Butterfly Gandhimathi Appliances Ltd Directors Report.

Your Directors have pleasure in presenting this Thirty Second Annual Report together with the Audited Statement of Accounts for the financial year ended on 31^st March 2019.

1. FINANCIAL RESULTS:

The Companys financial performance for the year ended 31^st March 2019 is summarised below:

2. DIVIDEND:

In view of the ongoing plans to expand capacity of the plant, the Board of Directors has felt it prudent to conserve the financial resources of the Company. Consequently, no dividend has been recommended by the Board for the financial year under review.

3. REVIEW OF OPERATIONS:

The Company registered a turnover of Rs.651.98 crores for the period ended 31^st March 2019 against Rs.540.55 crores as compared to previous year ended on 31^st March 2018. Sales achieved a growth of 20.6% for the FY 2018-19.

During the year, the Company made constructive progress in its initiatives to enhance the sales especially, modern trade, online sales, canteen stores and exports. In addition, the initiatives taken towards widespread advertising and marketing to augment sales and restructuring distribution network have resulted in an increase in cost of the Company, while these expenses are being incurred upfront, the benefit will accrue in later year through accelerated growth on sales.

4. DIRECTORS

Mr.V.M.Kumaresan (DIN No.00835948), Director retires by rotation from the Board, pursuant to the provisions of section 152(6) (c) of the Companies Act, 2013 and, being eligible, offers himself for reappointment.

5. MANAGEMENT DISCUSSION AND ANALYSIS:

The Directors comments on Management Discussion and Analysis, which forms a part of this report, are restricted to the areas which are relevant to the current scenario of the Company and outlook.

6. CREDIT RATING:

The Company is retaining the following CRISILs credit ratings for its bank facilities.

7. DIRECTORS RESPONSIBILITY STATEMENT:

In pursuance of Section 134(5) of the Companies Act 2013 ("the Act"), the Directors hereby confirm that:

a. In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b. The directors had 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 31^st March 2019 and of the profit of the Company for that year;

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; and

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.

f. The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

8. CORPORATE GOVERNANCE:

In accordance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), a Compliance Report on Corporate Governance as per Schedule V of the Listing Regulations, along with a Certificate of Compliance from the Statutory Auditors forms part of this report.

9. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTY TRANSACTIONS:

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 ‘arms length basis. The Company had not entered into any contract/ arrangement/ transactions with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions.

The Company enjoys distinct advantages in the form of competitive prices, product quality, economy in transportation cost and lower inventories by virtue of the existing related party transactions.

The Board of Directors of your Company, on the recommendation of the Audit Committee adopted a policy on Related Party Transactions, to regulate the transactions between your Company and its Related parties in compliance with the provisions of the Companies Act 2013 and the SEBI (LODR) Regulations 2015, the policy as approved by the Board is uploaded on the Companys website www.butterflyindia.com.

Particulars of contract or arrangements with related parties referred to in Section 188 (1) in Form AOC-2 has been annexed as Annexure – I.

10. RISK MANAGEMENT:

The Board has formulated the Companys Risk Management Policy, identifying the elements of risk that the Company may face, such as strategic, financial, credit, market, liquidity, security, property, legal, regulatory and other risks, pursuant to the provisions of Section 134 (3) (n) of the Act, which has been exhibited in the Companys website www.butterflyindia.com.

11. INTERNAL FINANCIAL CONTROLS:

The Company has in place adequate and effective internal financial control system commensurate with its size and operations.

12. DECLARATION FROM INDEPENDENT DIRECTORS:

The Company has received necessary declaration from each Independent Director under section 149 (7) of the Companies Act 2013 that they meet with the criteria of their independence laid down in Section 149 (6) of the Act and the SEBI (LODR) Regulations 2015.

13. APPOINTMENT OF DIRECTORS AND THEIR REMUNERATION:

Pursuant to the provisions of Section 178 (3) of the Act read with Companies (Meetings of Board and its Powers) Rules 2014 and Regulation 19(4) read with Schedule II Part –D of SEBI (LODR) Regulations, 2015, the Nomination and Remuneration Committee has formulated the criteria for determining qualifications, positive attributes and independence of a Director and for evaluating performance of the Directors and Key Management Personnel, which can be viewed at the Companys website www.butterflyindia.com.

14. KEY MANAGERIAL PERSONNEL (KMP):

The following managerial personnel are Key Managerial Personnel (KMP):

• Mr.V.M.Lakshminarayanan, Chairman & Managing Director

• Mr.V.M.Balasubramaniam, Vice Chairman & Managing Director

• Mr.V.M.Seshadri, Managing Director

• Mr.V.M.Gangadharam, Executive Director

• Mr.V.M.Kumaresan, Executive Director – Technical

• Mr.K.S.Ramakrishnan, Company Secretary & General Manager–Legal

• Mr.R.Nagarajan, Chief Financial Officer

15. PROGRAMME FOR FAMILIARISATION OF INDEPENDENT DIRECTORS:

The details of programme for familiarization of independent directors of the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company at its link www.butterflyindia.com.

