Your Board of Directors ("Board") present the Tenth (10th) Annual Report of FSN E-Commerce Ventures Limited ("your Company" or "the Company") together with the Audited Financial Statements of the Company, for the financial year ended March 31, 2022 ("the year under review" or "the year" or "FY 2021-22").
Financial Performance - An Overview
(Rs in Million)
|March 31, 2022||March 31, 2021||March 31, 2022||March 31, 2021|
|Revenue from Operations||1,876.99||1,458.13||37,739.35||24,408.95|
|Profit/(Loss) before Tax||1,216.92||448.26||473.06||661.24|
|Deferred Tax Expenses/(Credit)||137.88||86.38||(362.75)||(356.02)|
|Profit/(Loss) after Tax||1,035.13||361.88||412.88||616.48|
|Other Comprehensive Income (OCI)||(19.06)||(20.37)||5.56||(21.81)|
|Total Comprehensive Income||1,016.07||341.51||418.44||594.67|
|Balance in the Profit/(Loss) Account in the Balance Sheet||751.29||(283.84)||(581.50)||(992.25)|
REVIEW OF OPERATIONS
In FY 2021-22, your Company reported a revenue of Rs. 1,876.99 million which was Rs. 418.86 million higher than the previous year and EBITDA of Rs. 165.56 million with EBITDA margin at 8.82 % (previous year (28.76) million with EBITDA margin at (1.97)%).
At consolidated level, your Company reported a revenue of Rs. 37,739.35 million (previous year Rs. 24,408.95 million) and EBITDA of Rs. 1,632.58 million with EBITDA margin at 4.33% (previous year Rs. 1,566.55 million with EBITDA margin at 6.42%).
The operating and financial performance of your Company has been covered in the Management Discussion and Analysis Report which forms part of the Annual Report.
DETAILS OF MATERIAL CHANGES AND COMMITMENTS FROM THE END OF THE FINANCIAL YEAR
There are no material changes and commitments affecting the financial position of your Company, which have occurred between the end of the FY 2021-22 and the date of this report. Further, there has been no change in the nature of business of your Company.
There is no amount proposed to be transferred to the Reserves.
Your Board do not recommend any Dividend on the Equity Shares of the Company for Financial Year ended March 31, 2022 considering that the company is in growth stage and require funds to support its growth objectives.
DIVIDEND DISTRIBUTION POLICY
In terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("the Listing Regulations"), your Company has formulated a Dividend Distribution Policy, with an objective to provide the dividend distribution framework to the Stakeholders of the Company. The policy sets out various internal and external factors, which shall be considered by the Board in determining the dividend pay-out. The policy is annexed as Annexure - I to this Report and is also available on the website of the Company at https://www.nykaa.com/media/ wysiwyg/2021/Investors-Relations/pdfs/10-11/Dividend- Distribution-Policy.pdf.
STRATEGIC INITIATIVES DURING THE YEAR UNDER REVIEW AND TILL THE DATE OF THIS REPORT
A. INITIAL PUBLIC OFFERING & LISTING OF EQUITY SHARES OF THE COMPANY
During the year under review, your Company made an Initial Public Offering ("IPO" or "Issue") of 47,575,326 equity shares of face value of Rs. 1 each of the Company for cash at a price of Rs. 1,125 per equity share, including a premium of Rs. 1,124 per equity share aggregating to Rs. 53,497.24 million, comprising of a fresh issue of 5,602,666 equity shares aggregating to Rs. 6,300 million and an offer for sale of 41,972,660 equity shares aggregating up to Rs. 47,197.24 million by the selling shareholders. The issue included a reservation of 250,000 equity shares for purchase by eligible employees.
The issue opened on October 28, 2021 and closed on November 02, 2021. The issue was led by book running Lead Managers viz. Kotak Mahindra Capital Company Limited, Morgan Stanley Investment Management Private Limited, BofA Securities
India Limited, Citigroup Global Markets India Private Limited, ICICI Securities Limited and JM Finance Limited.
The issue drew bids worth $32.5 billion and was oversubscribed around 82 times (i.e., around 12 times in Retail Individual Investor (‘R11), 91 times in the Qualified Institutional Buyer (‘QIB) and 112 times in the Non-Institutional Investor (‘NII) category). The Company successfully completed the IPO process and the equity shares of the Company were listed on National Stock Exchange of India Limited and BSE Limited on November 10, 2021.
