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Trent Ltd

BSE: 500251 | NSE: TRENT ISIN: INE849A01012
Market Cap: [Rs.Cr.] 4,073.17 Face Value: [Rs.] 10
Industry: Textiles - Products

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Director's Report

TO THE MEMBERS OF TRENT LIMITED

The Directors present their Sixty Third Annual Report together with the Audited Financial Statements for the year ended 31st March 2015.

1. Financial Results

Standalone

Consolidated

2014-2015 2013-2014 2014-2015 2013-2014
Rs Crores Rs Crores Rs Crores Rs Crores
Total Income 1432.47 1306.36 2381.44 2394.39
Profit before tax 138.89 68.25 199.50 1.49
Less: Provision for taxation 38.86 14.01 70.07 20.22
Profit after tax 100.03 54.24 129.43 (18.73)
Less: Minority share of Profit/(Loss) - - 0.10 (0.14)
Less: Pre acquisition Profit / (Loss) - - - (0.04)
Profit /(Loss) after Minority Interest 100.03 54.24 129.33 (18.55)
Add: Balance brought forward from previous year 101.19 92.16 (109.67) (40.75)
Amount debited to opening reserves (4.53) - (5.35) (5.16)
Balance available for Appropriations 196.69 146.40 14.31 (64.46)
Appropriations
Proposed Dividend on:
Equity Shares 33.23 23.26 33.23 23.26
Preference Dividend Paid (full figure for FY 2013-14 is Rs11,891) - 0.00 - 0.00
Tax on dividend 6.77 3.95 6.77 3.95
Transfer to Debenture Redemption
Reserve 20.00 5.00 20.00 5.00
Transfer to General Reserve 5.00 6.00 5.00 6.00
Transfer to Capital Redemption Reserve - 7.00 - 7.00
Balance carried forward 131.69 101.19 (50.69) (109.67)
196.69 146.40 14.31 (64.46)

On a standalone basis, income for the year at Rs1432.47 crores increased by 9.65% from the previous year’s Rs1306.36 crores, Profit before tax for the year at Rs 138.89 crores increased by 103.50% (40% excluding exceptionals) from the previous year’s Rs68.25 crores and Profit after tax for the year at Rs100.03 crores increased by 84.42% from the previous year’s Rs54.24 crores.

On a consolidated basis, income for the year was Rs2381.44 crores, Profit before tax for the year was Rs199.50 crores and Profit after tax for the year was Rs129.33 crores. The consolidated results of the Company for the year under review are not comparable with the reported consolidated results for FY13-14, especially consequent to the transition of Trent Hypermarket Limited to a 50:50 joint venture from being a wholly owned subsidiary earlier.

Significant exceptionals in the year under review include the Profit on part sale of stake held by the Company in Trent Hypermarket Limited and the charge relating to restructuring of Landmark operations.

2. Dividend

The Board of Directors recommended payment of dividend of 100% i.e. Rs 10 per Equity Share (previous year @ 70% i.e. Rs7.00 per share) which includes a one time special dividend of 25% i.e. Rs2.50 per equity share, for approval by the shareholders on 3,32,31,544 Equity Shares of Rs10 each for the year ended 31st March 2015. This along with dividend distribution tax represents a payout ratio of around 39.99% of the Profit after tax. The special dividend is recommended by the Board of Directors primarily in the context of the gains realized by the Company on part monetization of the stake held in Trent Hypermarket Limited.

3. Significant developments

A brief overview of the Significant developments with respect to the Company and its key subsidiaries & joint ventures is as below. The Management Discussion & Analysis presents a more detailed commentary including the background and the rationale thereof.

Joint Venture with Tesco, UK

Trent Hypermarket Limited ("THL") operates the Star Bazaar retail business.

In the month of June 2014, Tesco Overseas Investments Limited ("Tesco"), a wholly owned subsidiary of Tesco PLC, UK, purchased part of the equity shares held by the Company in THL for an amount of Rs150 crores and separately subscribed to additional THL equity shares for an amount of Rs700 crores. Following the said investment, the Company and Tesco each hold a 50% stake in THL. Consequently, THL is now a joint venture of the Company with Tesco.

In the month of January 2015, the Company and Tesco further invested an amount of Rs150 crores each in THL’s Rights Issue.

