DIRECTORS' REPORT TO THE SHAREHOLDERS The Directors have pleasure in presenting their Report and the Audited Financial Statements of your Company for the year ended 31st March 2015. DIVIDEND During the year under review the Board of Directors declared an interim dividend of Rs. 10.00/- per equity share (100% of the paid-up value). Your directors are pleased to recommend a final dividend of Rs. 10.00/- per equity share (100% of the paid-up value) for your consideration and approval at the ensuing Annual General Meeting of the Company. With the proposed final dividend, the total dividend for the year 2014-15 would be Rs. 20.00/- per equity share (200% of the paid-up value) as against the total dividend of Rs. 5.00/- per equity share ( 50% of the paid-up value) declared in the previous year. The total dividend outgo would amount to Rs. 1771 lacs (including dividend distribution tax). SHARE CAPITAL The paid up Equity Share Capital as on March 31st, 2015 was Rs. 7.49 Crores. During the year under review, the Company has not issued shares with differential voting rights nor granted stock options nor sweat equity. As on March 31, 2015, Mr. CK Birla, Chairman holds 51,376 equity shares of the Company. None of the Directors of the Company, except as specified above, hold shares or convertible instruments of the Company. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS Particulars of Loans, Guarantees and Investments as required under the provisions of Section 186 of the Companies Act, 2013 are provided in the notes to the Financial Statements. The Company has not accepted any deposits covered under chapter V of the Companies Act 2013 and as such, no amount of principal or interest was outstanding as on 31st March 2015. OVERALL ECONOMIC OUTLOOK: The low economic growth phase in the Indian Economy appears to have bottomed out and 2014-15 witnessed a gradual improvement in economic activity. As per the advance estimates of Central Statistics Office (CSO), India's economic growth is pegged at 7.4% in 2014-15 as compared to 6.9% in 2013-14. With the control over price rise continuing a remarkable fall in inflation was noted, as the wholesale price index (WPI) fell to a 5-yr low of 0.11 in December'2014. The Manufacturing PMI reported by Market Economics and conducted by HSBC every month, rose from 51.40 at the beginning of Q1 of 2014-15 to 52.10 by the end of Q4 of 2014-15. The Business confidence index has been continuously rising from 49.9 in Q4 of 2013-14 to 56.4 in Q4 of 2014-15 as reported by Confederation of Indian Industry (CII). The forecast expects the index to rise to 58.18 by 2016.The medium term to long term growth prospects look positive in view of the Government's determination to bring in reforms. The Economic Survey has projected the Gross Domestic Product (GDP) growth at 8%-8.5% in financial year 2015-16 and double-digit growth in the coming years. STATE OF COMPANY'S AFFAIR In the year 2014-15, the Company's net revenue stood at Rs. 1108 Crores as compared to Rs. 869 Crores in the previous year, a growth of 27.5%. Consequently, Profit before Tax for the year under review was Rs. 91.95 Crores as compared to Rs. 9.89 Crores reported last year signifying an y-o-y growth of 830%. In order to compete in the changing market conditions, HIL started adapting different strategic initiatives in its existing businesses. A focussed approach and unique strategy was adopted for each business division with the objective of achieving higher growth and profitability. Various strategic initiatives such as optimization of cost, focused sales strategy, regular performance improvement initiatives contributed to an impressive performance by your Company both in terms of revenue and profitability. Your company's priority is to develop eco-friendly products and to achieve this it has a well thought strategy in place for the development of new products and for the growth of Green Building Products produced by the Company. Sheeting: The Sheeting business had a historical year with the highest ever sales volume and revenue. It witnessed a growth of 23% in volume during the year under review. This was achieved through focus on high potential geographies, sales & marketing initiatives in priority markets, changes in manufacturing footprint and cost optimization at it's plants. Aerocon AAC - Blocks The year under review was a challenging year for the AAC Blocks Industry. While the Industry witnessed a growth in demand due to increasing awareness about green building products, however the pricing was a challenge because of surplus capacity and oversupply across regions. There was intense price pressure especially in the North and Western markets resulting in a drop in realization by 10%-20% as compared to the previous year. Aerocon AAC Blocks sales revenue grew by 59% as compared to the market growth of 32% approximately. Aerocon Panels During the year under review the Aerocon Panel Sales grew by 29% and your company continued to be the market leader in this segment. Demand for the Company's pre-fabricated panels is increasing especially from major Government, Industrial, Healthcare projects as well as from export requirement. Your company will continue its focus on Tier 2 and Tier 3 towns which are witnessing good growth in real estate and infrastructure projects. Advanced Polymer Products (APP): The year under review was the first full year of operations for the Advanced Polymer Products division of the Company. In its first full year of operation, the Company has successfully setup its distribution foot print in 10 states covering Northern and Southern markets and has cornered about 7% market share in North. The division's