23.05.2014,. 7.98, PGDM, B.TECH, SEL Manufacturing Company Limited, Permanent, 0, No; Rajesh Mandawewala, Managing Director , 53, 01.12.1985, 101.29, CA,N.A., Contractual, 0 No; Suneel Mohnot, President - Commercial, 56, 26.08.2013, 9.34, M.COM, MBA, Reliance Industries Limited, Permanent, 0, No; Anil Nimbargi, Senior Vice President - IT, 50, 09.09.2009, 7.96, BSc., MBA (Prod/MKTG/ MGMT), Ispat Industries Limited, Permanent, 0, No; Rajesh Padmanbhan, Director* - HCGA, 54, 01.02.2016, 32.50, MBA (Finance / HR), Vedanta Group, Permanent, 0, No; Chintan Thaker, Vice President-CASPC, 38, 01.04.2013, 7.00, MBA, Gujarat Water Infrastructure Limited, Permanent, No; Bharat Thanvi, Vice President - Commercials, 42, 27.01.1996, 6.28, BE (Mech), GDMM - MM, N.A., Permanent, 0, No; RR. Vinod, Senior Vice President- Procurement , 46, 04.01.2016, 6.10, PGDRM, B.TECH, Arvind Mills, Permanent, 0, No. * Not a Member of Board iii. Ms. Dipali Goenka, Joint Managing Director & CEO who is receiving remuneration and commission from your Company, receives Rs. 15 million as remuneration and commission of 2% of profits also from Welspun Global Brands Limited, a subsidiary of your Company. iv. Details of managerial remuneration and payments to other directors is given in the Corporate Governance Report forming part of this Report. EXTRACT OF THE ANNUAL RETURN: An extract of the annual return in Form MGT-9 of the Companies (Management and Administration) Rules, 2014 is annexed as Annexure - 4 to this Report. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO: The information on conservation of energy, technology absorption and foreign exchange earnings and outgo required to be disclosed pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 is annexed as Annexure - 5 to this Report. CORPORATE SOCIAL RESPONSIBILITY (CSR): The key philosophy of all CSR initiatives of the Company is enshrined in the three E's which have become guiding principles of our CSR initiatives - Education, Empowerment (of Women) and Environment & Health. The CSR Policy of your Company as approved by the Board of Directors' is hosted on the Company's website and a web link thereto is: <http://www.welspunindia.com/policy/csr_policy>. The initiatives undertaken by your Company during FY 2015-16 in CSR have been detailed in this Report. Disclosures as required under Rule 9 of the Companies (Corporate Social Responsibility) Rules, 2014 is annexed as Annexure - 6 to this Report. 18. INTERNAL CONTROLS: Your Company has adequate internal control system, which is commensurate with the size, scale and complexity of its operations. Your Company has designed and implemented a process driven framework for Internal Financial Controls ("IFC") within the meaning of the explanation of Section 134(5)(e) of the Act, SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015 and other relevant statutes applicable to your Company. Your Company has well-documented Standard Operating Procedures (SOPs) for various processes which are periodically reviewed for changes warranted by business needs. The Internal Auditors continuously monitor the efficiency of the internal controls / compliance with the SOPs with the objective of providing to the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance of the adequacy and effectiveness of the organisation's risk management, control and governance processes. For the year ended March 31, 2016, the Board is of the opinion that your Company has sound IFC commensurate with the nature of its business operations; wherein adequate controls are in place and operating effectively and no material weakness exists. Your Company has a process in place to continuously monitor existing controls and identify gaps and implement new and / or improved controls wherever the effect of such gaps would have a material effect on your Company's operation. 19. RISK MANAGEMENT: Your Company is exposed to risks across all levels and functions of the organisation. The Board has approved Enterprise Risk Management Policy (ERMP) to effectively address financial, operational, business, compliance and strategic risk. A structured enterprise risk management program has been formulated and implemented. Refer to the Management Discussion and Analysis Section in this Report for risks and threats applicable to your Company. 20. CORPORATE GOVERNANCE: The Company is committed to maintain the highest standards of corporate governance requirements as set out by SEBI. The Report on Corporate Governance as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms an integral part of this Report. The requisite Compliance Certificate is obtained from Mr. Uday Sohoni, Practicing Company Secretary regarding compliance of conditions of Corporate Governance as stipulated under Part E of Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is annexed to the Corporate Governance Report. 21. VIGIL MECHANISM: Your Company is committed to highest standards of ethical, moral and legal business conduct. Accordingly, the Board of Directors has formulated Whistle Blower Policy and Vigil Mechanism for its directors and employees and any director or employee may make protected disclosures to the Chairman of the Audit Committee. No personnel have been denied access to the Audit Committee. 22. DIRECTORS' RESPONSIBILITY Pursuant to Section 134(3)(c) & 134(5) of the Act, your Directors hereby confirm that: a. in the preparation of the annual accounts for the financial year ended March 31, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures; b. the directors 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. the directors 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. 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 were operating effectively; and f. the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively 23. MISCELLANEOUS: During the year, there was no change in the general nature of business of your Company. No material change or commitment has occurred which would have affected the financial position of your Company between the end of the financial year to which the financial statements relate and the date of the 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. Further, based on the Policy on Prevention, Prohibition and Redressal of Sexual Harassment of women at workplace, the Internal Complaints Committee for each locations of your Company informed that no case of sexual harassments was reported during the year under review. Your Company has not made any provision of money for the purchase of, or subscription for, shares in your Company or its holding company, to be held by or for the benefit of the employees of your Company and hence the disclosure as required under Rule 16(4) of Companies (Share Capital and Debentures) Rules, 2014 is not required. 24. ACKNOWLEDGEMENTS: Your Directors thank the government authorities, financial institutions, banks, customers, suppliers, members, employees and other business associates of your Company, who through their continued support and co-operation, have helped as the 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 : April 25, 2016 |