godfrey phillips india ltd share price Management discussions

Your Directors are pleased to present the 85^th Annual Report on the business and operations along with the Audited Financial Statements of the Company for the financial year ended March 31, 2022.

ECONOMIC ENVIRONMENT

Global economic activity recovered strongly in 2021 following a sharp contraction in 2020 due to unprecedented Covid-19 crisis which quickly morphed into financial crisis. World GDP output recorded a robust growth of 6.1% in 2021 compared to a decline of 3.1% in 2020. The US economy registered a GDP growth of 5.7% in 2021 compared to de-growth of 3.4% in 2020 and European economy GDP recorded growth of 5.3% in 2021 compared to de-growth of 6.4% in 2020. In Asia, China recorded a GDP growth of 8% in 2021, compared to 2.3% in 2020. Overall, the growth was primarily driven by pick up in the economic activity backed by higher vaccination rates, robust consumer spending and increase in investment which was further supported by governments favourable monetary and fiscal policies. However, high commodity and fuel prices, rising debt level and spiraling inflation across the world continues to add pressure on the economic activity. The growth momentum slowed considerably by the end of 2021, including economies such as China, European Union and United States, due to the dissipation of fiscal and monetary stimulus and major supply-chain disruptions.

The global economy enters 2022 in a weaker position due to Russia and Ukraine crisis and its implications on the world economies. As a result, the global growth is expected to moderate from 5.9% in 2021 to 3.6% in 2022. Furthermore, the ongoing geopolitical tension and increasing trade sanctions continue to add to the series of supply shocks that have hit the global economy over the course of the pandemic, contributing to more shortages beyond the energy and agricultural sectors. Once again, many countries have reimposed select restrictions on mobility due to the rapid spread of Covid-19 variants. A rise in energy prices and supply disruptions has led to higher and wider-based inflation than expected, particularly in the United States and many emerging market and developing economies. Overall, the impact of Russia and Ukraine crisis, the withdrawal of broad-based extraordinary policy support and central banks initiatives to raise interest rates to curb inflation, are collectively expected to weaken the global economic activity in 2022.

The Indian economy in tandem with global economies, registered a robust recovery of 8.2% in 2021 and was one of the fastest growing economies in the world. The growth momentum was hit by the second wave of Covid-19 in April- June 2021 but its impact on the economic activity was limited due to state-wise restrictions. The broad-based recovery across sector and industries was visible from the second half of the year and the growth was well supported by Reserve Bank of India with favourable monetary policy support and greater push on infrastructure by government of India. India also registered worlds largest and successful vaccination program roll-out which allowed it to contain the effects of the Covid-19, while also pursuing its goal of economic recovery. However, the escalation of Russia and Ukraine crisis has once again dampened the economic outlook. Consequently, the sharp jump in the prices of crude oil and energy, food grains and other commodity prices have led to higher inflation globally. In May 2022, the Reserve Bank of India increased the repo rate 40 bps to 4.4% in an attempt to curb the inflation. The combination of these macroeconomic headwinds has led IMF to reduce its GDP growth target to 8.2% in 2022 as compared to 9.0% projected by it in January 2022. Despite ongoing global economic volatility, India is still expected to remain one of the fastest growing economies backed by strong consumer demand and greater push on infrastructural development by government of India.

TOBACCO INDUSTRY

India is the worlds second largest tobacco producer with annual production of 800 million kg and major exporter of tobacco after China and Brazil. Indian tobacco accounts for 10% of the area and 9% of the total production in the world. Tobacco farming is drought tolerant, hardy and short duration crop and contributes a major percentage of the total value of commercial crops in India generating huge socio-economic benefits in terms of agricultural employment, incomes, revenues and foreign exchange earnings. Due to its low production costs, average farm and export prices, India has an edge over other leading tobacco producer. Given that tobacco production is highly labour intensive, the tobacco industry provides employment directly and indirectly to more than 45.7 million people working in processing, manufacturing and exports of tobacco and tobacco products.

