Godrej Industries Ltd Directors Report.

Board’s Report

To the Members,

Your Directors have pleasure in presenting the Annual Report along with the Audited Accounts for the Financial Year ended March 31, 2018.

Review of Operations

Your Company’s performance during the year as compared with that during the previous year is summarized below:

( Rs. Crore) ( Rs. Crore)
Particulars Year Ended March 31 2018 Year Ended March 31 2017
Revenue from Operations 1,986.32 1,602.17
Exceptional Items 267.38 -
Other Income 33.43 46.88
Total Income 2,287.13 1,649.05
Total Expenditure other than Finance Costs and 1,749.47 1,534.11
Depreciation and Amortisation
Profit before Finance Costs, Depreciation and 537.66 114.94
Amortisation and Tax
Depreciation and Amortisation Expense 68.58 52.43
Profit before Finance Costs and Tax 469.08 62.51
Finance Costs (net) 212.43 207.86
Profit before Tax 256.65 (145.35)
Provision for Current Tax 13.48 -
Provision for Deferred Tax 1.77 (0.11)
Net Profit 241.40 (145.24)
Remeasurment of Defined Benefits Plans (0.28) (1.92)
Total Comprehensive Income 241.12 (147.16)
Surplus brought forward 541.87 689.03
Profit after Tax available for appropriation 782.99 541.87
Appropriation
Dividend on equity shares 58.85 -
Tax on Distributed Profit 1.15 -
Transfer to General Reserve - -
Surplus Carried Forward 722.99 541.87
Total appropriation 782.99 541.87

Dividend

The Board of Directors of your Company recommends a dividend of Rs. 1.75 per equity share of Rs. 1/- each, aggregating Rs. 58.85 Crore as final dividend for the year ended March 31, 2018.

Dividend Policy

The Dividend policy of the Company is uploaded on the Company’s website. http://www.godrejindustries.com/listing-compliance.aspx

_ Natures Basket Ltd. (100%)

_ Other investments

INDUSTRY STRUCTURE AND DEVELOPMENT

As per The World Economic Outlook (WEO) update, around 120 economies accounting for three quarters of world Gross Domestic Product (GDP), saw a pickup in growth in year-on-year terms in 2017, the broadest synchronized global growth upsurge since 2010. Global output is estimated to have grown by 3.7% in FY17. The International Monetary Fund (IMF) has raised its growth forecasts for 2018 to 3.9%, expecting the global economy to continue to recover on the back of buoyant trade and investment.

IMF projected, India to grow at 7.4% of its GDP in FY18 as compared to China’s 6.6%, making it the fastest growing economy among emerging economies.

The World Bank in its India Economic Update expects the economic growth to accelerate to 7.3% in FY19 and 7.5% in FY20.

In FY18, the first half of the year was impacted by issues such as lingering effects of demonetization, difficulties in implementation of Goods and Service Tax (GST). However, in the second half of the year the economy witnessed robust signs of revival. Economic growth improved, corrective actions were taken, and the global economic recovery boosted exports. Recent sovereign ratings upgrade and jump in World Bank’s Ease of Doing Business rankings are endorsements of government reforms and policies. In FY19 also, growth is expected to be driven by increase in exports due to acceleration in global growth, expected rebound in private investments and increase in consumption demand. However, persistent high oil prices (at current levels) remain a key risk, which would adversely affect inflation, the current account balance, the fiscal position and growth. This will force macroeconomic policies to be tighter.

Agriculture sector and its allied activities are estimated to have registered a moderate growth rate of 3.4% in the fiscal year. This was mainly due to the high base effect of FY17 which saw a very high growth rate as it followed two years of drought. In terms of monsoon, FY18 experienced an overall ‘normal’ monsoon at 95% of long period average (LPA – measured for the trailing 10 year period).