primary focus is to build deep and wide distribution channels, increase SKU's and develop in-house compounding capability which are some of the key essentials in this business. Thermal Insulation - HYSIL Hysil business continued to maintain its market leadership position in the Granular Insulation segment, with a virtual numero - uno position in the Cement industry which is its biggest consumer. To de-risk itself against any slowdown in the Indian Cement industry, it has forayed into Exports. In the fiscal year 2014-15, 16% of the Hysil business came through Exports to Africa, Middle East, Nepal & Bangladesh. NEW PROJECTS Wind Power: During the year, HIL commissioned a 2.0 MW Wind Turbine Generator in Rajasthan on 30th September 2014, taking the HIL's renewable energy portfolio to 9.35 MW. HIL continues to evaluate various options for expanding its renewable energy portfolio. AAC Blocks: Expanding its foot print in the growing AAC Blocks Industry, HIL on 1st January 2015 commissioned a AAC Blocks manufacturing facility in Jhajjar, Haryana with an installed capacity of 1.5 lac Cu.m/annum. This plant shall cater to the growing AAC Blocks market in the National Capital Region (NCR) and the northern region of the Country. APP Division: HIL ventured into manufacturing of Advanced Polymer Products, with CPVC and UPVC plumbing products in October, 2013 with the commissioning of its Faridabad unit. Expanding further, HIL on 2nd March 2015, commissioned its second state of the art manufacturing facility for CPVC and UPVC Pipes and Fittings at Timmapur, Telangana with an initial capacity of 1555 MT. This unit will help strengthen your Company's presence in the Southern market. MANAGEMENT DISCUSSION & ANALYSIS REPORT A Report on Management Discussion & Analysis is appended as Annexure (I) to this report as per the requirements of Listing Agreement with the Stock Exchange(s). DIRECTORS During the year under review, the members at the AGM held on 18th July, 2014 appointed Mr. P Vaman Rao and Mr. Yash Paul as Independent Directors of the Company for a term of 5 years w.e.f 18th July, 2014 and Mrs. Gauri Rasgotra as Independent Director of the Company for a term of 5 years w.e.f 8th May, 2014. During the year, Mr. Abhaya Shankar, resigned as Managing Director of the Company with effect from 22nd September, 2014. The Board of Directors place on record their appreciation for the hard work and dedication of Mr. Abhaya Shankar during his tenure since February 2008, as Managing Director of the Company. The Board of Directors of the Company, on the recommendation of the Nomination and Remuneration Committee, co-opted Mr. Prashant Vishnu Vatkar as an Additional Director of the Company with effect from 20th April, 2015, and appointed him as Managing Director of the Company, subject to the approval of the members, at the forthcoming Annual General Meeting. In accordance with the provisions of Companies Act, 2013 and the Articles of Association of the Company, Mr. Desh Deepak Khetrapal Director of the Company will retire by rotation at the ensuing Annual General Meeting and, being eligible, offers himself for re-appointment. The Resolutions proposing appointment of Mr. Prashant Vishnu Vatkar as Managing Director and reappointment of Mr. Desh Deepak Khetrapal as Director of the Company will be placed before the Shareholders for their approval at the ensuing Annual General Meeting of the company. The Company has received declarations from all the Independent Directors of the Company confirming that they continue to meet with the criteria of independence as prescribed under sub-section (6) of Section 149 of the Companies Act, 2013 and under Clause 49 of the Listing Agreement with the Stock Exchanges. For Directors seeking appointment/re-appointment in the forthcoming Annual General Meeting of the Company; the particulars as required to be disclosed in accordance with Clause 49 (Corporate Governance) of Listing Agreement, forms part of Corporate Governance Report. During the year under review, six board meetings were held on 08th May, 2014, 18th July, 2014, 16th September, 2014, 17th October, 2014, 23rd December, 2014 and 19th January, 2015. The maximum time-gap between any two consecutive meetings was within the period prescribed under the Companies Act, 2013. BOARD EVALUATION The Board of Directors evaluated the annual performance of the Board as a whole, its committee's and the directors individually in accordance with the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement in the following manner: i. Structured evaluation forms, as recommended by the Nomination and Remuneration Committee, after taking into consideration inputs received from the Directors, covering various aspects of the Board's functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance, for evaluation of the performance of the Board, its Committee's and each director were circulated to all the members of the Board along with the Agenda Papers. ii. The members of the Board were requested to evaluate by filling the evaluation forms and the duly filled in evaluation forms were required to be sent to the Company Secretary in a sealed envelope or personally submitted to the Chairman at the concerned meeting. iii. Based on the individual evaluation of the Directors, the Board initiated a detailed discussion at the concerned meeting on the performance of the Board / Committee/ Individual Director, and formulated a final collective evaluation of the Board. The Board also provided an individual feedback to the concerned director on areas of improvement, if any. A separate meeting of Independent Directors was held on 23rd December, 2014 to evaluate the performance