The Indian government earns foreign exchange of around Rs. 6,500 crores through export of tobacco and tobacco products. Cigarette tobacco (Flue Cured Virginia) contributes around more than 70% of Indias leaf tobacco export in value terms. Tobacco products are big contributor to the government tax revenue. On the basis of last three year average, government has collected around ^53,000 crores of tax revenue from tobacco products and 80% of tobacco tax revenue is from legal cigarettes. In India, the legal cigarettes account for 8% of the total tobacco consumption and this is in complete contrast with rest of the world where 90% of the tobacco is in the form of cigarettes. The remaining 92% contribution is from other traditional products, like chewing tobacco, bidis, Khaini etc. and illegal cigarettes.

Over the years, the pace of taxation on cigarettes and the regulatory framework governing the tobacco products in India, such as the 85% pictorial warnings that appear on the packs of tobacco products, have led to a significant decline in the sale of legal cigarettes in the country while illegal cigarette trade has grown significantly as they do not bear mandated warnings and consumer perceives it safer. The share of legal cigarette has declined from 21% in 1981-82 to 8% in 2020-21 despite 50% increase in tobacco consumption in India, this clearly reflects that illegal cigarette trade has increased significantly and now accounts for roughly 1/4th of the total cigarette market in India. Government continues to curb the trade of illegal cigarette through regular raids and seizures. It also focuses on stabilizing the domestic legal cigarette market and moderation in cigarette taxation may help optimize tax collection and reduce shift towards cheaper illicit cigarettes.

The tobacco and cigarette manufacturing industry were also impacted by the Covid-19 pandemic induced lockdown restrictions and was one of the industries to resume its operations at last after upliftment of Covid restrictions. The supply chain constraints, logistics problems, increased freight rates and delays in shipping schedules, all these has attributed to the decline in export of tobacco and tobacco products. Besides this, the tobacco industry is experiencing a slowdown globally due to more restrictions being placed on smoking and tobacco consumption. During the year, the cigarette demand started to recover with the opening of economy, increase in mobility and resumption of work in offices. The market serviceability also improved with the removal of inter-state restrictions and has led to recovery in the sales and demand of cigarettes.

CONSUMER AND RETAIL INDUSTRY

Indias FMCG industry is the fourth-largest sector of the economy backed by its demography and growing consumerism. The Indian economy is on the path to recovery after devastating waves of Covid-19 pandemic. Many sectors of the economy are back to their pre-pandemic levels of production. The pandemic had big impact on the FMCG sector especially during lockdown where companies were focused on re-inventing their strategies for customer acquisition, market penetration and maintaining demand-supply balance. In addition, the higher adoption of technology, digitalization, door to door delivery has given fresh impetus to FMCG sector in India. Offline sales also accelerated on the back of improved store footfalls and mobility. However, the recovery is still underway with different parts of the economy improving at varying rates. The Indian FMCG sector remained resilient in 2021 and delivered a nine -year high growth of 16%. The growth was driven by continued consumer demand and higher product prices.

The retail industry in India is witnessing a fast-paced growth, with retail development penetration expanding to tier II and III cities and not restricting to metro cities. Growing awareness, rapid urbanization, increasing working population, higher disposable income and changing lifestyles are the primary growth drivers for the sector. Business activity among micro-retailers is reaching near normal levels, as they are adopting digital business tools to boost efficiency and growth. Indian retail industry remains one of the fastest growing in the world, expected to reach to US$ 1,407 billion by 2026 compared to US$ 779 billion in 2019 and more than US$ 1.8 trillion by 2030. Furthermore, E-commerce is widely considered as a way to reduce penetration costs and drive convenience buying. Increasing affordability and proliferation of smartphones coupled with affordable data prices makes online platforms easier and more convenient to reach target consumers. The Government of Indias initiatives such as Digital India programme has contributed significantly to the growth of e-commerce segment and India is now home to more than 800 door to customer (D2C) brands and is expected to reach US$ 101 billion by 2025.