The Indian Meteorological Department (IMD) in its first monsoon forecast for the season has predicted a ‘normal’ monsoon for the upcoming FY19, brightening the chances of an accelerated growth for the sector. Good monsoons help to improve the poor sentiment prevailing in the rural economy and the sector expects bumper Kharif and Rabi crops. Further, agriculture and allied sector has also received a lot of impetus in the Union Budget. Recent endeavor of the Government to formulate a separate exports policy for agriculture is also a step in the right direction to achieve the dream of doubling farmer incomes. However, climate change and high dependence on monsoon for sector growth continue to be the key risks.

Commodity price remained range bound during FY18. There is over capacity for Fatty Alcohol, however, global manufacturer were running the plants at lower capacity which helped in protecting the margin. Also good demand of Glycerine helped overall Oleo-chemical Industry. Indian surfactants demand continues to be robust mainly driven by growth in detergent, shampoo and hand wash consumption.

According to a report by CREDAI and JLL India, Indian real estate sector is projected to reach a market size of $180 billion by FY20, a sharp rise from $126 billion in FY15. The housing sector’s contribution to the Indian GDP is expected to almost double to more than 11% by FY20 up from estimated 5-6%.

Fragmentation in real estate sector is high, not just on a national level, but on a city level too. However, disruption - starting with demonetization in FY16 and institutionalized via the Real Estate Regulatory Act (RERA) reform in FY17 has triggered accelerated consolidation. Customer preferences also have shifted towards better quality and branded developments. Access to cheaper capital has gained importance as working capital requirements rise. The organized sector should be able to more than double its market share of the residential property market, to nearly 20% over the next five to seven years.

Improvement in the current subdued job creation/income growth outlook could lead to even faster growth. Developers with a scalable business model are better placed to grow market share in a regulatory environment demands greater accountability and transparency from developers.

The affordable housing segment is expected to continue to drive the real estate sector in FY18 with several developers and institutional funds eyeing opportunities in this space. Various initiatives from the Government of India under Pradhan Mantri Awas Yojona, or rationalizion of GST rates on affordable and low-cost housing, which attracts a GST of 8% on the total value of under-construction properties, which is 4% less than the earlier effective rate of 12% or to set up dedicated affordable housing fund under the National Housing Bank, to boost demand and supply of low-cost homes. The end-user demand in this segment along with the government’s thrust through incentives such as granting infrastructure status is ensuring a rising appetite for such projects across the country.

There is a separate section on Management Discussion and Analysis appended as Annexure A to this Report, which includes the following:

Subsidiary and Associate Companies

Your Company has interests in several industries including animal feeds, poultry, dairy and agro-products, oil palm plantation, property development, personal and home care, etc. through its subsidiary and associate companies.

Godrej Agrovet Limited (GAVL)

GAVL is a subsidiary of your Company and is a diversified agri-business company with interests in animal feed, crop protection, dairy and oil palm business. GAVL also has a joint venture with the ACI Group in Bangladesh for the feed business and with Tyson Foods Inc., USA for the poultry and processed food business. This year was a landmark year for GAVL, as it went public through an Initial Public Offer (IPO) and was listed on the stock exchanges. The IPO was oversubscribed by 96 times.

During FY18, agriculture and allied activities is estimated to have registered a moderate growth rate of 3.4%. This was mainly due to the high base effect of fiscal 2016-17 which saw a very high growth rate as it followed two years of drought. In terms of monsoon, fiscal 2017-18 experienced an overall ‘normal’ monsoon at 95% of long period average (LPA – measured for the trailing 10 year period). Also, crop production business of GAVL remained robust for FY18 resulting in lower commodity prices during the year.

GAVL recorded consolidated revenues of Rs. 5,206 crore during FY18 compared to revenues of Rs. 4,926 crore during FY17, registering a year-on-year growth of 5.7%. Consolidated profit before tax (excluding the non-recurring and exceptional items) was at Rs. 360 crore during FY18 representing a year-on-year growth of 10.8%. Revenue growth was mainly driven by crop protection, vegetable oil and dairy business segments.

Animal Feeds:

The animal feed business of GAVL has shown a volume growth of 7.4% during FY18 driven by cattle feed and layer feed. GAVL was also successful in arresting the volume decline seen in the past few years in the broiler feed segment, despite intense competition. However, the volumes in the shrimp feed and fish feed segments saw a decline compared to FY17. GAVL continues to remain committed to invest in Research & Development in the animal feed space which will help GAVL in creating differentiated offering in the segment and help in increasing our market share over the medium-term.