Purchase of stake of Tesco Hindustan Wholesaling Private Limited by THL

Tesco Hindustan Wholesaling Private Limited ("THWPL") is engaged in the business of wholesale trading of variety of food and non-food products, including fast moving consumer goods, general merchandise, fruits, vegetables and staples. THWPL had also developed backend infrastructure in terms of warehousing facilities, people and related processes.

THL acquired 100% stake of THWPL in January 2015 and consequently THWPL is now a wholly owned subsidiary of THL.

Scheme of Amalgamation

In order to streamline the group structure, the Board of Directors of THL, THWPL and Virtuous Shopping Centres Limited ("Virtuous") in the month of January 2015 approved the Scheme of Amalgamation of

THWPL and Virtuous with THL. Virtuous, a wholly owned subsidiary of THL, through its subsidiary, owns a real estate asset in Pune, Maharashtra and otherwise does not have any separate operations. As THWPL and Virtuous are wholly owned subsidiaries of THL, no shares of THL would be issued and allotted pursuant to the proposed Scheme.

The Scheme is subject to the requisite approval of the High Courts and other relevant regulatory authorities.

Landmark restructuring

During the year under review, the Company undertook a Significant restructuring exercise with respect to the Landmark business. This exercise was taken up in the context of the evolving environment for retailing of categories handled by the Landmark business (including books, music, gaming etc.) and the headwinds posed by muted performance of the Landmark store portfolio. The exercise involved Significant rationalization of the store portfolio, further restructuring of the product offer and material changes to look & feel of the 5 retained stores. Consequently, the Company has taken an exceptional charge of Rs35.64 crores in the FY 2014-15.

Sport Zone

In the month of April 2015, the Company launched ‘Sport Zone’ in its Bangalore store as an integral part of the Landmark offer. Sonae SR operates the largest chain of sports shops in Portugal under the banner Sport Zone. The innovative products & equipment developed and marketed by Sport Zone will be available to the Indian customers in select Landmark stores managed by the Company. The partnership plans to open the first five Sport Zone outlets by end of 2016.

4. Management Discussion and Analysis

A separate section on Management Discussion and Analysis (MD&A) is included in the Annual Report as required in Clause 49 of the Listing Agreement with BSE Limited and National Stock Exchange of India Limited. The MD&A includes discussion on the following matters within the limits set by the Company’s competitive position: industry prospects & developments, opportunities & risks, the performance of key retail formats & the outlook for the business, risks & concerns, internal control systems & their adequacy and discussion on financial performance.

5. Business Excellence Initiative

The Company participates in the Tata Business Excellence Model ("TBEM") business maturity review and evaluation mechanism. TBEM emphasizes quality, leadership, strategic planning, customer orientation & services, process orientation, human relations, shareholder value and commitment to community development.

6. Board and Committee Meetings

The Board met 8 times during the FY 2014-15.

The Audit Committee consists of Mr. A.D. Cooper as the Chairman and Mr. N.N. Tata, Mr. Z.S. Dubash, Mr. B.N. Vakil & Mr. A. Sen as members. There have not been any instances during the year when recommendations of the Audit Committee were not accepted by the Board.

Details of the composition of the Board and its Committees and of the Meetings held and attendance of the Directors at such meetings are provided in the Corporate Governance Report.

7. Directors

Mr. H. Bhat was appointed as an additional director of the Company with effect from 1st April 2014. He held office upto the date of the Annual General Meeting (AGM) held on 14th August 2014. He was appointed as a Director of the Company at the said AGM.

In accordance with the provisions of the Companies Act, 2013 ("the Act"), Mr. H. Bhat is liable to retire by rotation at the ensuing AGM and is eligible for re-appointment.

At the AGM held on 14th August 2014, the members have approved the appointment of Mr. Z.S. Dubash, Mr. S. Susman and Mr. B.N. Vakil as Independent Directors for a term of 5 years. At the said AGM, the shareholders also approved the appointment of Mr. A.D. Cooper as an Independent Director from the date of AGM till 23rd August 2015 (retirement date).

Ms. S. Singh and Mr. A. Sen have been appointed as additional directors (Independent Director) of the Company with effect from 3rd March 2015 and 27th May 2015 respectively to hold office for a period of two years from their respective date of appointment, subject to Members’ approval at the forthcoming AGM. They are not liable to retire by rotation. As additional directors, they hold office as Director upto the date of the forthcoming AGM and are eligible to be appointed as Directors. Notices have been received from a member pursuant to Section 160 of the Act signifying his intention to propose Ms. Singh and Mr. Sen for appointment as Directors of the Company. All the Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Act and Clause 49 of the listing agreement entered into with the Stock Exchanges.