Government of India has taken several serious initiatives to encourage the FMCG sector in India. It has announced Production Linked Incentive Scheme (PLI) as incentive plans to encourage scaling up and to boost industry. Government has approved 100% FDI in the cash and carry segment and in single-brand retail along with 51% FDI in multi-brand retail. These measures will help the sector to establish a robust supply chain and reduce the risk of disruption.

Further, the decline in unorganized markets in the FMCG sector is expected to augment the growth of organised sector mostly due to the increase in brand awareness, coupled with the growth of modern retail and convenience. Following the Covid-19 pandemic, consumers have rapidly adopted new technologies. The predominant theme in the Union Budget of 2022-23 is its strong focus on the creation and development of physical and digital infrastructure. The internet enabled companies are likely to reach a wider audience using online sales promoted by an improved infrastructure, competitive pricing and reduced marketing and outreach costs associated with a digital platform.

SEGMENTWISE PERFORMANCE IN 2021-22

Cigarettes

The domestic Cigarettes industry showcased resilience and signs of recovery in FY22 but it was hampered by the unprecedented headwinds of 2^nd Wave of COVID-19. Illicit and contraband continue to impact the industry, with the lockdown period allowing enhanced penetration of illicit especially in the semi urban and smaller urban sections of India.

In the backdrop of this challenging situation and restrictions which had led to lower customer footfalls across markets, your Company was able to maintain its growth momentum in the Regular Size Filter Tipped (RSFT) segment and register decent growth in other segments that it operates in, backed by performance of flagship brands in core markets and introduction of some new brands/variants to not only address new opportunities but also strengthen presence in new geographies. Our main brands Four Square, Red & White, Cavanders, Stellar & Focus continue to perform strongly, especially in our core markets owing to concentrated efforts in increasing relevance to the evolving consumer needs, improving capabilities for faster product development and innovations and an organization wide effort to increasing efficiencies through cost optimizations.

Your Company is committed to driving enhanced shareholder value by pursuing various plans like portfolio expansion to address new growth opportunities, adding pricing power to flagship brands, improving distribution footprint across various states through expanded infrastructure, accelerated customer acquisition along with higher efficiencies through cost optimization.

Chewing Products

Your Companys Chewing business continues to focus on premium segment of the Industry, with a clear objective to make the business profitable. In view of the same, considerable efforts were made last year to bring Pan Vilas, our flagship brand, back on the growth path which had suffered volume losses on account of the COVID-19 pandemic.

Your Companys Confectionary business has recovered well and the sales have grown over FY21 backed by two significant initiatives, first being to grow Naturalz Imli candy by focussing on distribution and availability across markets and second being introduction of new innovative candy called FUNDA C, which offers unique benefit of taste and Vitamin C, to cash on increasing importance of Vitamin C post pandemic.

Exports

The following table shows the status of exports for different products during the year under report:

	2021-22	2020-21
Commodity/Product	Value (Rs. in crores)	Value (Rs. in crores)
Cigarettes	97.88	139.57
Unmanufactured tobacco/CLB	442.12	421.35
Cut tobacco	21.82	36.53
Total	561.82	597.45

Financial year 2021-22 continued to pose challenges arising from the pandemic. Cigarette and cut tobacco export business suffered as we were faced with major logistic hurdles both on account of low availability of containers as well as rising freight rates throughout the year. Also, restrictions in various markets because of the pandemic took some time for the business to come on track. Despite the turmoil, we have been able to hold on to our key clients and hope to deliver better in times to come with some new product offerings.

Unmanufactured tobacco exports though have done reasonably well despite adverse conditions experienced due to COVID-19, by registering growth of 5% over last financial year. This was made possible by meticulous planning and stakeholder management. Also, the Company has started to make a foothold in the markets of Egypt, Russia and Taiwan.