Crop Protection Business:

In FY18, GAVL’s crop protection business has registered a growth of 13.2% in the standalone revenues. GAVL successfully introduced new products which helped in increasing the penetration both in strategic crops and in new geographies.

Oil Palm:

In the crude palm oil business, volumes growth remained robust for both crude palm oil and palm kernel oil. The Oil Palm business clocked a consolidated revenue of Rs. 585 crore in FY18. The business converts the oil palm biomass into value added product and this contributes to the profitability of the business. Latest technology has been deployed in this plant which is expected to increase the operational efficiencies.

Astec LifeSciences Limited & Its Subsidiaries:

Astec LifeSciences Limited is a subsidiary of GAVL and operates in the crop protection segment. In FY18, Astec’s consolidated performance remained robust as it posted revenues of Rs. 371 crore, a growth of 18.6% over the previous financial year. Profit before exceptional items and tax also increased to Rs. 52 crore during FY18 up by 31% on a year-on-year basis.

Creamline Dairy Products Limited (CDPL) & Its Subsidiary:

CDPL is a subsidiary of GAVL and operates in the dairy segment. CDPL focuses on increasing its market share in the southern states in which it operates. Further, CDPL also increased the share of value added products in its portfolio. CDPL recorded a revenue growth of 14.6% during FY18.

Joint Ventures (JVs) & Associates of GAVL:

Godrej Tyson Foods Limited:

The Joint Venture with Tyson Foods Inc., USA, recorded revenues of Rs. 434 crore during FY18 as compared to Rs. 446 crore during the previous year. The joint venture continues to focus on building its current brands namely ‘Real Good Chicken’ and ‘Yummiez’.

ACI Godrej Agrovet Private Limited, Bangladesh:

The joint venture continues to remain among the top four players in Bangladesh in all the feed categories it operates. ACI posted sales of Rs. 675 crore during FY18, registering a year-on-year growth of 11.8%.

Godrej Maxximilk Private Limited

Godrej Agrovet has 49.9% stake in this associate and GAVL has plans to foray in cattle breeding under this entity

Godrej Properties Limited (GPL)

Financial Highlights: For FY18, GPL’s total income increased by 38% and stood at Rs. 2,397 crore, EBITDA increased by 25% to Rs. 503 crore, and net profit increased by 14% to Rs. 235 crore.

Sales Highlights: This has been the best ever year in GPLs history in terms of the value and volume of real estate we have been able to sell. For the first time in its history, GPL has delivered sales of more than Rs. 1,000 crore in each of the four quarters of the financial year. Also, for the first time, GPL has emerged as amongst the top three developers by value of real estate sold in each of the four focus markets of Mumbai, NCR, Bangalore, and Pune. In FY18, GPL was the largest developer in NCR, the second largest developer in Mumbai & Pune, and the third largest developer in Bangalore by value of real estate sold. GPL sold more than 1.25 million sq. ft. with a booking value of over INR 800 crore in each of the four focus markets viz. Mumbai, NCR, Bangalore and Pune. This has largely been possible by combining our traditional strength in new launches with a strong improvement in sales from existing inventory, which stood at Rs. 2,780 crore in FY18. The total value of bookings in FY18 stood at Rs. 5,083 crore, which represents a 152% year-on-year increase. We are especially pleased with this sales performance given that sales for the industry as a whole have declined during the financial year.

Continued success in business development: FY18 has also been the best ever year for business development in the history of GPL in terms of the number of new projects added. GPL added 12 new projects with saleable area of 23.5 million sq. ft. More than 80% of the area added in FY18 is in partnership with other real estate developers and all the projects added are in the four largest real estate markets in India.

Global recognition for sustainability initiatives:

GPL was ranked 2nd in Asia & 6th globally by GRESB (Global Real Estate Sustainability Benchmark) - An industry-driven organization which assesses Environmental, Social and Governance (ESG) performance of real estate assets globally.