evaluation of the Chairman, the Non Independent Directors, the Board and flow of information from management. VIGIL MECHANISM The Board of Directors, on recommendation of the Audit Committee, established a vigil mechanism by framing a Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The Vigil Mechanism framework ensures that strict confidentiality is maintained whilst dealing with concerns and also that no discrimination shall be meted out to any person for a genuinely raised concern. The designated officer/ Audit Committee Chairman can be directly contacted to report any suspected or confirmed incident of fraud / misconduct on cs@hil.in. A high level Committee has been constituted which looks into the complaints raised. The Committee reports to the Audit Committee and the Board. The Whistle Blower Policy is also posted in the Investors section of the Company's website www.hil.in on the following link <http://hil.in/investors/codes-policies/>. REMUNERATION POLICY The Board of Directors, on recommendation of the Nomination and Remuneration Committee framed a Nomination and Remuneration policy for selection, appointment and remuneration of Directors, KMP and Senior Management and matters covered u/s 178(3) of the Companies Act 2013. The details of the same are provided in the Corporate Governance Report. The Policy is also posted in the Investors section of the Company's website www.hil.in <http://www.hil.in> on the following link <http://hil.in/investors/codes-policies/> SEXUAL HARASSMENT POLICY The Company as required under the provisions of "The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013" has framed a Policy on Prohibition, Prevention and Redressal of Sexual Harassment of Women at Workplace and matters connected therewith or incidental thereto. In the year under review, the Company has not received any complaint under the said Policy. RELATED PARTY TRANSACTIONS The Board of Directors, on recommendation of the Audit Committee framed a policy for Related Party Transaction which includes policy for selection, appointment and remuneration of Directors, KMP and Senior Management and matters covered u/s 178(3) of the Companies Act 2013. The details of the same are provided in the Corporate Governance Report. The Policy is also posted in the Investors section of the Company's website www.hil.in on the following link http:/ /hil.in/investors/codes-policies/. All Related Party Transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. The requisite details of the related party transactions entered into during the financial year are provided as Annexure (II) to this report. Suitable disclosure as required by the Accounting Standards (AS18) has been made in the notes to the Financial Statements. All Related Party Transactions are placed before the Audit Committee as also the Board for approval, where ever required. Prior omnibus approval of the Audit Committee is obtained for the transactions which are of a foreseeable and repetitive nature. A statement giving details of all related party transactions entered into pursuant to the omnibus approval so granted are placed before the Audit Committee and the Board of Directors on a quarterly basis. None of the Directors, other than to the extent of their shareholding, receipt of remuneration / commission, has any pecuniary relationships or transactions vis-a-vis the Company. DIRECTORS' RESPONSIBILITY STATEMENT Directors' Responsibility Statement as required under the provisions of Section 134(3)(c) of the Companies Act, 2013, is given in the Annexure (III) attached hereto and forms part of this Report. CORPORATE GOVERNANCE Your Company is committed to good Corporate Governance coupled with good corporate practices. As per the requirements of Listing Agreement with the Stock Exchanges, a Compliance Report on Corporate Governance for the year 2014-15 and a Certificate from the Auditors of the Company M/s. S R Batliboi & Associates LLP., Chartered Accountants, [ICAI Firm Registration Number: 101049W] is furnished as part of the Annual Report. The Ministry of Corporate Affairs has issued Corporate Governance Guidelines in December, 2009. While these Guidelines are recommendatory in nature, your Company has already adopted most of the Guidelines. The Company will be reviewing its Corporate Governance Practices in the context of other recommendations under the said Guidelines for appropriate adoption. AUDIT COMMITTEE Your Company has constituted an Audit Committee as per the requirements of section 177 of the Companies Act, 2013. The details of the composition of the Audit Committee as required under the provisions of Section 177(8) of the Companies Act, 2013, is given in the Corporate Governance Report furnished as part of the Annual Report. During the year under review, the Board has accepted all the recommendations of the Audit Committee. HUMAN CAPITAL The strong performance of your Company has been achieved through excellent work and team-spirit of the Company's employees. Your Company believes that the human capital is of utmost importance to sustain the market leadership in all product segments and also to capture new markets. The changes in the Organisation Structure implemented last year has given the Company rich dividends in terms of higher focus on individual businesses to optimise best resources & to leverage the market potential. We have benchmarked ourselves with the market and have identified the high Performers on critical roles and rewarded them appropriately, which has helped to achieve better employee engagement and financial results. Through appropriate Performance Management systems the Company differentiates the employees with potential to take