Mr. P. Auld, Chief Executive Officer and ‘Manager’ of the Company was appointed as an additional Director (designated as ‘Managing Director’) of the Company with effect from 4th November 2014. He holds office as Director upto the date of the forthcoming AGM. A notice has been received from a member pursuant to Section 160 of the Act signifying his intention to propose Mr. Auld for appointment as a Director of the Company.

Mr. P. Venkatesalu, Chief Financial Officer of the Company, was appointed as an additional Director (designated as ‘Executive Director and Chief Financial Officer’) of the Company with effect from 1st June 2015. He holds office as Director upto the date of the forthcoming AGM. A notice has been received from a member pursuant to Section 160 of the Act signifying his intention to propose Mr. Venkatesalu for appointment as a Director of the Company.

8. Key Managerial Personnel

Mr. P. Auld - Managing Director, Mr. P. Venkatesalu - Chief Financial Officer and Mr. M.M. Surti - Company Secretary are the Key Managerial Personnel as per the provisions of the Companies Act, 2013 and were already in office before the commencement of the Act.

Mr. P. Auld, was earlier ‘Manager’ of the Company (under the Companies Act) and was appointed as Managing Director of the Company with effect from 4th November 2014.

9. Particulars of loans, guarantees or investments

Particulars of loans given, investments made, guarantees given and securities provided are disclosed in the standalone financial statements.

10. Related Party Transactions

All related party transactions that were entered into during the financial year were in the ordinary course of the business and on an arms length basis. The Company has nothing to report in Form AOC-2, hence, the same is not annexed.

The Company has adopted a policy on Related Party Transactions. The policy as approved by the Audit Committee and the Board of Directors is uploaded on the website of the Company and the link for the same is http://www.mywestside.com/WebPages/InnerPages/Policies-information.aspx

11. Risk Management Policy

The Company has a Risk Management Policy consistent with the provisions of the Act and Clause 49 of the Listing Agreement.

The Internal Audit Department facilitates the execution of Risk Management Practices in the Company, in the areas of risk identification, assessment, monitoring, mitigation and reporting. The Company has laid down procedures to inform the Audit Committee as well as the Board of Directors about risk assessment and related procedures & status.

The current risk register and the comprehensive risk policy have been further reviewed during the year. The major risks forming part of the Enterprise Risk Management process are also aligned with the audit universe, to the extent seen appropriate/relevant.

12. Subsidiaries, associates and joint venture companies Key subsidiaries/joint ventures a. Trent Hypermarket Limited ("THL"), a joint venture of the Company, operates the Star (including under the banners Star Bazaar, Star Market & Star Daily) retail business.

THL reported a total revenue of Rs790.14 crores (795.35 crores in FY 2013-14) for the period under review and loss before tax of Rs65.36 crores (69.79 crores in FY 2013-14).

b. Fiora Hypermarket Limited ("FHL"), a subsidiary of the Company, is engaged in the retailing business. FHL operates hypermarket stores in the name of Star Bazaar (Please see commentary in the Management Discussion & Analysis for the background & context for FHL also operating Star Bazaar stores). FHL reported a total revenue of Rs144.96 crores for the period under review and loss before tax of Rs17.81 crores.

c. Fiora Services Limited ("FSL"), a subsidiary of the Company, continues to render various services in terms of sourcing activities, warehousing, distribution, clearing and forwarding. FSL reported a total revenue of Rs42.83 crores (30.99 crores in FY 2013-14) for the period under review and Profit before tax of Rs2.39 crores (0.04 crores in FY 2013-14).

d. Inditex Trent Retail India Private Limited ("Inditex"), a joint venture of the Company, is engaged in the retailing business. Inditex operates stores in the name of ‘Zara’. Inditex reported a total revenue of Rs720.63 crores (580.70 crores in FY 2013-14) for the period under review. The Company has 7 subsidiaries and 3 joint ventures as on 31st March 2015. Pursuant to provisions of Section 129(3) of the Act, a statement containing salient features of the financial statements of the Company’s subsidiaries and joint ventures in Form AOC-1 is attached to the financial statements of the Company.

Pursuant to the provisions of Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the Company.

Westland Limited ("Westland") is a subsidiary of the Company. Duckbill Books and Publications Limited ("Duckbill") ceased to be a subsidiary of Westland with effect from 31st December, 2014, consequent to sale of the stake held by Westland in Duckbill.

