DIRECTORS' REPORT Dear Members, Your Directors are pleased to present the Fifty Fifth Annual Report and the Company's audited financial statement for the financial year ended 31 March 2015. OPERATIONAL REVIEW Your Company performed satisfactorily, reinforcing its market position across business segments. Your Company's net sales grew by 6.06% to reach Rs. 1,82,088.96 lacs in 2014-15, compared to Rs. 1,71,683.29 lacs in 2013-14. The EBITDA went up by 27.27% to Rs. 34,504.90 lacs in 2014-15 from Rs. 27,111.72 lacs in 2013-14. Cash profit stood at Rs.21,473.60 lacs in 2014-15, compared to Rs. 16,072.48 lacs in 2013-14. Your Company's PAT accelerated by 85.32% to Rs. 10,414.97 lacs,compared to Rs. 5,619.97 lacs in 2013-14. Your Company's EPS grew to Rs. 15.70 in 2014-15, compared to Rs. 8.51 in 2013-14, registering a 84.49% increase. Building Products Division The gross revenue of the division grew by 6.21% to reach to Rs. 98,698.90 lacs during 2014-15 from Rs. 92,927.65 lacs in 2013-14. The operating profit grew to Rs. 19,903.58 lacs in 2014-15 from Rs. 19,701.75 lacs in 2013-14, registering a 1.02% increase. Capital employed grew by 8.34% to Rs. 94,991.35 lacs in 2014-15 as against Rs. 87,676.06 lacs in 2013-14. The division undertook multiple initiatives to stay ahead of the curve. © Commenced commercial production at the Greenfield state-of-the-art highly automated 'faucet' plant at Kaharani, Rajasthan, with an annual capacity of 2.5 million pieces © I nducted Shah Rukh Khan (SRK) as the brand ambassador for hindware brand. He will feature in hindware's new 360-degree integrated campaigns across all media channels © The division's luxury brand Queo, inducted Jacqueline Fernandez as brand ambassador. Her association will boost visibility and awareness of Queo as the bathroom space gradually shifts towards luxury © Entered into an exclusive distribution agreement with Groupe Atlantic of France. The alliance will augment the import of water heaters for the Indian market, co-branded as 'hindware - atlantic' Packaging Products Division The gross revenue for the division increased by 6.04%, and was marked at Rs. 1,01,571.91 lacs in 2014-15, compared to Rs. 95,788.32 lacs in 2013-14. The year under review also registered excellent operational profit at a staggering growth rate of 80.98%, surging the figures from Rs. 9,784.78 lacs in 2013-14 to Rs. 17,708.80 lacs in 2014-15. The capital employed in this division decreased from Rs. 1,32,058.28 lacs in 2013-14 to Rs. 1,23,119.18 lacs in 2014-15. The division witnessed an operational turnaround and put in place a robust operational architecture. © The division registered a produce of 1,660 million units of glass containers in 2014-15 © Changed over to alternate fuel in container glass production to reduce operational costs © I nvested in modern technology and equipment to upgrade the quality and functionality of products to address changing industry trends and consumer requirements © Focused on debottlenecking of existing facilities to improve operating efficiencies © Increased the average container glass capacity utilisation to 68.8% in 2014-15, through process up-gradation and higher demand. Fifty new glass bottles were introduced, including 21 light-weight bottle varieties and 20 new PET bottles Reduced the manufacturing cost to improve the profit margin. Added 102 new clients to the existing customer base PET production grew from 6,177 Mts in 2013-14 to 6,438 Mts in 2014-15, while average PET capacity utilisation grew to 65.9% in 2014-15 No material changes and commitments affecting the financial position of the Company occurred between the end of financial year of the Company to which the financial statements relates and the date of this Report. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES The company has no material subsidiary in accordance with the provisions of clause 49 of the Listing Agreement. No company ceased or became the subsidiary/ joint venture/associate company of the Company during the Financial Year 2014-15. During the year the Board of Directors reviewed the affairs of the subsidiaries. In accordance with section 129(3) of the Companies Act, 2013, we have prepared consolidated financial statements of the Company and all its subsidiaries, which form part of the Annual Report. Further, a statement containing the salient features of the financial statement of our subsidiaries in the prescribed format AOC-1 forms part of the consolidated financial statement and hence not repeated here for the sake of brevity. The statement provides the details of performance, financial positions of each of the subsidiary. In accordance with Section 136 of the Companies Act, 2013, the audited financial statement, including the consolidated financial statements and related information of the Company and audited accounts of each of its subsidiaries, are available on Company's website <http://www.hindwarehomes.com>. These documents will also be available for inspection during business hours at our registered office in Kolkata, India, between 12-00 Noon to 2-00 P.M. till the date of AGM. During the year under review, the Company has issued 6,250,000 equity shares of Rs. 2/- each at a premium of Rs. 398/- to Qualified Institutions Buyers under Qualified Institutional Placement. The Policy for determining material