Outlook: The Indian real estate sector is on the cusp of a major transformation. Indias fragmented property sector is witnessing a major change as far-reaching reforms like the introduction of GST and The Real Estate (Regulation and Development) Act, 2016 (RERA) drive consolidation. These changes combined with the most affordable house prices in decades should lead to an improvement in sentiment which is extremely important for the revival of the sector. High-quality developers, with a greater focus on the residential market, will benefit disproportionately from this cyclical upturn. With growing transparency and improving policies, the country’s real estate sector is expected to become more institutionalized and we expect 2018 to be a year of consolidation and recovery for the property sector. We strongly believe our focus on building presence in high return markets with a deep focus on execution across our project portfolio puts us in a strong position to benefit from a robust recovery in the sector and improve market share in the years ahead.

Natures Basket Limited (NBL)

Natures Basket Limited delivered a healthy top line of Rs. 291 crore for FY18, a growth of 18% over the previous year.

NBL, during the year, worked on defining the long-term strategy for its business. Mumbai, Pune and Bangalore continue to be focus markets for NBL from the perspective of both revenue growth and profitability. NBL’s overall customer base increased by over 13% in FY18. NBL would like to excel and be a leading Omni Channel player by focusing strongly on Instore as well on line business channels in Daily Food Delight space. The online business clocked a sale of Rs. 19 crore in FY18, a growth of 10% over the previous year. NBL continues to improve its website and App experience through regular updates and improvements.

During the year, NBL introduced i-Pro, an Operations Excellence initiative, which looks to improve performance through: 1) Improved Inventory Management 2) Better customer experience 3) Increased staff efficiency.

The brand continues to win awards in forums like Food & Grocery forum, Franchise India Retail Award for Omni Chanel performance, TRRAIN awards for Customer service etc.

Godrej Consumer Products Limited (GCPL)

Godrej Consumer Products (GCPL), an associate of your Company, has continued to grow ahead of the overall FMCG sector, as well as the home and personal care categories that it participates in, despite a challenging macro environment.

On a consolidated basis, GCPL reported a total sales of Rs. 9862 crore during the FY18 compared to Rs. 9584 crore for FY17. The net profit grew by 25% at Rs. 1634 crore as compared to Rs. 1304 crore during FY17.

GCPL is a leading emerging markets company. As part of the 121-year young Godrej Group, GCPL is fortunate to have a proud legacy built on the strong values of trust, integrity and respect for others. At the same time, we are growing fast and have exciting, ambitious aspirations.

Today, the Godrej Group enjoys the patronage of 1.1 billion consumers globally, across different businesses. In line with its 3 by 3 approach to international expansion, GCPL is building a presence in 3 emerging markets (Asia, Africa, Latin America) across 3 categories (home care, personal wash, hair care). It ranks among the largest household insecticide and hair care players in emerging markets. In household insecticides, it is the leader in India, the second largest player in Indonesia and are expanding its footprint in Africa. It is the leader in serving the hair care needs of women of African descent, the number one player in hair colour in India and Sub-Saharan Africa, and among the leading players in Latin America. It also ranks number two in soaps in India and is the number one player in air fresheners and wet tissues in Indonesia.

However, it is very important that besides our strong financial performance and innovative, much-loved products, GCPL remains a good company. Approximately 23 per cent of the promoter holding in the Godrej Group is held in trusts that invest in the environment, health and education. We are also bringing together our passion and purpose to make a difference through our Good & Green approach to create a more inclusive and greener India.

At the heart of all of this, is a talented team. GCPL takes much pride in fostering an inspiring workplace, with an agile and high performance culture. It is also deeply committed to recognising and valuing diversity across our teams.

Other Subsidiaries

Godrej International Limited (GINL) is incorporated in the Isle of Man and is a wholly owned subsidiary of the company. GINL trades worldwide in vegetable oils.

Godrej International Trading & Investments Pte. Ltd. (GITI) is registered and located in Singapore and trades in palm and soya oil as well as in byproducts.