13. Deposits

During the year under review, the Company has not accepted any deposits from the Public. As on 31st March 2015, there were no deposits which were unclaimed and due for repayment.

14. Significant and material orders passed by regulators or courts

No Significant or material orders were passed by the regulators or courts or tribunals impacting the going concern status and Company’s operations in future.

15. Internal Financial Controls

Your Company has laid down standards and processes which enable internal financial control across the Company and ensured that the same are adequate and are operating effectively.

Details of the internal controls system are given in the Management Discussion and Analysis Report, which forms part of the Director’s Report.

16. Particulars of Employees

The information required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed as

Annexure A.

The information required under Rule 5 (2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure forming part of the Report. In terms of the first proviso to Section 136 of the Act, the Report and Accounts are being sent to the Shareholders excluding the aforesaid Annexure. Any Shareholder interested in obtaining the same may write to the Company Secretary at the Registered Office of the Company.

17. Annual evaluation made by the Board of its own performance and that of its committees and individual directors

Pursuant to the provisions of the Act and Clause 49 of the Listing Agreement, the Board has carried out an annual evaluation of its own performance, performance of the Directors as well as the evaluation of the working of its Committees.

The Nomination and Remuneration Committee has defined the evaluation criteria, procedure and time schedule for the Performance Evaluation process for the Board and its Directors.

The Board’s functioning was evaluated on various aspects, including inter alia degree of ful_llment of key responsibilities, Board structure and composition, establishment and delineation of responsibilities to various Committees, effectiveness of Board processes, information and functioning.

The Directors were evaluated on aspects such as attendance and contribution at Board/ Committee Meetings and guidance/ support to the management outside Board/ Committee Meetings. In addition, the Chairman was also evaluated on key aspects of his role, including setting the strategic agenda of the Board, encouraging active engagement by all Board members and motivating and providing guidance to the Managing Director.

Areas on which the Committees of the Board were assessed included degree of ful_llment of key responsibilities, adequacy of Committee composition and effectiveness of meetings.

The performance evaluation of the Independent Directors was carried out by the entire Board, excluding the Director being evaluated. The performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors who also reviewed the performance of the Board as a whole. The Nomination and Remuneration Committee also reviewed the performance of the Board and its Directors.

The Chairman of the Board provided feedback to the Directors on an individual basis, as appropriate. Significant highlights, learning and action points with respect to the evaluation were presented to the Board.

18. Company’s Policy on Directors’ appointment and remuneration, etc. Procedure for Nomination and Appointment of Directors

The Nomination and Remuneration Committee is responsible for developing competency requirements for the Board, based on the industry and strategy of the Company. Board composition analysis reflects in-depth understanding of the Company, including its strategies, environment, operations, financial condition and compliance requirements.

The Nomination and Remuneration Committee conducts a gap analysis to refresh the Board on a periodic basis, including each time a Director’s appointment or re-appointment is required. The Committee is also responsible for reviewing and vetting the CVs of potential candidates vis--vis the required competencies and meeting potential candidates, prior to making recommendations of their nomination to the Board.

Criteria for determining Qualifications, Positive Attributes and Independence of a Director

The Nomination and Remuneration Committee has formulated the criteria for determining Qualifications, positive attributes and independence of Directors in terms of provisions of Section 178 (3) of the Act and Clause 49 of the Listing Agreement.

Independence: In accordance with the above criteria, a Director will be considered as an ‘Independent Director’ if he/ she meets with the criteria for ‘Independent Director’ as laid down in the Act and Clause 49 of the Listing Agreement.

Qualifications: A transparent Board nomination process is in place that encourages diversity of thought, experience, knowledge, perspective, age and gender. It is also ensured that the Board has an appropriate blend of functional and industry expertise. While recommending the appointment of a Director, the Nomination and Remuneration Committee considers the manner in which the function and domain expertise of the individual will contribute to the overall skill-domain mix of the Board. Positive Attributes: In addition to the duties as prescribed under the Act, the Directors on the Board of the Company are also expected to demonstrate high standards of ethical behavior, strong interpersonal and communication skills and soundness of judgment. Independent Directors are also expected to abide by the ‘Code for Independent Directors’ as outlined in Schedule IV to the Act.