Retail

24Seven is Indias only organized retail chain in the round the clock convenience store format with more than 100 stores spread across Delhi NCR and Chandigarh. Despite the 2^nd and 3^rd Wave of COVID-19 affecting the operating hours of business, Gross sales during the FY22 increased by 14% to Rs.405 crores from Rs.354 crores in the previous year. Operational performance was also better than FY21 due to sustained cost saving initiatives and improvement in product mix and margins. During the year, we have opened a few low capex modelled stores which are operationally efficient with lower breakeven period.

We continued to follow all safety protocols as mandated and recommended by the authorities to safeguard the health and well-being of our customers and employees.

HUMAN RESOURCE DEVELOPMENT

Your Company has yet again been recognised among Indias Best Companies to Work For. This recognition is a testimony of your Companys approach towards putting people first, be it pandemic times or business as usual scenario. Best-in-class people practices, desired managerial styles, inclusive culture and assenting employee experiences at work ensures high level of people centricity, teamwork and a passionate workforce focussed on delivery of business results. Alongside, your Company is constantly upgrading and digitizing its people processes to ensure seamless reach, quick access, transparency and ease of usage for employees. Your Company has also been introducing new forms of learning, leadership development and capability building measures to upskill and reskill the workforce on an ongoing basis. Strategic people and performance focus through several employee engagement initiatives and leadership connect ensured that employees remain energised, connected and motivated.

INFORMATION TECHNOLOGY (IT)

There have been rapid advances in the areas of Information Technology and Digital, offering new avenues for value creation. The Company has a strategic approach for leveraging modern technologies. We are well on our way in the Cloud Transformation journey with the nationwide Sales and Distribution system, already on AWS Cloud and being further enhanced with new capabilities/feature rollouts and Digitization. Our futuristic architecture is truly multi-cloud and will offer greater agility in our future deployments. We have enhanced our overall Infrastructure setup in our Data Centre and across the organization, to fulfil the performance demands of the organization and to enable Digital Transformation in the times to come.

We are in the process of implementing an end-to-end Digital Supply Chain solution that leverages AI and ML. All the core business processes starting from a centralised Demand and Supply Planning till the final Delivery to our Distributors will be fully automated and we will have advanced control tower capabilities built into the platform.

We have an advanced Data Lake Setup to facilitate our BI and Data Analytics needs. This has matured over the last several years and is now a way of working and decision-making for our key functions like Sales and Distribution, Supply Chain and Finance. The Data Lake has feed from all our key systems and we have near real-time updates, thereby facilitating high quality decision-making. Our dashboards and algorithms constantly evolve with time and as per the demands of our ever-changing business.

We have implemented complete Work-from-Home (WFH) solutions which were tested and enhanced during the multiple Covid waves and the entire employee base adapted to this in double-quick time. This was the initiation of moving towards a digital workplace, with further initiatives launched this year towards employee self-service, notably a Mobile App. All our key systems are now accessible remotely with appropriate access controls and in-built cybersecurity measures.

With all the above, your Company has embarked on a structured digital transformation program for the organization, aligned to strategic business goals and adopting the best of technologies, practices and methodologies.

TREASURY OPERATIONS

Your Company continues to enjoy the highest rating of CRISIL A1+ for Short Term Debt Programme, CRISIL AA+/ Stable for Long Term Loan, CRISIL AA+/Stable for fund-based credit facilities and long term non-fund based Facilities & CRISIL A1+ for short term non-fund-based facilities. With these ratings in place, your Company can raise funds at most competitive terms. Following the principles of liquidity, safety and tax efficient returns, the Company has been deploying its long term surplus funds primarily in debt-oriented schemes of reputed mutual funds. Also, the Company continued to park its temporary surpluses in liquid/short-term schemes of various mutual funds.