16. NOMINATION AND REMUNERATION COMMITTEE:

The Nomination and Remuneration Committee of the Company has formulated and devised policies regarding qualifications, positive attributes and independence of a Director as also a policy relating to the remuneration for the Directors and Key Management Personnel. The Companys policy in this regard is exhibited in its website www. butterflyindia.com.

17. PERFORMANCE EVALUATION OF DIRECTORS:

The Independent Directors of the Company held a separate meeting on 06.04.2018 without the attendance of non-independent Directors and members of management. At the said meeting, they reviewed the performance of non-independent Directors and the Board as a whole, including the Chairman of the Company, taking into account the views of Executive Directors and Non-Executive Directors. Similarly, at a meeting of the Board of Directors held on the same day, the Board evaluated the performance of each Independent Directors and the Committees represented by such Independent Directors in accordance with the parameters for such evaluation formulated by the Nomination and Remuneration Committee of the Company.

i. Statutory Auditors and their Report:

The Members at the 30^th Annual General Meeting held on 7^th August 2017 had appointed M/s.ASA & Associates LLP, Chennai as the Statutory Auditors of the Company to hold office for a term of five years i.e., from the conclusion of the said Annual General Meeting until the conclusion of 35^th Annual General Meeting of the Company to be held in 2022, subject to ratification of their appointment by the shareholders, every year. The requirement for the annual ratification of Auditors appointment at the Annual General Meeting has been omitted pursuant to the Companys amendment Act 2017 notified on 7^th May 2018. The Auditors Report to the Shareholders on the financial statement for the year ended 31st March 2019 does not contain any qualification, reservations or adverse comments.

ii. Cost Auditor and Cost Audit Report:

The Board has reappointed M/s.S.Mahadevan & Co., Cost Auditors (FRN.000007), No.1, Lakshmi Nivas, K.V.Colony, Third Street, West Mambalam, Chennai – 600 033 for conducting the audit of cost records of the Company for the financial year 2019-20. Their report for financial year 2017-18 was filed on the MCA Portal on 04.09.2018.

iii. Secretarial Auditor and Secretarial Audit Report:

The Board has appointed M/s.A.K.Jain & Associates, Company Secretaries, [CP No.3550] No.2 (New No.3), Raja Annamalai Road, First Floor, Purasawalkam, Chennai – 600084 to conduct Secretarial Audit under the provisions of Section 204 of the Companies Act 2013 for the financial year 2018-19. The Secretarial Audit Report for the financial year ended 31.3.2019 is annexed to this report as Annexure II. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

19. DISCLOSURES: Audit Committee:

The Audit Committee comprises Independent Directors, viz., Messrs.K.Ganesan (Chairman), M.Padmanabhan and A.Balasubramanian (Members) all qualified as Chartered Accountants and also V.M.Lakshminarayanan, Chairman & Managing Director of the Company as a Member. All the recommendations made by the Audit Committee were accepted by the Board.

Vigil Mechanism:

The Company has established vigil mechanism for directors and employees to report genuine concerns pursuant to section 177 (9) and (10) of the Act and Regulation 22 of the Listing Regulations, 2015.

The Vigil Mechanism of the Company also incorporates a Whistle Blower Policy in terms of the Listing Regulations. Protected disclosures can be made by a Whistle Blower through an email or dedicated telephone line or a letter addressed to the Chairman of the Audit Committee/ Executive Director of the Company. The Companys Whistle Blower Policy may be accessed on its website at the link www. butterflyindia.com.

Meetings of the Board:

The Board met nine times during the financial year. The meeting details are provided in the Corporate Governance Report forming part of this Boards Report.

Disclosures under Schedule V(F) of the SEBI (LODR) Regulation 2015:

Your Company does not have any unclaimed shares issued in physical form pursuant to Public Issue/Right Issue.

Conservation of energy, technology, absorption and foreign exchange out go:

Information relating to energy conservation, technology absorption, foreign exchange earned and spent, and research and development activities undertaken by the Company in accordance with Section 134 (3) (m) of the Act read with Rule 8(3) (A) of Companies (Accounts) Rules, 2014, are given in Annexure – III of the Directors Report.

Extract of Annual Return:

As required pursuant to Section 92(3) of the Act and Rule 12(1) of the Companies (Management and Administration) Rules 2014, an extract of Annual Return in Form MGT-9 is given in Annexure – IV of the Directors Report.