Proceeds from Initial Public Offering
The details of the proceeds of the Fresh Issue are set forth below:
|Gross Proceeds of the Fresh Issue||Rs. 6,300 million|
|(Less) Net of provisional IPO Expenses||Rs. 290.49 million|
|Net Proceeds||Rs. 6,009.51 million|
The utilisation of funds raised through IPO have been mentioned hereunder:
|Mode||Object||Amount Allocated||Amount Utilised as on March 31, 2022|
|IPO||Investment in certain Subsidiaries for setting up of retail stores||Rs. 420 million||Rs. 4.20 million|
|Capital expenditure and Investment in certain Subsidiaries for setting up of warehouses||Rs. 420 million||Rs. 13.47 million|
|Repayment of certain borrowings of the Company||Rs. 1,560 million||Rs. 1,560 million|
|Acquire and retain customers by enhancing the visibility and awareness of our brands||Rs. 2,340 million||Rs. 369.52 million|
|General Corporate Purposes||Rs. 1,269.51 million||Rs. 401.05 million|
|Net Proceeds||Rs. 6,009.51 million||Rs. 2,348.24 million|
Your Company has appointed ICICI Bank Limited as Monitoring Agency in terms of Regulation 41 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 ("ICDR Regulations"), as amended from time to time, to monitor the utilisation of IPO proceeds and the Company has obtained monitoring reports from the Monitoring Agency from time to time confirming no deviation or variation in the utilisation of proceeds of the IPO from the objects stated in the Prospectus dated November 02, 2021. The Company has submitted the statement(s) and report as required under Regulation 32 of the Listing Regulations to both the exchanges where the shares of the Company are listed, namely, National Stock Exchange of India Limited and BSE Limited and on timely basis.
Your Directors would like to thank the merchant bankers - Kotak Mahindra Capital Company Limited, Morgan Stanley India Company Private Limited, BofA Securities India Limited, Citigroup Global Markets India Private Limited, ICICI Securities Limited and JM Financial Limited and legal counsels involved with the IPO - AZB & Partners, Cyril Amarchand Mangaldas, Sidley Austin LLP and Trilegal for helping the Company achieving successful IPO and listing.
Your Directors would also like to thank the regulators SEBI and ROC for enabling the Company to take its equity story to the public market.
Last but not the least, your Directors extend their heartfelt gratitude to the shareholders for investing in the IPO and reposing their continuous trust and faith in the Company & its management.
B. SHARE CAPITAL
Details of changes in paid-up equity share capital during the year under review, are as under:
|Paid-up Equity Share Capital||Rs in Million|
|A At the beginning of the year, i.e. as on April 01, 2021||150.57|
|B Allotments made pursuant to:|
|Employee Stock Option Scheme 2012||0.17|
|Employee Stock Option Scheme 2017||0.43|
|Issue of Equity Shares upon conversion of Optionally Convertible Redeemable Preference Shares (OCRPS)||4.51|
|C Sub-Total of C (A+B)||155.68|
|D Allotments made pursuant to:|
|Issue of bonus shares in the ratio 2:1||311.36|
|Issue of shares in Initial Public Offering||5.60|
|Employee Stock Option Scheme 2012||0.01|
|Employee Stock Option Scheme 2017||1.46|
|Sub-Total of D||318.43|
|At the end of the year, i.e. as on March 31, 2022 (C+D)||474.11|
* Pursuant to board resolution dated July 15, 2021 and shareholders resolution dated July 16, 2021, equity shares of face value of Rs. 10 each of the Company were sub-divided into equity shares of face value of Rs. 1 each.
C. ACQUISITION OF 51% STAKE IN DOT & KEY WELLNESS PRIVATE LIMITED
On September 28, 2021, your Company acquired 51% of the outstanding equity shares of Dot & Key Wellness Private Limited ("Dot & Key") through the subscription and purchase of equity shares. Pursuant to the shareholders agreement, the Company has written put option on the balance 49% of the equity share capital. The put option liability will be settled for a consideration not exceeding Rs. 1,530 million for stake upto 49%. Dot & Key is engaged in the business of manufacturing, marketing, branding and sale of skincare and personal care products, including serums, toners, cleansers, face masks and face creams. Dot & Key has also launched few products in the nutraceuticals category. Its products are listed on Companys and other online retailers platforms as well as in physical retail stores. Following this investment, Dot & Key became one of Companys owned brands and this investment will allow the Company to expand its skincare, personal care and nutraceuticals offerings.
D. ACQUISITION OF 18.51% STAKE IN EARTH RHYTHM PRIVATE LIMITED
Your Board at its meeting held on April 22, 2022 had approved entering into Share Subscription Agreement, Share Purchase Agreement and Shareholders Agreement by the Company to acquire by way of subscription and/or purchase of Compulsory Convertible Cumulative Preference Shares and/ or Equity shares, up to 18.51 % of the fully diluted share capital of Earth Rhythm Private Limited (Earth Rhythm), for a consideration of up to Rs. 416.5 million.
Your Company continues to partner with homegrown D2C brands. Earth Rhythm was incorporated on October 12, 2020 under the Companies Act, 2013 in India. It is a personal care brand which manufactures and sells sustainable/non-toxic beauty products on their website and other e-commerce websites. This investment will further strengthen your Companys product portfolio into sustainable beauty segment and its positioning in the growing market for products that are committed to efficacy as well as the planet.
E. ACQUISITION OF 60% STAKE IN NUDGE WELLNESS PRIVATE LIMITED
On April 22, 2022, your Board approved entering into Share Subscription and Shareholders Agreement and Share Purchase Agreement by the Company to acquire by way of subscription and/or purchase of Equity shares, initially up to 60% (with a right to go up to 100%) of the fully diluted share capital of Nudge Wellness Private Limited ("Nudge") for a consideration of up to Rs. 36 million.