FINANCIAL RESULTS
	2021-22	2020-21
	Rs. in Lakhs	Rs. in Lakhs
Profit before Depreciation and Tax	70375.75	60340.45
Less: Depreciation and amortization	14215.76	13845.10
Profit before tax	56159.99	46495.35
Less: Provision for tax
- current tax	13137.71	10235.44
- deferred tax	(174.71)	565.81
Profit after tax for the year	43196.99	35694.10
Add: Other comprehensive income/(loss)-net of tax	7.12	(135.95)
Total comprehensive income	43204.11	35558.15

During the year, the gross sales value registered a growth of 14.3% by reaching the level of Rs. 7325 crores from Rs. 6408 crores last year. Similarly, the profit after tax is Rs. 431.97 crores as compared to Rs. 356.94 crores last year.

DIVIDEND

Your Directors are pleased to recommend the dividend of 1400 % i.e. Rs. 28 per equity share of face value of Rs.2/- each. The proposed dividend will absorb Rs. 14558.30 lakhs.

DEPOSITS

Your Company has not accepted any deposits, covered under Chapter V of the Companies Act, 2013 and hence, no details pursuant to Rules 8(v) and 8(vi) of the Companies (Accounts) Rules, 2014 are required to be reported.

ANNUAL RETURN

As required under Section 134(3)(a) and section 92(3) of the Act, the Annual Return has been uploaded on the Companys website and can be accessed at https://www.godfrevphillips.com/companv/investor-relation/financials/annual-return/.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

As on 31^st March 2022, your Company had seven subsidiaries and three associate companies. The basic details of these companies form part of the Annual Return as mentioned above.

Form AOC-1 containing the salient features of financial statements of the Companys subsidiaries and associates is attached as Annexure - 1. Note 46 of the consolidated financial statements shows the share of each subsidiary and associate company in the consolidated net assets and profits of the Company. The audited financial statements of these entities will be available for inspection during business hours at the Registered Office of the Company.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Indian Accounting Standard (Ind AS-110) - Consolidated Financial Statements, Group Accounts form part of this Annual Report. The Group Accounts have been prepared based on financial statements received from the subsidiary and associate companies, as approved by their respective Boards.

INTERNAL CONTROL SYSTEMS

Your Company has a robust system of internal controls commensurate with the size of the Company and the nature of its business, which ensures that transactions are recorded, authorised and reported correctly apart from safeguarding its assets against loss from wastage, unauthorised use and disposition.

The internal control systems are supplemented by well documented policies, guidelines and procedures which are in line with the internal financial control framework requirements. There is an extensive programme of internal audit by a firm of chartered accountants followed by periodic management reviews.

The Audit Committee actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same.

CORPORATE SOCIAL RESPONSIBILITY

The Companys CSR initiatives are largely focused on tobacco farmers who are core of our business. In shortterm goals to ensure farming efficiencies and impact earnings, Good Agriculture Practices has been initiated for the farmers wherein we provide technical advice, establish processes, and minimize hazards to ensure better yield and quality of crop. In long-term goals, we look at environment management - of water, soil, waste etc. The Company has built over 26 check dams, 32 farm ponds and undertaken over 22 de-siltation of ponds and tanks for water management in past 6 years. The Company has also implemented bore well recharge pits to lower impact on ground water and has created bio-diversity parks over approx. 17 acres with over 26 species of trees.

Health has the biggest impact on livelihood. The Company has installed community RO water plants in over 35 villages for access to safe potable water as Vinukonda area is dangerously high on fluoride and TDS. Health Camps are held in over 40-50 villages every year with specialists on board and free medicine distribution. Also, eliminating child labour is an essential element to our commitment to STP (Sustainable Tobacco Production) and our initiatives have led to zero child labour incidences in the past 3 years. The Company run After School Program keeps children back in school until their parents return from farms especially during harvesting time. The program looks after the children in school itself and provides nutritious food, classes in yoga, coaching and help with homework, etc.

The Company also invests in marginalised communities in Delhi. The program endeavours to empower vulnerable urban poor communities through better educational approach, health, life skills and leadership development programs. Collaborating with government schools like SDMC, the project works on upgrading and developing school infrastructure to create friendly and safe spaces for children to learn in along with developing modern curricula, teacher training, enabling extra-curricular activities and integration programs for weak students and dropouts. Also, it runs awareness programs on various issues that impact children and youth, from bullying to gender roles, substance abuse and sexual abuse.