Vegetable oil markets were affected by adverse factors notably when India raised import duties in July, then in November 2017 and finally again in March 2018. India is the worlds biggest importer and casts a huge impact on price behavior. Uncertainty on bio diesel as a result of Trump

Administration wavering and EU protectionism also affected the market. As a result both GINL & GITI had a modest year. GINL & GITI continued to enjoy a high reputation in the industry for their market research and their frequent Markey Outlook releases.

Ensemble Holdings & Finance Limited (EHFL), a wholly owned subsidiary of your Company, is a Non-Banking Finance Company. The total income of EHFL for FY18 was Rs. 0.62 crore as compared to Rs. 0.15 crore in the previous year.

Pursuant to Regulation 16(1)(c) of the SEBI (Listing Obligations and disclosure requirements) Regulations, 2015 (Listing Regulations), your Company has formulated a policy for determining its ‘material subsidiaries’. The said policy has been uploaded on the Company’s website: http://www.godrejindustries.com/Resources/pdf/ compliances/material_subsidiaries.pdf

Financial Position

The loan funds at the end of the year stand at Rs. 2,704 crore as compared to Rs. 2,862 crore for the previous year. The Net debt equity ratio is 1.47 as compared to 1.76 last year. Your Company continues to hold the topmost rating of [ICRA] A1+ from ICRA for its commercial paper program ( Rs. 1000 crore) (previous year Rs. 1000 crore). ICRA has reaffirmed an [ICRA] A1+ rating for its short term debt instruments/other banking facilities ( Rs. 800 crore) (previous year Rs. 800 crore). This rating of ICRA represents highest-credit quality carrying lowest-credit risk. ICRA also reaffirmed [ICRA]AA rating with stable outlook for long-term debt, working capital and other banking facilities ( Rs. 1340 crore) (previous year Rs. 1015 crore). The ICRA rating of [ICRA]AA for Non-convertible Debenture programme & MAA+ for Public Deposit programme has been discontinued as there is no amount outstanding against these instruments. In addition to the ICRA rating for commercial paper programme, CRISIL has also assigned a rating of "CRISIL A1+" to the commercial paper programme of Rs. 1000 crore. Instruments with these ratings are considered to have very strong degree of safety regarding timely payment of financial obligations.

Manufacturing Facilities

Your Company has manufacturing units at Ambernath, Valia, Wadala and Dombivli.

The Ambernath factory is ISO-9001:2008, ISO 14001:2004, ISO 18001:2007 certified. Over the last year the factory also got re-certified for FSSC 22000 (Food safety management system) for Glycerine and ISO 22716 (Good manufacturing practices) for cosmetics. The factory has also achieved considerable energy savings over the last year

The Valia factory is ISO-9001:2015, ISO 14001:2015, ISO 18001:2007certified. The Factory has also got certification from FDA, FSSAI and Kosher GMP+B2 for Palmitic acid used as Animal feed. We are member of RSPO (Roundtable on Sustainable Palm Oil). The Valia factory has successfully got USP NF certification for fatty alcohol as excipient during the year 2017-18. Company has continuously invested in plants for making specialty products.

Vegoils Division (Wadala) manufactures & sells Edible Oils under "Godrej" Brand. This factory is ISO 22000-2005 (Food safety management system) certified. The factory also has Kosher and Halal certificate. This is also FSSAI and FDA approved facility with cleanroom to supply Pharmaceutical grade oils and Vanaspati (IP and BP) Packing facility under factory partially renovated as per Schedule IV of FSSAI norms. The factory produces variety of product range of oils & Vanaspati e.g. Sunflower oil, Ground nut oil, Filter Ground nut oil, Sesame oil, Rice bran oil, Palmolein oil and Vanaspati.

The Dombivali unit has flexibility of producing multiple value added products, mainly fatty esters and amide, used in personal and home care products.

Research and Development (R&D)

During the year under consideration, our R&D activities have resulted in the innovative process improvements for existing range of products and also launch of several new products. Majority of these new products are high value derivatives of fatty acids and fatty alcohols, with applications in home, personal care products, animal feeds and agricultural products.