Statement pursuant to Rule 5 (1), (2) & (3) of Companies (Appointment and remuneration) Rules 2014:

Information as per Section 197 (12) of the Companies Act 2013 read with Rules 5 (1), (2) & (3) of Companies (Appointment and Remuneration) Rules 2014 is annexed as Annexure V of the Directors Report.

Payment of remuneration made to managerial personnel is in conformity with Schedule V Part II Section II (A) to the Companies Act 2013.

Corporate Social Responsibility Committee:

Pursuant to the provisions of Section 135(1) of the Act, the Company has constituted a Corporate Social Responsibility Committee, consisting two Independent Directors and the Chairman & Managing Director of the Company. The said Committee has formulated and recommended to the Board a Corporate Social Responsibility Policy (CSR Policy), indicating the activities to be undertaken by the Company, which has been approved by the Board.

During the year under review, the Company created a plan to ensure that its CSR initiatives are truly beneficial to the community in the long run.The company initiated CSR projects in the area of education, environment and community/social development having duration of more than one year. The Company regularly spends significant amounts of money on various activities aimed at serving communities around the factories. That our Company was always contributing to CSR activities much before it was even mandated for several years now. However, since the Company did not reach the minimum threshold limits as stipulated in Section 135 (1) of the Act, the Company is not liable for CSR expenses for the year under review.

During the financial year ended 31^st March 2019, the Committee met once on 11.02.2019.

The CSR committee confirmed that the implementation and monitoring of CSR Policy is in compliances with CSR objectives and Policy of the Company.

Details of CSR Activities are annexed as Annexure VI of the Directors Report.

Details relating to fixed deposits covered under chapter V of the Act;

The Company is neither inviting or accepting deposits from public or shareholders and hence there is no deposits outstanding or remaining unpaid as at the end of 31^st March 2019.

Details regarding Loans, Guarantees and Investment under Section 186 of the Companies Act:

During the year under review, your Company had not given any loan or provide guarantees or made investments under section 186 of the Companies Act 2013.

Significant and Material orders passed by the Regulators or Courts or Tribunals which may impact the going concern status and Companys operations in future:

There is no significant and material orders passed by the Regulators/Court which would impact the going concern status of the your Company and the future operations.

Obligation of your Company under the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act 2013:

Your Company firmly believe in providing safe, supportive and friendly workplace environment. A workplace where our values come to life through the supporting behaviours. Positive workplace environment and great employees experience are integral part of our culture. Your Company believes in providing and ensuring workplace free from discrimination and harassment based on gender.

Your Company educates its employees as to what may constitute sexual harassment and in the event of any occurrence of an incident constituting sexual harassment; your Company has created the framework for individuals to seek recourse and redressal to instances of sexual harassment.

In order to prevent sexual harassment of women at workplace a legislation, The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013 was notified on 9^th December 2013. Under the said Act, every Company is required to set up an Internal compliance Committee and investigate complaints relating to sexual harassment at the workplace of any women employee. Further, adequate awareness programme was also conducted for the employee of your Company.

Transfer of Investor Education and Protection Fund [IEPF] - Unclaimed dividends for the year ended 31^st March 2011:

Your Company has transferred a sum of Rs.5,44,499/- during the financial year 2018-19 to the Investor Education and Protection Fund established by the Central Government, in compliance with Sections 123 – 125 of the Companies Act 2013. The said amount represents the unclaimed dividends for the year ended 31^st March 2011, which were lying unclaimed with your Company for a period of seven years from due date of payment.

Listing with Stock Exchanges:

The Company confirms that it has paid the Annual Listing Fee for the year 2019-20 to both National Stock Exchange of India Limited and BSE Limited with whom the equity shares of the Company have been listed.

Others:

• There were no material changes, complaints and commitments, affecting the financial position of the Company which have occurred between financial year ended 31.03.2019 and the date of this report.

• No equity shares were issued with differential rights as to dividend voting or otherwise.

• The Company has not resorted to any buy back of the equity shares during the year under review.

• There was no fraud reported by the auditors of the Company under Section 143(12) of the Act to the Audit Committee.

• The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Board Meeting and Annual General Meeting.

• No equity shares (including sweat equity shares) were issued to employee of your Company, under any Scheme.

20. PERSONNEL:

The spirit of trust, transparency and teamwork has enabled the Company to build a tradition of partnership and harmonious industrial relations. Your Directors record their sincere appreciation of the dedication and commitment of the employees to achieve excellence in all areas of the business.

21. ACKNOWLEDGEMENTS:

Your Directors take this opportunity to thank, in particular State Bank of India and other Consortium Banks, Fullerton India Credit Company Limited, Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Ltd. for the co-operation extended by them. Our thanks are also due to employees at all levels, suppliers, distributors, dealers and customers for their strong support.

Your Directors also thank the shareholders for their continued confidence and trust placed by them with the Company.