higher challenges and devise a separate career program for their retention and advancement. A customized Competency based Leadership Program has been devised for High - Potential employees with focus on their Individual Development Plan & helping them to become future leaders. Nurturing young, hi potential talent has been our focus through the CEO Circle program wherein the selected participants are provided rigorous leadership training for 2 years to prepare them to take-up higher roles in the organization. We continue to strive to build a performance driven culture and create an environment conducive for the employee's growth. CORPORATE SOCIAL RESPONSIBILITY The Board of Directors, on recommendation of the Corporate Social Responsibility Committee framed a Corporate Social Responsibility Policy in consonance with Section 135 of the Companies Act, 2013 read with the rules framed there under duly indicating the activities to be undertaken by the Company as specified in the Schedule VII of the Companies Act, 2013. The Corporate Social Responsibility Policy is posted in the Investors section of the Company's website www.hil.in on the following link <http://hil.in/investors/codes-policies/>. The Annual Report on CSR activities is annexed herewith as Annexure (IV) and forms part of this report. RISK MANAGEMENT The Risk Management programme at HIL is focused on ensuring that risks are known and addressed. The Board of Directors, on recommendation of the Audit Committee, established a robust Risk Management framework by framing a Risk Management Policy to deal with all risks including possible instances of fraud and mismanagement, if any. The Risk Management Policy details the Company's objectives and principles of Risk Management along with an overview of the Risk Management process, procedures and related roles and responsibilities. As a part of the Risk Management framework, the Company has implemented an online Risk Management tool to help monitor and mitigate risks by assigning the risks to different officers/committees. The Board is of the opinion that there are no elements of risks that may threaten the existence of the Company. The board periodically tracks the progress of implementation of the Risk Management policy. STATUTORY AUDITORS The Statutory Auditors of the Company, M/s. S R Batliboi & Associates LLP., [ICAI Firm Registration Number: 101049W], were re-appointed by the members at the 67th Annual General Meeting held on 18th July, 2014 for a term of 3(Three) years till the conclusion of 70th Annual General Meeting to be held in 2017. Members are requested to ratify the same at the ensuing Annual General Meeting of the company, in accordance with section 139 of the Companies Act 2013. The Audit Report issued by the Statutory Auditors for the financial year ended 31st March, 2015 forms part of this Report. There are no qualifications, reservations or adverse remarks made by the Statutory Auditors which requires explanation or comments from the Board. COST AUDITORS Pursuant to Section 148 of the Companies Act, 2013 read with the rules framed thereunder, the cost audit records maintained by the Company in respect of its cement products manufacturing activity are required to be audited by a Cost Auditor. The Board of Directors, on recommendation of the Audit Committee, appointed M/s S S Zanwar & Associates, as Cost Auditors of the Company, to conduct the audit of the cost records of the Company for the financial year ending 31st March, 2016 at a remuneration of Rs. 6.00 (Six) lakhs. Members are requested to ratify the remuneration payable to the Cost Auditors at the ensuing Annual General Meeting of the company, in accordance with section 148 of the Companies Act 2013. SECRETARIAL AUDIT Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules framed there under, the Board of Directors, on recommendation of the Audit Committee, appointed M/s P S Rao and Associates, Practicing Company Secretaries to undertake the secretarial audit of the Company. The secretarial audit report issued by M/s P S Rao and Associates, Practicing Company Secretaries for the financial year ending 31st March, 2015 is given in the Annexure (V) attached hereto and forms part of this Report. There are no qualifications, reservations or adverse remarks made by the secretarial auditor and the observation made is self explanatory and requires no further explanation from the Board. EXTRACT OF ANNUAL RETURN Pursuant to the provisions of Section 92 of the Companies Act, 2013 and rules framed there under, the extract of the Annual Return in form MGT-9 is annexed herewith as Annexure (VI) and forms part of this Report. PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Particulars with respect to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo as required under Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014 are given in the Annexure (VII) attached hereto and forms part of this Report. PARTICULARS OF EMPLOYEES The information required pursuant to the provision of Section 197 read with Rule, 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, are set out in Annexure (VIII) of this Report. ACKNOWLEDGEMENTS The Board of Directors places on record their appreciation for the co-operation and support extended by all stakeholders in the Company including the Shareholders, Bankers, Regulatory Bodies, Suppliers and other Business Associates. The Directors also wish to place on record their deep sense of gratitude and appreciation for all the employees for their commitment and contribution towards achieving the goals of the Company. On behalf of the Board of Directors Sd/-CK BIRLA Chairman Place : New Delhi, date : 27th April, 2015 |