Besides our efforts to manufacture and improve the premium quality fatty acids and fatty alcohols using alternate raw materials, the endeavor to develop new processes through innovations and advanced technologies will be an ongoing activity. We will also continue to focus our attention on high value fractionated fatty acids and fatty alcohols for the applications in polymer, oilfield, lubricant and paper industries. Parallel to all the above oleo chemicals projects, R&D continues its efforts in developing improved and customized specialty surfactants, biosurfactants and home & personal care ingredients and their blends, through inhouse and external consultation routes.

Human Resource Development and Industrial Relations

During the year under review, industrial relations at all plant locations remained harmonious.

Your Company emphasizes on the safety of people working in its premises. Structured safety meetings were held and safety programmes were organized for them throughout the year.

The total number of persons employed in your Company as on March 31, 2018 were 1129.

Business Responsibility Report

SEBI, vide its circular SEBI/LAD-NRO/GN/2015-16/27 dated December 22, 2015 had mandated inclusion of Business Responsibility Reports (BRR) as part of the Annual Reports for top 500 listed entities based on market capitalization as on March, 31 of every financial year.

A detailed report on your Company’s sustainability initiatives is published in the Business Responsibility Report, as ‘Annexure B’ and forms a part of this report. The BRR describes the initiatives taken by the Company from an environment, social and governance perspective.

Information Systems

Your Company had a smooth implementation of all GST related system changes in our ERP package

- SAP in time thus ensuring compliance with the new tax law.

Your Company implemented Sales and Operations Planning Module in SAP to increase customer satisfaction and enable better order fulfilment.

Employee Stock Grant Scheme 2011 (ESGS) and Employee Stock Option Plan (ESOP)

During the year, the Nomination and Compensation Committee approved a total of 1,03,828 stock grants equivalent to 1,03,828 equity shares of the Company to eligible employees in terms of the ESGS 2011 Scheme. The exercise price is Rs. 1/- per equity share. As on March 31, 2018 and in terms of the ESGS Scheme, 2011, a total of 1,34,866 grants were vested and 1,32,945 were exercised and allotted.

Disclosure in compliance with Section 62 of the Companies Act, 2013, rule 12 of companies (share capital and debentures) rules, 2014, SEBI (Share based employee benefits) regulations, 2014 and The SEBI (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines 1999 is given in Annexure C attached and forms a part of this report.

Fixed Deposits

Your Company is currently not accepting public deposits. The Company has no overdue deposits other than unclaimed deposits.

Depository System

Your Company’s equity shares are available for dematerialization through National Securities Depository Limited and Central Depository Services (India) Limited. As of March 31, 2018, 99.84% of the equity shares of your Company were held in demat form.

Directors

In accordance with the Articles of Association of the Company, the following directors retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for reappointment;

• Mr. V. M. Crishna (DIN: 00066267)

• Mr. N.S.Nabar (DIN: 06521655)

Your Company had appointed following Non-Executive (Independent) Directors pursuant to Regulation 17 of the Listing Regulations and they are not liable to retire by rotation as per Companies Act, 2013 (the Act);

• Mr. S.A.Ahmadullah (DIN 00037137)

• Mr. A. B. Choudhury (DIN 00557547)

• Mr. K. K. Dastur (DIN 00050199)

• Mr. K. M. Elavia (DIN 00003940)

•Mr. A.D.Cooper (DIN 00026134)

• Mr. K. N. Petigara (DIN 00066162)

Your Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed under sub-section (7) of Section 149 of the Act.

Your Company has conducted a formal Board Effectiveness Review as part of its efforts to evaluate, identify improvements and thus enhance the effectiveness of the Board, its Committees, and Individual Directors. This was in line with the requirements mentioned in the Act.

The HR team of the Company worked directly with the Chairman and the Nomination and Compensation Committee of the Board, to design and execute this process which was adopted by the Board. Each Board Member completed a confidential online questionnaire, providing vital feedback on how the Board currently operates and how it might improve its effectiveness.