Remuneration Policy

The Company has adopted a Remuneration Policy for the Directors, Key Managerial Personnel and other employees, pursuant to the provisions of the Act and Clause 49 of the Listing Agreement. The philosophy for remuneration of Directors, Key Managerial Personnel and all other employees of the Company is based on the commitment of fostering a culture of leadership with trust. The Remuneration Policy of the Company is aligned to this philosophy.

The Nomination and Remuneration Committee has considered the following factors while formulating the Policy:

(i) The level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Directors of the quality required to run the Company successfully;

(ii) Relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and

(iii) Remuneration to Directors, Key Managerial Personnel and Senior Management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals.

It is affirmed that the remuneration paid to Directors, Key Managerial Personnel and all other employees is as per the Remuneration Policy of the Company. Details of the Remuneration Policy are given in the Corporate Governance Report.

19. Details of establishment of vigil mechanism

The Board of Directors on the recommendations of the Audit Committee has approved and adopted a Whistle Blower Policy that provides a formal mechanism for all employees of the Company to approach the Chairman of the Audit Committee/ Chief Ethics Counselor of the Company and make protective disclosure about the unethical behavior, actual or suspected fraud or violation of the Company’s Code of Conduct. The details of the Whistle Blower Policy is available on the website of the Company (www.mywestside.com)

20. Corporate Social Responsibility

The Company’s Corporate Social Responsibility ("CSR") policy takes into consideration the Tata group’s overall CSR strategy and values and aligns its focus areas as per the guidelines mentioned under the Tata Affirmative Action Initiative, focus areas being Education, Employment, Employability and other key allied social initiatives with an aim to improve the quality of life of those we are associated with and communities we work in.

In order to make the community initiatives sustainable in the long run, the Company’s approach to societal responsibilities and support of key communities is linked to its business and core competencies. The organization approaches all such initiatives with the philosophy of it being beneficial to the business as well and focuses on:

Creating more jobs for the society by following a growth agenda, and recruiting freshers from the local communities

Increasing employability of the employees at the entry level through cross training so that they can also pursue enriching careers within and outside the enterprise.

Today around 21% of the Company’s workforce comes from the Affirmative Action communities. Through the Star & Diya programme, the Company’s supports NGO projects in areas of Child Education & Nutrition across store locations. This initiative has been carried out during Diwali and Christmas festival promotions initiatives at Westside and Landmark stores. This programme enables the customers to participate in ‘giving’ by lighting a diya during Diwali, or putting up a star on the Christmas tree during the Christmas season; proceeds of which are routed to select NGOs who are engaged in community work. Through this annual initiative, the Company supports children hailing from disadvantaged communities by providing financial assistance in various forms like educational scholarships, midday meals, infrastructure development. Organizational and store volunteers visit NGOs to interact and explore opportunities to improve cooperation. The stores (Westside & Landmark) collectively raised an amount of Rs 81 lacs that supported 24 education and nutrition projects that benefitted nearly 4500 children across locations.

The Company has also set up 8 school libraries in English medium Municipal schools in Mumbai in partnership with Room to Read India Trust, a public charitable trust that works in collaboration with communities and local governments across Asia and Africa to develop literacy skills and a habit of reading among primary school children.

Through this project, the Company focuses on promoting reading skills and focusing towards developing literacy, among the primary school children and thereby progressing with the older children.

The Company, through its Westside and Landmark stores across locations in India continue to raise funds for Tata Medical Center. The funds raised are used for treatment of underprivileged cancer patients.

Regular donations in kind by employees through materials such as clothes, toys, footwear are done regularly to responsible NGO partners like GOONJ India and Bigger Than Life and Guru Nanak Hospital (medicines). Employees have been part of these initiatives offering their support through regular volunteering.

In compliance with Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules 2014, the Company has established Corporate Social Responsibility (CSR) Committee and statutory disclosures with respect to the CSR Com

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Key Information

Key Executives:

S N Tata , Chairman Emeritus

N N Tata , Chairman

A D Cooper , Director

Zubin S Dubash , Director


Company Head Office / Quarters:

Bombay House,
24 Homi Mody Street,
Mumbai,
Maharashtra-400001
Phone : Maharashtra-91-22-66658282 / Maharashtra-
Fax : Maharashtra-91-22-22042081 / Maharashtra-
E-mail : investor.relations@trent-tata.com
Web : http://www.mywestside.com

Registrars:

TSR Darashaw Ltd
6-10 Haji Moosa ,Patrawala Ind.Estate,DrEMoses Rd Mahalaxm,Mumbai - 400 011

 
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