Nudge, incorporated under the Companies Act, 2013 on March 10, 2022, is a nutricosmetics wellness company which will be in the business of manufacturing and selling dietary supplement products on their website and other e-commerce websites. The investment will mark Companys entry into owned brand of dietary supplement and other nutricosmetics products. This will address the growing demand for high-potential category of edible beauty in India.
F. ACQUISITION OF THE BRAND ‘KICA
On April 22, 2022, your Board approved entering into definitive agreements/documents by Nykaa Fashion Private Limited (a wholly-owned subsidiary of the Company) for acquisition of the brand ‘KICA including Brand Trademark, other Intellectual Property Rights etc. for a consideration of up to Rs. 45.1 million.
KICA is an activewear athleisure brand which offers stylish, high-quality garments (tops, shorts, sports bra, legging, tracks, etc.) on their website and other e-commerce websites. The transaction will be in the direction of Nykaa Fashion Private Limiteds mission to strengthen its active-wear play providing greater variety and curation for the growing active-wear community of athletes and everyday fitness seekers. This transaction will also augment current offerings under the Companys brand "Nykd".
Pursuant to the approval of the Board, the Company and Nykaa Fashion Private Limited have finalised and executed the relevant agreements for the proposed transactions mentioned in above points (D) to (F) which are subject to fulfilment of various terms and conditions as specified in the relevant agreements and statutory approvals, if any.
SUBSIDIARIES AND JOINT VENTURE
As on March 31, 2022, the Company has seven subsidiaries. Following were the additions during the year under review:
(i) FSN Distribution Private Limited became a Wholly Owned Subsidiary of the Company w.e.f. July 30, 2021; and
(ii) Dot & Key Wellness Private Limited became Subsidiary of the Company w.e.f. September 28, 2021.
The details of business carried on by the subsidiaries of the Company are as follows:
Nykaa E-Retail Private Limited (‘Nykaa E-Retail) was incorporated on February 22, 2017 and is a 100% subsidiary of your Company. Nykaa E-Retail operates primarily using an inventory-led model and is engaged in the business of purchasing beauty, hygiene and wellness products directly from the manufacturers and selling such products through online channels i.e., its online platforms or websites, and other online applications.
Nykaa Fashion Private Limited (‘Nykaa Fashion) was incorporated on February 04, 2019 and is a 100% subsidiary of your Company. Nykaa Fashion runs on marketplace, sale or return (SOR), and just-in-time inventory models. It is engaged in the business of selling and distribution of fashion garments and fashion accessories through online channels i.e., its online platforms or websites, other online applications and retail outlets, general trade and modern trade.
FSN Brands Marketing Private Limited (‘FSN Brands) was incorporated on February 19, 2015 and is a 100% subsidiary of your Company. FSN Brands is engaged in the business of import, purchase, selling and distribution of beauty and wellness, personal care, health care, skin care, hair care and other related products through retail outlets, general trade and modern trade.
FSN International Private Limited (‘FSN International) was incorporated on December 10, 2019 and is a 100% subsidiary of your Company. FSN International is engaged in the business of selling beauty, wellness, fitness, personal care, health care, skin care, hair care and other related products on/through e-commerce, m-commerce, internet, stores, stalls, etc.
FSN International Private Limited has two wholly owned subsidiaries namely, FSN Global FZE, Dubai and Nykaa International UK Limited, United Kingdom (UK).
i. FSN Global FZE (‘FSN Global) was incorporated on June 21, 2020 and is engaged in the business of sale of cosmetics, beauty, personal care, skin care, hair care, beauty and personal care products and equipment through marketplace model.
ii. Nykaa International UK Limited (‘Nykaa International) was incorporated on November 15, 2020 to engage in the business of sale of cosmetics, beauty, personal care, skin care and hair care products in UK. Nykaa International has not yet commenced its business operations, while it is in process of getting the products registered in UK.
FSN Distribution Private Limited (‘FSN Distribution) was incorporated on July 30, 2021 and is a wholly-owned subsidiary of your Company. FSN Distribution is in the business of selling beauty, hygiene and wellness products through its distribution network to the wholesalers and retailers using online and offline channels of sales.
Nykaa-KK Beauty Private Limited (‘Nykaa-KK Beauty) was incorporated on July 13, 2018. Your Company entered into a Joint Venture Agreement with Katrina Kaif, Matrix India Entertainment Consultants Private Limited and Nykaa-KK Beauty on December 11, 2018 and holds 51% shares in Nykaa-KK Beauty which is engaged in the business of manufacturing, selling & distribution of ‘Kay Beauty products on the online platforms or websites such as e-commerce, m-commerce, internet as well as through physical stores, stalls, general trade and modern trade etc.
Dot & Key Wellness Private Limited (‘Dot & Key) was acquired on September 28, 2021 and your Company holds 51% shares in it. Dot & Key is engaged in the business of manufacturing, marketing, branding and sale of skincare and personal care products, including serums, toners, cleansers, face masks and face creams.