subsidiaries as approved may be accessed on the Company's website at the link: <http://www.hindwarehomes.com/> pdf/Policy-on-Material-Subsidiaries.pdf DIVIDEND Your Directors have recommended a dividend of Rs. 3.50 (i.e.175%) per equity share (last year Rs. 3.00 (i.e. 150%) per equity share) on equity shares of Rs.2/- each for the financial year ended 31 March 2015, amounting to Rs. 3036.30 lacs (inclusive of Dividend Distribution Tax Rs. 503.93 lacs). The dividend payout is subject to approval of members at the ensuing Annual General Meeting. The dividend will be paid to members whose names appear in the Register of Members ason 16 September 2015 and in respect of shares held in dematerialised form, it will be paid to members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on 15 September 2015. TRANSFER TO RESERVES The Company proposes to transfer X 2,000 lacs to the general reserves. DEPOSITS We have not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 and as such no amount of principal or interest was outstanding as on the Balance Sheet date. AUDITORS AND AUDITORS' REPORTS Statutory Auditors M/sWalker Chandiok & Co LLP, Chartered Accountants, Statutory Auditors of the Company, having Firm's Registration No. 00I076N/N5000I3 hold office till the conclusion of the ensuing Annual General Meeting and being eligible offer themselves for re-appointment. The Company has obtained written confirmation from the Statutory Auditors, confirming that they are eligible for appointment as Auditors of the Company under Section I39 of the Companies Act, 20I3 and meet the criteria for appointment specified under Section I4I of the Companies Act, 20I3. The Audit Committee and the Board of Directors recommend re-appointment of M/sWalker Chandiok & Co LLP, Chartered Accountants, having firm Registration No. 00I076N/N5000I3 as the Company's Statutory Auditors from the conclusion of the ensuing Annual General Meeting till the conclusion of the next Annual General Meeting of the Company. The Notes on Financial Statement referred to in the Auditors' report are self-explanatory and therefore do not require any further comments. Secretarial Auditor The Board had appointed M/s Drolia & Company,Practicing Company Secretaries, Kolkata, having CP No.I362 to conduct Secretarial Audit for the financial year 20I4-I5, pursuant to the provisions of Section 204 of the Companies Act, 20I3 and Companies (Appointment and Remuneration of Managerial Personnel) Rules, 20I4. The Secretarial Audit Report in Form MR - 3 for the financial year 2014-I5 is enclosed herewith as Annexure A to this Report. The Secretarial Audit Report does not contain any observation or adverse remark. CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The particulars as prescribed in subsection (3)(m) of section I34 of the Companies Act, 20I3, read with Companies (Accounts) Rules, 20I4 are enclosed as Annexure B to this Report. SHARE CAPITAL During the year under review, the Company has issued 6,250,000 equity shares of Rs. 2/- each at a premium of Rs. 398/- to Qualified Institutions Buyers under Qualified Institutional Placement. The paid-up Equity Share Capital as on 3I March 20I5 was Rs. I,445.97 lacs. EXTRACT OF ANNUAL RETURN In accordance with Section I34(3)(a) of the Companies Act, 20I3, the extract of the Annual Return in Form No. MGT - 9 is enclosed as Annexure C to this Report. MANAGEMENT DISCUSSION AND ANALYSIS REPORT Management Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is presented in a separate section forming part of the Annual Report. DIRECTORS' RESPONSIBILITY STATEMENT Your Directors in terms of Section I34(3) (c) of the Companies Act, 20I3 state that: a) in the preparation of the annual accounts for the year ended 3I March 20I5, the applicable accounting standards read with requirements set out under Schedule III to the Act, had been followed and there are no material departures from the same; b) the Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31 March 2015 and of the profit of the Company for the year ended on that date; c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) the Directors had prepared the annual accounts on a 'going concern' basis; e) 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; and f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. CORPORATE GOVERNANCE The report on Corporate Governance as stipulated under the Listing Agreement forms an integral part of this Report. The requisite certificate from the Auditors of the Company confirming compliance with the conditions of corporate governance is attached to the report on Corporate Governance. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis and therefore provisions of section I88 of the Companies Act, 20I3 are not attracted. Thus, disclosure in Form AOC-2 is not required. During the year, the Company has not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the Policy of the Company on materiality of related party transactions. The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link: <http://www.hindwarehomes.com/> pdf/Related-Party-Transaction-Policy.pdf Your Directors draw attention of the members to Note 39 to the financial statement which sets out related party disclosures. CORPORATE SOCIAL RESPONSIBILITY (CSR) As per provisions under Section I35 of the Companies Act, 20I3, all companies having net worth of Rs. 500 crores or more, or turnover of XI,000 crores or more or a net profit of Rs. 5 crores or more during any financial year are required to constitute a Corporate Social Responsibility (CSR) Committee of Board of Directors comprising three or more directors, at least one of whom should be an Independent Director and such Company shall spend 2% of the average net profits of the Company made during the three immediately preceding financial years. Accordingly CSR Committee has been constituted by the Company comprising Mr. Salil Bhandari (Chairman), Mr. Rajendra Kumar Somany and Mr. Sandip Somany as other members of the Committee. The CSR Committee has also framed a Corporate Social Responsibility Policy (CSR Policy) duly approved by the Board, indicating the activities to be undertaken by the Company to fulfil the expectation of our Stakeholders and to continuously improve our social, environmental and economical performance while ensuring sustainability and operational success of our Company. The Company would also undertake other need based initiatives in compliance with Schedule VII to the Companies Act, 20I3 The guiding principles for all CSR initiatives of the Company are as follows: Establishing a guideline for compliance with the provisions of Regulations to dedicate a percentage of Company's profits for social projects. Ensuring the implementation of CSR initiatives in letter and spirit through appropriate procedures and reporting Creating opportunities for employees to participate in socially responsible initiatives The CSR Policy may be accessed on the Company's website at the link: <http://> www.hindwarehomes.com/pdf/CSR_ <http://www.hindwarehomes.com/pdf/CSR_> Policy_HSIL.pdf The Annual Report on CSR Activities is enclosed as Annexure D. NUMBER OF BOARD MEETINGS During the year under review, four Board Meetings were convened and held. For further details, please refer Report on Corporate Governance which is forming part of this Annual Report. AUDIT COMMITTEE The Audit Committee comprises Independent Directors namely Mr. V.K. Bhandari (Chairman), Mr. Salil Bhandari, Mr. N.G. Khaitan and Mr. Ashok Jaipuria. For further details, please refer Report on Corporate Governance which is forming part of this Annual Report. All the recommendations made by the Audit Committee were accepted by the Board. VIGIL MECHANISM (WHISTLE BLOWER) The Company has formulated a Whistle Blower Policy to establish a vigil mechanism for Directors/Employees and other stakeholders of the Company to report concerns affecting the smooth and efficient running of operations of the Company. This Policy documents the Company's commitment to maintain an open work environment in which employees, consultants and contractors are able to report instances of unethical or undesirable conduct, actual, suspected fraud or violation of the Company's Code of Conduct. The Vigil Mechanism (Whistle Blower) Policy is available on Company's website at the link: <http://www.hindwarehomes>. com/vigil-mechanism.aspx REMUNERATION POLICY On the recommendation of the Nomination and Remuneration Committee, the Board has formulated Remuneration Policy for appointment of Directors, Key Managerial Personnel, Senior Management and their remuneration. The Remuneration Policy of the Company is enclosed as Annexure E to this Report. PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS Particulars of loans, guarantees and investments covered under section I86 of the Companies Act, 20I3 forms part of the notes to the Financial Statements (Please refer Note Nos. I5, I6, 2I and 39). PARTICULARS OF EMPLOYEES Information required as per Section I97(I2) of the Companies Act, 20I3 read with Rule 5(I), 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 20I4 is enclosed as Annexure F forming part of this Report. INTERNAL CONTROLS The Company has in place adequate internal control systems, which commensurate with its size, nature of business and complexity of its operations and are designed to provide a reasonable degree of assurance regarding the effectiveness and efficiency of operations, the adequacy of safeguard for assets, internal control over financial reporting, and compliance with applicable laws and regulations. Internal audit function evaluates the adequacy of and compliance with policies, plans,regulatory and statutory requirements. The Internal Auditors directly report to the Board's Audit Committee, thus ensuring the independence of the process. It also evaluates and suggests improvement in effectiveness of risk management, controls and governance process. The Audit committee and Board provides necessary oversight and directions to the Internal audit function and periodically reviews the findings and ensures corrective measures are taken. RISK MANAGEMENT The Company has adopted several strategies for Risk Management to mitigate risks and uncertainties. Controls have been put in place to quickly and systematically identify, prioritise, monitor and mitigate such risks on a constant basis. This is a real-time and ever-evolving area, given the dynamic nature of the environment. The Company has devised its Risk Management Policy and also constituted a Risk Management Committee which ensures that the Company has an appropriate and effective Risk Management System with appropriate Policies and Process which carries out risk assessment and ensures that risk mitigation plans are in place. In addition, all the key risks get continuously deliberated and discussed at the Group Executive Committee level as well as the Business Unit level. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 The Company has in place a Sexual Harassment Policy in compliance with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company always endeavors to create and provide an environment that is free from discrimination and harassment including sexual harassment. The Internal Complaints Committee (ICC) has been set up to redress complaints regarding sexual harassment, if any. The Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 20I3. DIRECTORS AND KEY MANAGERIAL PERSONNEL During the year under review, the members approved the appointment of Ms. Sumita Somany as a Non-executive Non-Independent Director who is liable to retire by rotation and Mr. N.G. Khaitan, Mr. Salil Bhandari, Mr. V.K. Bhandari, Mr.Ashok Jaipuria and Dr. Rainer Siegfried Simon as Independent Directors who are not liable to retire by rotation. The members have also re-appointed Mr. Rajendra Kumar Somany as Chairman and Managing Director of the Company. In accordance with the provisions of the Companies Act, 20I3 and the Articles of Association of the Company, Ms. Sumita Somany, Non executive Director of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible have offered herself for re-appointment. During the year, Mr. Rajendra Kumar Somany, Chairman and Managing Director, Mr. V.K. Ajmera, Chief Financial Officer and Ms. Payal M Puri, Company Secretary, were designated as Key Managerial Personnel of Company. However, due to the enhanced roles and responsibilities of Hindware Home Retail Private Limited (wholly owned subsidiary of the Company), Mr. V. K. Ajmera assumed the complete responsibility of Hindware Home Retail Private Limited and resigned as Chief Financial Officer of the Company with effect from 6 April 20I5. Mr. Sandeep Sikka was appointed as Chief Financial Officer of the Company and Key Managerial Personnel with effect from 6 April 20I5. DECLARATION BY INDEPENDENT DIRECTORS The Company has received necessary declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under Section I49(6) of the Companies Act, 20I3 and Clause 49 of the Listing Agreement with the Stock Exchanges. BOARD EVALUATION In accordance with Clause 49 of the Listing Agreement, it is mandatory that the Board shall monitor and review the Board Evaluation Framework. The Companies Act, 20I3 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual Directors. Schedule IV of the Companies Act, 20I3 states that the performance evaluation of Independent Directors shall be done by the entire Board of Directors, excluding the director being evaluated. The Board and the Nomination and Remuneration Committee reviewed the performance of the individual Directors on the basis of the criteria and framework adopted by the Board. In addition, the performance of Board as a whole and committees were evaluated by the Board after seeking inputs from all the Directors on the basis of various criteria. a separate meeting of Independent Directors, performance of Non Independent Directors, performance of Board as a whole and performance of the Chairman was evaluated, taking into account the views of the Executive Directors and Non-Executive Directors. The evaluation process has been explained in the Corporate Governance Report section of the Annual Report. None of the Independent Directors are due for re-appointment. TRAINING OF INDEPENDENT DIRECTORS The details of programmes conducted for familiarization of Independent Directors with the Company, nature of the industry in which the Company operates, business model of the Company has been uploaded on the Company's website at the web link <http://www.hindwarehomes.com/training_> of_directors.aspx. For further details, please refer Report on Corporate Governance which is forming part of this Annual Report. GENERAL Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: 1. Details relating to deposits covered under Chapter V of the Act. 2. Issue of equity shares with differential rights as to dividend, voting or otherwise. 3. Issue of shares (including sweat equity shares) to employee of the Company under any scheme. 4. Issue of Employees Stock Option to employee of the company under any scheme. 5. Neither the Managing Director nor the Whole-time Directors of the Company receive any remuneration or commission from any of its subsidiaries. 6. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future. 7. Business Responsibility Report as per Clause 55 of the Listing Agreement with the Stock Exchange, describing the initiatives taken by Company from an environmental, social and governance perspective is not applicable to the Company, as per SEBI Circular CIR/CFD/ DIL/8/2012, dated 13 August 2012. ACKNOWLEDGEMENT Your Directors would like to express their appreciation for the assistance and co-operation received from the financial institutions, banks, Government authorities, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services by the executives and staff of the Company. For and on behalf of the Board of Directors Rajendra Kumar Somany Chairman and Managing Director Date: 18 May 2015 Place: Gurgaon |