The Company has constituted a CSR Committee of the Board in accordance with the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014. The brief outline of the CSR policy, overview of the activities undertaken with amounts spent/unspent thereon during the year, reason for unspent CSR thereof and composition of the Committee has been disclosed in Annexure - 2.

DIRECTORS

Mr. R. A. Shah (DIN: 00009851), who retires by rotation but has expressed his unwillingness to seek re-appointment and therefore, would cease to be a Director of the Company on conclusion of the ensuing Annual General Meeting (AGM).

The Board, on the recommendation of the Nomination and Remuneration Committee (NRC), has resolved that the vacancy created by retirement of Mr. R. A. Shah be not filled up for the time being. Accordingly, a resolution for not filling up the vacancy caused by retirement of Mr. R. A. Shah, will form part of the Notice of the ensuing AGM.

Dr. Bina Modi (DIN: 00048606) was appointed as President and Managing Director of the Company for a period of 5 (five) years effective from 14^th November, 2019. Presently she is not drawing any remuneration from the Company. However, considering her invaluable contributions to the growth of the Company and based on recommendation of the NRC, the Board has approved payment of remuneration during the unexpired tenure of her appointment i.e. from 1^st June, 2022 till 13^th November, 2024. Accordingly, a resolution to this effect shall form part of the Notice of the ensuing AGM.

Mr. Sharad Aggarwal (DIN: 07438861) was appointed as Whole-time Director of the Company w.e.f. 1^st October, 2017 for a period of five years. Further, he was also appointed as the Functional Chief Executive Officer of the Company with effect from 27^th December, 2021. Based on the recommendation of the NRC, the Board has approved the re-appointment of Mr. Sharad Aggarwal as Whole-time Director of the Company for a further period of five years with effect from 1^st October, 2022. Accordingly, a resolution to this effect shall form part of the Notice of the ensuing AGM.

Based on the recommendation of the NRC, the Board has approved the appointment of Mr. Subramanian Lakshminarayanan (DIN: 02808698) as Additional Director to serve as Non-Executive Independent Director of the Company. As per provisions of the Companies Act, 2013, Mr. Lakshminarayanans appointment is subject to the approval of the shareholders in the ensuing AGM. Accordingly, a resolution proposing appointment of Mr. Subramanian Lakshminarayanan as a Non-Executive Independent Director of the Company for a term of five years, will form part of the Notice of the ensuing AGM.

The Independent Directors of your Company have confirmed that (a) they meet the criteria of Independence as prescribed under Section 149 of the Companies Act, 2013 and Regulation 16 of the SEBI (LODR) Regulations, 2015, and (b) they are not aware of any circumstance or situation, which could impair or impact their ability to discharge duties with an objective independent judgement and without any external influence. Further, in the opinion of the Board, the Independent Directors fulfill the conditions prescribed under the Listing Regulations and are independent of the management of the Company.

PERFORMANCE EVALUATION OF THE BOARD, ETC.

Details pertaining to the way evaluation of the Board, its committees and individual Directors has been carried out, form part of Corporate Governance Report.

KEY MANAGERIAL PERSONNEL

Dr. Bina Modi, Managing Director, Mr. Samir Modi, Executive Director, Mr. Sharad Aggarwal, Whole-time Director, Mr. Sunil Agrawal, Chief Financial Officer and Mr. Sanjay Gupta, Company Secretary of the Company are deemed to be Key Managerial Personnel of the Company as per the provisions of Companies Act, 2013 and rules made thereunder.

BOARD MEETINGS

Details of the meetings of the Board held during the year, form part of the Corporate Governance Report.

AUDIT COMMITTEE

The composition, functions and details of the meetings of the Audit Committee held during the year, form part of the Corporate Governance Report.

RISK MANAGEMENT

Your Company considers that risk is an integral part of its business and therefore, it takes proper steps to manage all risks in a proactive and efficient manner. The Company management periodically assesses risks in the internal and external environment and incorporates suitable risk treatment processes in its strategy and business and operating plans. The details of practices being followed by the Company in this regard, form part of the Corporate Governance Report.