Pursuant to the provisions of Section 129(3) of the Companies Act, 2013 ("Act") read with the Companies (Accounts) Rules, 2014 and in accordance with applicable accounting standards, a statement containing the salient features of financial statements of your Companys subsidiaries in Form No. AOC-1 is annexed as Annexure - II to this Report.
In accordance with the provisions of Section 136 of the Act and the amendments thereto, and the Listing Regulations, the audited Financial Statements, including the consolidated financial statements and related information of the Company and financial statements of your Companys subsidiaries and joint ventures have been placed on the website of your Company viz. https://www. nykaa.com/investor-relations
Your Company has formulated a Policy for determining Material Subsidiaries. The said policy is available on the website of the Company at https://www.nykaa.com/ media/wysiwyg/2021/Investors-Relations/pdfs/10-11/ Policy-for-determining-Material-Subsidiary.pdf. During the year under review Nykaa E-Retail and FSN Brands were material subsidiaries of the Company, as per the Listing Regulations.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report for the year under review, as stipulated under the Listing Regulations, is presented in a separate section, forming part of the Annual Report.
BUSINESS RESPONSIBILITY REPORT (BRR)
Your Company believes that transparent, accurate and comprehensive disclosure practices not only aid in strategic decision-making but also help in demonstrating incremental value created for all groups of stakeholders.
The Business Responsibility Report for the year under review, as stipulated under Regulation 34(2)(f) of the Listing Regulations, describing the initiatives taken by your Company from social and governance perspective, forms an integral part of the Annual Report.
STANDALONE AND CONSOLIDATED FINANCIAL STATEMENTS
The audited financial statements of the Company are drawn up, both on standalone and consolidated basis, for the financial year ended March 31, 2022, in accordance with the requirements of the Companies (Indian Accounting Standards) Rules, 2015 (Ind-AS) notified under Section 133 of the Act, read with relevant Rules and other accounting principles. The Consolidated Financial Statement has been prepared based on the financial statements received from subsidiaries, as approved by their respective Board of Directors.
Your Company embeds sound Corporate Governance practices and constantly strives to adopt emerging best practices. It has always been the Companys endeavour to excel through better Corporate Governance and fair and transparent practices. A Report on Corporate Governance forms part of this Report as Annexure - III.
M/s. S. N. Ananthasubramanian & Co., Company Secretaries, the Secretarial Auditor of the Company vide their certificate dated May 25, 2022, have confirmed that the Company is and has been compliant with the conditions stipulated in the chapter IV of the Listing Regulations. The said certificate is annexed as ‘Annexure - IV to this Report.
The Annual Return of the Company as on March 31, 2022 in Form MGT - 7 in accordance with Section 92(3) and Section 134(3)(a) of the Act as amended from time to time and the Companies (Management and Administration) Rules, 2014, will be made available on the website of the Company at https://www.nykaa.com/investor-relations.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the provisions under Section 134(5) of the Act, with respect to Directors Responsibility Statement, the Directors of the Company confirm that:
(a) in the preparation of the annual accounts for the year ended March 31, 2022, the applicable accounting standards 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 March 31, 2022 and of the profits 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 this 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 were adequate and operating effectively.
AUDITORS AND THEIR REPORT
(i) Statutory Auditors
Pursuant to the provisions of Section 139 of the Act and the Rules framed thereunder, M/s. V. C. Shah & Co., Chartered Accountants, Mumbai, were appointed as Statutory Auditors of the Company, for a term of five consecutive years to hold office from the conclusion General Meeting ("AGM") till the conclusion of 13th AGM of the Company to be held for the FY 2024-25. Further, during the year under review, M/s. S. R. Batilboi & Associates LLP, Chartered Accountants were reappointed as Joint Statutory Auditors of the Company, for a term of five consecutive years to hold office from the conclusion of 9th AGM of the Company held on September 29, 2021 till the conclusion of 14th AGM to be held in the FY 2026-27.
Pursuant to Section 139 and 141 of the Act and relevant Rules prescribed thereunder, the Statutory Auditors have confirmed that they are not disqualified from continuing as Auditors of the Company.
The Auditors have also confirmed that they have subjected themselves to the peer review process of Institute of Chartered Accountants of India (ICAI) and hold a valid certificate issued by the Peer Review Board of the ICAI.
The Auditors Report does not contain any qualification, reservation, adverse remark or disclaimer.
(ii) Secretarial Auditor
In terms of the provisions of Section 204 of the Act read with Rule 9 of Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2014 and Regulation 24A of the SEBI LODR Regulations, your Company has appointed M/s. S. N. Ananthasubramanian & Co., Company Secretaries, as Secretarial Auditor to conduct Secretarial Audit of the Company for FY 21-22.
Further, in compliance of Regulation 24A of the Listing Regulations, Companys unlisted material subsidiaries also undergo Secretarial Audit and the Secretarial Audit Reports of the Company and its unlisted material subsidiaries thereto in the prescribed Form No. MR-3 is attached as Annexure - V, V(A) and V(B) forming part of this Report. The same are also available on the website of the Company.
The Secretarial Audit Report of your Company and its unlisted material subsidiaries does not contain any qualification, reservation, adverse remark or disclaimer.
DISCLOSURES IN TERMS OF THE PROVISIONS OF THE ACT & THE LISTING REGULATIONS
A. Board of Directors ("Board")
(i) Number of meetings
The Board met 18 times during the year under review. The details of such meetings are disclosed in the Corporate Governance Report forming part of this Annual Report.
The maximum interval between any two meetings did not exceed 120 days, as prescribed by the Act.
(ii) Director retiring by rotation
In accordance with the provisions of the Act and the Articles of Association of the Company, Mr. Anchit Nayar, Executive Director and Mr. Sanjay Nayar, Non-Executive Director of the Company, are due to retire by rotation at the ensuing Annual General Meeting and being eligible, have offered themselves for re-appointment. The Board of Directors on the recommendation of the Nomination and Remuneration Committee ("NRC") has recommended their re-appointment.
Resolution seeking their re-appointment along-with their profile as required under Regulation 36(3) of Listing Regulations forms part of the Notice of Tenth Annual General Meeting.
(iii) Board evaluation
Pursuant to applicable provisions of the Act and the Listing Regulations, the Board, in consultation with its Nomination and Remuneration Committee, has formulated a framework containing, inter alia, the criteria for performance evaluation of the entire Board of the Company, its Committees and individual directors, including Independent Directors. The framework is monitored, reviewed and updated by the Board, in consultation with the Nomination and Remuneration Committee, in accordance with the new compliance requirements.
The annual performance evaluation of the Board, its Committees and each Director has been carried out for the financial year 2021-22 in accordance with the framework. The details of evaluation process of the Board, its Committees and individual directors, including independent directors have been provided under the Corporate Governance Report which forms part of this Report.
The Policy on Board of Directors Evaluation Framework can be accessed at: https://www.nykaa. com/media/wysiwyg/2021/Investors-Relations/ pdfs/10-11/Board-of-Directors-Evaluation- Framework.pdf
(iv) Declaration of independence
The Company has received necessary declaration from each Independent Director of the Company stating that:
(i) they meet the criteria of independence as provided in Section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations; and
(ii) as required vide Rule 6 (1) & (2) of the Companies (Appointment and Qualifications of Directors) Rules, 2014 they have registered their names in the Independent Directors Databank maintained by the Indian Institute of Corporate Affairs.
Based on the declarations received from the Directors, the Board confirms, that the Independent Directors fulfil the conditions as specified under Schedule V of the Listing Regulations and are independent of the management.
(v) Familiarisation Programme for Independent Directors Disclosure pertaining to familiarisation programme for Independent Directors is provided in the Corporate Governance Report forming part of this Annual Report.
B. Committees of the Board
The Board has constituted five committees which are mandated by the Act and the Listing Regulations, viz. Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Risk Management Committee and Corporate Social Responsibility & Environmental, Social, and Governance Committee. In addition to the said committees, the Board has also constituted Fundraise and Investment Committee.
i. Audit Committee
The Audit Committee comprises of Mr. Milind Sarwate - Independent Director (Chairperson), Ms. Anita Ramachandran - Independent Director, Ms. Alpana Parida - Independent Director, Mr. Seshashayee Sridhara - Independent Director, Mr. Milan Khakhar - NonExecutive Director and Mr. Anchit Nayar - Executive Director. Majority of the Members including the Chairperson of the Committee are Independent Directors and possess strong accounting and financial management knowledge. During the year under review, all the recommendations made by the Audit Committee were accepted by the Board.
ii. Nomination & Remuneration Committee
Nomination & Remuneration Committee comprises of Ms. Anita Ramachandran - Independent Director (Chairperson), Ms. Alpana Parida - Independent Director and Mr. Milan Khakhar - NonExecutive Director.
iii. Stakeholders Relationship Committee
The Stakeholders Relationship Committee comprises of Ms. Alpana Parida - Independent Director (Chairperson), Mr. Anchit Nayar - Executive Director and Ms. Adwaita Nayar - Executive Director.
iv. Risk Management Committee
The Risk Management Committee comprises of Mr. Sanjay Nayar - Non-Executive Director (Chairperson), Mr. Pradeep Parameswaran - Independent Director and Mr. Sanjay Suri - Chief Technology Officer.
v. Corporate Social Responsibility & Environmental, Social, and Governance Committee
The Corporate Social Responsibility & Environmental, Social, and Governance Committee comprises of Ms. Anita Ramachandran - Independent Director (Chairperson), Mr. Sanjay Nayar - Non-Executive Director and Ms. Adwaita Nayar - Executive Director.
Details of all the committees, along with their charters, composition and meetings held during the year, are provided in the Corporate Governance Report forming part of this Annual Report.
C. Key Managerial Personnel
In accordance with the provisions of Sections 2(51) and 203 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the following are the Key Managerial Personnel of the Company:
(i) Ms. Falguni Nayar - Executive Chairperson, Managing Director and Chief Executive Officer;
(ii) Mr. Arvind Agarwal - ChiefFinancial Officer; and
(iii) Mr. Rajendra Punde - Company Secretary and Compliance Officer During the year under review, there has been no changes in the Key Managerial Personnel of the Company.