There are no risks which, in the opinion of the Board, threaten the very existence of your Company. However, some of the challenges faced by it have been dealt with under Management Discussion and Analysis which forms part of this Report.

Details regarding constitution of Risk Management Committee, its role and responsibilities, form part of the Corporate Governance Report.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Companies Act, 2013 (the Act), the Directors, to the best of their knowledge, confirm that:

(i) In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any;

(ii) Appropriate accounting policies have been applied consistently and judgements and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the period;

(iii) Proper and sufficient care has been taken for 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;

(iv) The Annual Accounts have been prepared on a going concern basis;

(v) The internal financial controls to be followed by the Company have been laid down and such internal financial controls are adequate and are operating effectively; and

(vi) Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

The above statements were noted by the Audit Committee at its meeting held on 28^th May, 2022.

RELATED PARTY TRANSACTIONS

Form AOC-2 containing particulars of contracts or arrangements entered into by the Company with related parties referred in Section 188(1) of the Companies Act, 2013 is attached as Annexure - 3.

Details of related party transactions and related disclosures are given in the notes to the financial statements.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of loans, guarantees and investments covered by the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the financial statements.

WHISTLE BLOWER POLICY/VIGIL MECHANISM

Details of Whistle Blower Policy/Vigil Mechanism form part of the Corporate Governance Report.

REMUNERATION AND NOMINATION POLICY

The appointment and remuneration of Directors is governed by the recommendation of Nomination and Remuneration Committee and then decided by the Board subject to approval of the shareholders.

The remuneration payable to the Directors is decided keeping into consideration long term goals of the Company apart from the individual performance expected from Director(s) in pursuit of the overall objectives of the Company.

The remuneration of Executive Director(s) including Managing Director(s) and Whole-time Director(s) is governed by the recommendation of Nomination and Remuneration Committee as per the criteria recommended by it and then approved by the Board subject to approval of the Shareholders.

The Non-executive Director(s) may be paid remuneration by way of commission either by way of monthly payments or specified percentage of net profits of the Company or partly by one way and partly by the other, as may be recommended by Nomination and Remuneration Committee and then decided by the Board subject to approval of the Shareholders.

In accordance with the provisions of the Articles of Association of the Company and the Companies Act, 2013, a sitting fee (presently fixed at Rs. 1,00,000 per meeting) is paid to the Non-executive Directors of the Company who are not drawing any remuneration described hereinabove, for attending any meeting of the Board or of any Committee thereof.

The remuneration payable to Directors shall be governed by the ceiling limits specified under section 197 of the Companies Act, 2013.

The remuneration policy for other senior management employees including key managerial personnel aims at attracting, retaining and motivating high calibre talent and ensures equity, fairness and consistency in rewarding the employees. The remuneration to management grade employees involves a blend of fixed and variable component with performance forming the core. The components of total remuneration vary for different employee grades and are governed by industry practices, qualifications and experience of the employees, responsibilities handled by them, their potentials, etc. Remuneration of senior management employees is also being looked at by the Nomination and Remuneration Committee.

DIVIDEND DISTRIBUTION POLICY

As mandated by the Listing Regulations, the Board has formulated a dividend distribution policy and the same is attached as Annexure - 7 and is also available on the Companys website at: https://www.godfreyphillips.com/company/investor-relation/corporate-governance/policies/

KEY FINANCIAL RATIOS

Key Financial Ratios for the financial year 2021-22 with comparatives for the year 2020-21, are disclosed in Annexure - 8.

BUSINESS RESPONSIBILITY REPORT

As mandated by the Listing Regulations, the Business Responsibility Report has been included as part of the Annual Report.

UNCLAIMED SHARE CERTIFICATES

Status of the unclaimed shares as on 31^st March, 2022 has been mentioned in the Report on Corporate Governance.