D. Remuneration of Directors and Employees
Disclosure comprising particulars with respect to the remuneration of directors and employees and other details, as required to be disclosed in terms of the provisions of Section 197(12) of the Act and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed as "Annexure - VI" to this Report.
In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, statement showing the names of the top ten employees in terms of remuneration drawn and names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules forms part of this Report.
Having regard to the provisions of the second proviso to Section 136(1) of the Act, the Annual Report excluding the aforesaid information is being sent to the members of the Company. Any member interested in obtaining such information may write to the Company Secretary or e-mail at nykaacompanysecretary@ nykaa.com.
Your Company has adopted Policy on Remuneration for Directors, Key Managerial Personnel and other Employees which sets out criteria for the remuneration for Directors, Key Managerial Personal (‘KMP) which can be accessed at: https://www.nykaa.com/ media/wysiwyg/2021/Investors-Relations/pdfs/10- 11/Remuneration-Policy-for-Directors-KMP-and- other-employees.pdf
E. Vigil Mechanism/Whistle-Blower
The Company has established a Vigil Mechanism/ Whistle-blower policy in accordance with the provisions of the Act and the Listing Regulations. Vigil Mechanism/Whistle blower policy has been formulated with a view to provide a mechanism for Employees, Directors and other stakeholders of the Company to approach the designated Ombudsperson and/or the Chairperson of the Audit Committee of the Company to report actual or suspected unethical behaviour, fraud or violation of the Companys Code of Conduct/ ethics/ principles and matters specified in the Policy.
Employees and other stakeholders are required to report actual or suspected violations of applicable laws and regulations and the Code of Conduct. Such genuine concerns disclosed as per Policy are called "Protected Disclosures" and can be raised by a Whistle-blower through an e-mail or a letter to the Ombudsperson/ Chairperson of the Audit Committee. The Company affirms that in compliance with the Whistle-Blower Policy/ Vigil Mechanism no personnel had been denied access to the Audit Committee. The Vigil Mechanism and Whistle-blower policy is available on the Companys website and can be accessed at: https://www.nykaa.com/media/ wysiwyg/2021/Investors-Relations/pdfs/10-11/ Vigil-Mechanism-Whistle-Blower- Policy.pdf
F. Corporate Social Responsibility ("CSR")
The Company has in place a CSR policy in line with Section 135 read with Section VII of the Act. As per the CSR policy of the Company Upliftment and Mentoring across age groups Education, Skilling & Entrepreneurship, Access to healthcare, Sustainability and environmental responsibility are the focus areas for CSR engagement. Over and above these, from time to time, on a need and criticality basis your Company undertakes / will undertake CSR activities which are prescribed under Schedule VII of the Act.
A brief outline of the CSR Philosophy, salient features of the CSR Policy of the Company, the CSR initiatives undertaken during the financial year 2021-22 together with progress thereon and the report on CSR activities in the prescribed format, as required under Section 134(3)(o) read with Section 135 of the Act and the Companies (Corporate Social Responsibility Policy) Rules, 2014, are set out in Annexure - VII to this Report and the CSR Policy can be accessed using the link https://www.nykaa.com/media/wysiwyg/2021/ Investors-Relations/pdfs/10-11/CSR-Policy.pdf.
G. Employee stock option scheme ("ESOS")
Your Company grants Employee stock options that would enable the employees to share the value they create for the Company in the years to come. Accordingly, pursuant to the approval of the Board and the members of the Company and in terms of the provisions of applicable laws, your Company has duly implemented the:
a) Employee Stock Option Scheme -2012 ("ESOS 2012")
b) FSN Employees Stock Option Scheme 2017 ("ESOS 2017")
Collectively referred as "ESOS 2012 & 2017 Scheme" or "ESOP Schemes"
The Nomination and Remuneration Committee is entrusted with the responsibility of administering the ESOS 2012 & 2017 Scheme.
During the financial year 2021-22, 1,74,000 Stock Options under ESOS 2012 Scheme and 20,26,200 Stock Options under ESOS 2017 Scheme were issued to eligible employees. 1,74,000 Stock Options under ESOS 2012 Scheme and 44,18,650 Stock Options under ESOS 2017 Scheme are outstanding as on March 31, 2022.
During the year under review, prior to the Initial Public Offer (‘IPO) of its equity shares, your Company amended the ESOS 2012 & 2017 Scheme of the Company by passing special resolutions at its general meeting held on September 30, 2021 so as to meet the regulatory requirements, as mandated by the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SEBI SBEB Regulations"). Further post IPO of its equity shares, as per requirement of Regulation 12(1) of the SEBI SBEB Regulations, ESOP Schemes were ratified by the Shareholders of the Company by way of postal ballot on February 09, 2022. There is no material change in the ESOP Schemes and they are in compliance with the provisions of SEBI SBEB Regulations and other applicable provisions of law.
The applicable disclosures as stipulated under Regulation 14 of SEBI SBEB Regulations with regard to Employees Stock Option Plan of the Company are available on the website of the Company and weblink for the same is https://www.nykaa.com/media/ wysiwyg/2021/Investors-Relations/pdfs/annual- report/21-22/esop-sebi-disclosure-fy-21-22.pdf
A certificate from M/s. S. N, Ananthasubramanian & Co., Company Secretaries, the Secretarial Auditor of the Company, confirming that the aforesaid schemes have been implemented in accordance with the SEBI SBEB Regulations, will be open for inspection at the ensuing Tenth Annual General Meeting.
H. Investor Education and Protection Fund (‘IEPF)
‘Transfer of unclaimed/unpaid amount to the Investor Education and Provident Fund has been covered in the Corporate Governance Report forming of the Annual Report.
I. Related party transactions
All transactions with related parties were reviewed and approved by the Audit Committee and are in accordance with the Policy on dealing with and materiality of Related Party Transactions and the Related Party Framework, formulated and adopted by the Company. An omnibus approval from the Audit Committee is obtained for the related party transactions which are unforeseen in nature.
All contracts/arrangements/transactions entered into by the Company during the year under review with Related Parties were in the ordinary course of business and on arms length. During the year under review, the Company had 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 or which is required to be reported in Form No. AOC-2 in terms of Section 134(3) (h) read with Section 188 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014. Accordingly, there are no transactions that are required to be reported in Form AOC-2.
The Companys Policy on Materiality of Related Party Transactions and on dealing with Related Party Transaction is available on the website of the Company at https://www.nykaa.com/media/wysiwyg/2021/
I nvestors-Relations/pdfs/10-11/Related-Party- Transaction- Policy.pdf.
The details of the related party transactions as per Indian Accounting Standards (IND AS) - 24 are set out in Note 43 to the Standalone Financial Statement of the Company. The Company in terms of Regulation 23 of the Listing Regulations submits within 15 days from the date of publication of its standalone and consolidated financial results for the half year, disclosures of related party transactions on a consolidated basis, in the specified format to the stock exchanges. The said disclosures can be accessed on the website of the Company at https://www.nykaa.com/ stock-exchange-fi lings.
J. Conservation of energy, technology absorption, foreign exchange earnings and outgo Considering the nature of business of your Company, the particulars with respect to conservation of energy and technology absorption required as per Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, are not applicable to the Company.
The foreign exchange earnings and outgo are as below:
|Earnings in Foreign Exchange||Rs. 15.69 million||Nil|
|Expenditure in Foreign Exchange||Rs. 271.66 million||Rs. 84.78 million|
K. Risk Management
Risk Management is integral to your Companys strategy and for the achievement of our long-term goals. Our success as an organisation depends on our ability to identify and leverage the opportunities while managing the risks.
Your Company has a risk management framework in place working at various levels across the enterprise designed to identify, assess and mitigate risks appropriately. These levels form the strategic defence cover of the Companys risk management with an organisational structure for managing and reporting on risks. Furthermore, the Enterprise Risk Management (‘ERM) Governance Structure of your Company identifies the key internal stakeholders responsible for creating, implementing and sustaining ERM in the organisation.
The Risk Management Committee of the Company has been entrusted by the Board with the responsibility of reviewing the risk management process in the Company and ensuring that the risks are brought within acceptable limits.
Our approach to risk management is designed to provide reasonable assurance that our assets are safeguarded, the risks facing the business are being assessed and mitigated and all information that may be required to be disclosed is reported to Companys Senior Management, the Audit Committee, the Risk Management Committee and the Board.
The Company endeavours to continually sharpen its Risk Management systems and processes in line with a rapidly changing business environment. There are no risks which in the opinion of the Board threaten the existence of the Company. Details of various risks faced by your Company are provided in the Management Discussion & Analysis Report.
Your Company has framed a nd implem ented a Risk Management Policy in terms of the provisions of Regulation 17 of the Listing Regulations, for the assessment and minimisation of risk, including identification therein of elements of risk, if any, which may threaten the existence of the Company which may be accessed at https://www.nykaa.com/media/ wysiwyg/2021/Investors-Relations/pdfs/10-11/Risk- Management-Policy.pdf
L. Internal financial control
According to Section 134(5)(e) of the Act the term Internal Financial Control (IFC) means the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. The Act also mandate the need for an effective Internal Financial Control system in the Company which should be adequate and shall operate effectively. Rule 8(5)(viii) of Companies (Accounts) Rules, 2014 requires the information regarding adequacy ofInternal Financial Controls with reference to the financial statements to be disclosed in the Boards report.
The Company has adequate Internal Financial Control System over financial reporting ensuring that all transactions are authorised, recorded, and reported correctly in a timely manner to provide reliable financial information and to comply with applicable accounting standards which commensurate with the size and volume of business of the Company.
The key internal financial controls have been documented, automated wherever possible and embedded in the respective business processes.
Assurance to the Board on the effectiveness of internal financial controls is obtained through 3 Lines of Defence which include:
a) Management reviews and self-assessment;
b) Continuous controls monitoring by functional experts; and
c) Independent design and operational testing by the external professional firm.