CORPORATE GOVERNANCE

The Company is committed to maximise the value for its stakeholders by adopting the principles of good Corporate Governance in line with the provisions of law and particularly those stipulated in the Listing Regulations. Its objective and that of its management and employees is to manufacture and market the Companys products in a way so as to create value that can be sustained over the long term for consumers, shareholders, employees, business partners and the national economy in general.

Certificate from the auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in the Listing Regulations, is enclosed.

Certificate from Dr. Bina Modi, Managing Director as the Chief Executive Officer (CEO) and Mr. Sunil Agrawal, Executive Vice President - Finance as the Chief Financial Officer (CFO) in relation to the financial statements for the year along with declaration by the CEO regarding compliance with the code of business conduct of the Company by the directors and the members of the senior management team of the Company during the year, were submitted to and taken note of by the Board.

STATUTORY AUDITORS

In compliance with the provisions of Section 139 and other applicable provisions of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014 (including any statutory modification(s)/re-enactment(s)/ amendment(s) thereof, for the time being in force), S.R.Batliboi & Co. LLP, Chartered Accountants, (FRN 301003E/ E300005) have been recommended for re-appointment as Statutory Auditors for another term of five (5) consecutive years by the Board of Directors at its meeting held on 28^th May, 2022. Accordingly, a resolution for them to hold office from the date of conclusion of the Eighty Fifth Annual General Meeting until the date of conclusion of the Ninetieth Annual General Meeting, will form part of the Notice of the ensuing Annual General Meeting.

Auditors Report on the financial statements of the Company forms part of the Annual Report and does not contain any qualification, reservation, adverse remark or disclaimer.

COST AUDIT

The provisions of Cost Audit are not applicable on the Company.

SECRETARIAL AUDIT

M/s. Chandrasekaran Associates, Practicing Company Secretaries, have been appointed as the Secretarial Auditor of the Company.

The Secretarial Audit Report for the year under review is attached as Annexure - 4 and does not contain any qualification, reservation, adverse remark or disclaimer.

COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETING

Pursuant to Clause 9 of Revised Secretarial Standard -1 (SS -1), your Company has complied with applicable Secretarial Standards issued by Institute of Company Secretaries of India, during the financial year under review.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under review, no significant and material order was passed by the Regulators/Courts that could impact the going concern status of the Company and its future operations.

There is no proceeding pending under the Insolvency and Bankruptcy Code, 2016. There was no instance of onetime settlement with any Bank or Financial Institution.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached as Annexure - 5.

Pursuant to the provisions of Section 136(1) of the Act and as advised, the statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, will be available for inspection at the Registered Office of the Company during working hours and Members interested in obtaining a copy of the same may write to the Company Secretary and the same will be furnished on request. Hence, the Annual Report is being sent to the Members excluding the aforesaid information.

CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars prescribed under Section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are attached as Annexure - 6.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place a policy on prevention, prohibition and redressal of sexual harassment of women at workplace in line with the requirements of the above Act.

Under the said policy, an Internal Complaints Committee (ICC) has been set up to redress complaints received relating to sexual harassment. All employees (permanent, contractual, temporary and trainees) are covered under this policy. During the year under review, no complaint was filed with the Company.

THE FUTURE

Your Company has valiantly weathered the ill-effects of the COVID-19 pandemic which adversely impacted the business operating environment and had led to slowdown in the economic activity in past two years. Your Company has taken all possible steps to get back to pre-Covid level of business. Despite prevailing uncertainty on account of this pandemic, your Company is highly optimistic of robust business performance in times to come.

ACKNOWLEDGEMENT

Your Directors wish to place on record their sincere appreciation to the Government authorities, Companys bankers, customers, vendors, investors and all other stakeholders for their continued support during the year. Your Directors are also pleased to record their appreciation for the dedicated services of employees at all levels of operations in the Company.

	Respectfully submitted on behalf of the Board
	R.A. SHAH
	CHAIRMAN
New Delhi
Dated: 28th May, 2022