The Company believes that these systems provide reasonable assurance that the Companys internal financial controls are adequate and are operating effectively as intended. During the year under review, such controls were tested by the Statutory Auditors of the Company and no material weaknesses or significant deficiencies in the design or operations were observed and reported by the Statutory Auditors. Details of the internal controls system are provided in the Management Discussion & Analysis Report.
M. Policy on Directors Appointment and Remuneration
In terms of Section 178 of the Act and Regulation 19 of the Listing Regulations, the Board of your Company, on recommendation of the Nomination and Remuneration Committee ("NRC"), had adopted a "Remuneration Policy for Directors, Key Managerial Personal (‘KMP) and other employees (‘Remuneration Policy) and "Policy on Board Diversity".
The Companys Remuneration Policy is directed towards designing remuneration so as to attract, retain, and reward talent who will contribute to longterm success of the Company and build value for its shareholders. Objective of Board Diversity Policy is to ensure that the Board is fully diversified and comprises of an ideal combination of Executive and Non-Executive Directors, including Independent Directors, with diverse backgrounds.
The salient features of the Policies are outlined in the Corporate Governance Report and the Policies are made available on the Companys website, which can be accessed using the link https://www.nykaa.com/policies
N. Particulars of Loans, Guarantees and Investments Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security provided is proposed to be utilised by the recipient are provided in the Standalone Financial Statement (Refer Note 7, 8, 16, 24 and 44B to the Standalone Financial Statement).
O. Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
Your Company is committed to create and provide an environment free from discrimination and harassment including sexual harassment for all its employees. Your Company has in place Prevention of Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013 which mandates no tolerance against any conduct amounting to workplace sexual harassment. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.
The following is a summary of sexual harassment complaints received and conclusively handled during the year 2021-22:
|Particulars||Number of Complaints|
|Number of complaints received||Nil|
|Number of complaints disposed off||Nil|
|Number of complaints pending as on end of the financial year||Nil|
P. Environment & Safety
Your Company is conscious of the importance of environmentally clean and safe operations and has framed and adopted Health, Safety and Environment (HSE) Policy which can be accessed at https:// www.nykaa.com/media/wysiwyg/2021/Investors- Relations/pdfs/10-11/Nykaa-Health-Safety-and- Environment-Policy.pdf. The Companys policy requires conduct of operations in such a manner, so as to ensure safety of all concerned, compliances of environmental regulations and preservation of natural resources.
Your Company is committed to the highest standards of health, safety and environment practices within the organisation and the extended areas within our influence, with an aim to provide safe and healthy working environment to our employees, customers, business partners, suppliers and visitors.
During the year under review, the Company continued its waste management efforts through various environment friendly measures i.e., use of eco-friendly packaging material, recycling of plastic waste and redesigning packaging to reduce plastic waste. Scrap disposal is in line with industry benchmarks.
Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions/events on these items during the year under review:
• There was no change in the nature of business of your Company as stipulated under sub-rule 5(ii) of Rule 8 of Companies (Accounts) Rules, 2014.
• Details relating to deposits covered under Chapter V of the Act since your Company has not accepted any deposits from the public falling under Section 73 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014.
• No significant or material orders were passed by the Regulators or Courts or Tribunals, which impact the going concern status and Companys operations in future.
• Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except Employees Stock Options Schemes referred to in this Report.
• No fraud has been reported by the Auditors to the Audit Committee or the Board.
• There is no application made or proceeding pending under the Insolvency and Bankruptcy Code, 2016 during the FY 2021-22.
• The requirement to disclose the details of difference between amount of the valuation done at the time of onetime settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof, is not applicable.
• Your Company has not issued Equity shares with differential rights as to dividend, voting or otherwise; and
• Your Company has not raised funds through preferential allotment or qualified institutions placement as per Regulation 32(7A) of the Listing Regulations.
During the year under review, your Company has complied with the Secretarial Standards 1 and 2 on meetings of the Board of Directors and on General Meetings, respectively, issued by the Institute of Company Secretaries of India and notified by the Ministry of Corporate Affairs, in terms of Section 118(10) of the Act.
MAINTENANCE OF COST RECORDS
Your Company is not engaged in the business of production of goods or providing of services as specified in Rule 3 of the Companies (Cost Records and Audit) Rules, 2014 ("Rules"). Accordingly, the requirement of maintaining cost records in accordance with Section 148(1) of the Act read with the Rules is not applicable to the Company for the period under review.
The Board wishes to place on record its appreciation for the assistance, co-operation and encouragement extended to the Company by the Companys customers, business partners, brands, bankers and other stakeholders.
The Directors take this opportunity to place on record their warm appreciation for the valuable contribution, untiring efforts and spirit of dedication demonstrated by the employees and officers at all levels, in the sure and steady progress of the Company, despite the unprecedented challenges posed by the Covid pandemic. The Directors would also like to thank the shareholders for their support and contribution. We look forward to their continued support in future.
For and on behalf of the Board of Directors
Executive Chairperson, Managing Director & CEO
Date: May 27, 2022