The following reports were created, as part of the evaluation:

• Board Processes (including Board composition, strategic orientation and team dynamics);

• Individual Committees;

• Individual Board Members; and the Chairman

The overall Board Feedback Report was facilitated by Mr. A. B. Godrej, Chairman. The Individual Committees and Board Members’ feedback was shared with the Chairman. Following his evaluation, a Chairmans Feedback Report was also compiled.

On the recommendation of the Nomination & Compensation Committee, the Board had framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The details of the Board Appointment Policy are stated below:

Board Appointment Policy - Godrej Industries Limited (the "Company")

The Company is committed to equality of opportunity in all aspects of its business and does not discriminate on the grounds of nationality, race, colour, religion, caste, gender, gender identity or expression, sexual orientation, disability, age or marital status.

The Company recognises merit and continuously seeks to enhance the effectiveness of its Board. The Company believes that for effective corporate governance, it is important that the Board has the appropriate balance of skills, experience and diversity of perspectives.

Board appointments will be made on merit basis and candidates will be considered against objective criteria with due regard for the benefits of diversity on the Board. The Board believes that such merit-based appointments will best enable the Company to serve its stakeholders.

The Board will review this Policy on a regular basis to ensure its effectiveness.

The details of Directors familiarization program Pursuant to Regulation 25(7) of the Listing Regulations is uploaded on the Company’s website. http :// www.godrejindustries.com / listing -compliance.aspx

Key Managerial Personnel

There has been no change in the Key Managerial Personnel of the Company.

Statutory Auditors

Pursuant to section 139 of the Act, your Company has appointed M/s BSR & Co, LLP, Chartered Accountants (Firm Regn. No. 101248W/W-100022) as Auditors of the Company to hold office for the period commencing from the conclusion of the 29th Annual General Meeting on August 11, 2017 until the conclusion of the 34th Annual General Meeting in the year 2022, on a remuneration that will be approved by the Board.The Auditor’s Report for FY18 does not contain any qualification, reservation, adverse remark or disclaimer.

Cost Auditors

Pursuant to the provisions of Section 148 and other applicable provisions, if any, of the Companies Act, 2013, M/s. R. Nanabhoy & Co., Cost Accountants have been appointed as Cost Auditors of the Company for FY19. They are required to submit the report to the Central Government within 180 days from the end of the accounting year.

Secretarial Auditors

The Board has appointed M/s. A. N. Ramani & Co., Practicing Company Secretaries, to conduct Secretarial Audit for FY18. The Secretarial Audit Report for the financial year ended March 31, 2018 is annexed herewith marked as Annexure ‘G’ to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Audit Committee

The Audit Committee, constituted pursuant to the provisions of the Act and the Listing Regulations, has reviewed the accounts for the year ended March 31, 2018. The members of the Audit Committee are Mr. K. K. Dastur, Mr. S. A. Ahmadullah, Mr. K. N. Petigara and Mr. A. B. Choudhury, all Independent Directors.

Policy to Prevent Sexual Harassment at Work Place

Your Company is committed to creating and maintaining an atmosphere in which employees can work together without fear of sexual harassment, exploitation or intimidation. As required under the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, your Company has constituted an Internal Complaints Committee. No complaints were received by the committee during the year under review. Since the number of complaints filed during the year was NIL, the Committee prepared a NIL complaints report. This is in compliance with section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Secretarial Standards

The Directors state that applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to ‘Meetings of the Board of Directors’ and ‘General Meetings’, respectively, have been duly followed by the Company.

Directors’ Responsibility Statement

The Board has laid down Internal Financial Controls within the meaning of the explanation to section 134 (5) (e) ("IFC") of the Act. The Board believes the Company has sound IFC commensurate with the nature and size of its business. Business is however dynamic. The Board is seized of the fact that IFC are not static and will evolve over time as the business, technology and possibly even fraud environment changes in response to competition, industry practices, legislation, regulation and current economic conditions. There might therefore be gaps in the IFC as Business evolves. The Company has a process in place to continuously identify such gaps and implement newer and/or improved controls wherever the effect of such gaps might have a material effect on the Company’s operations.

Pursuant to the provisions contained in Section 134 of the Act, the Directors of your Company confirm:

a) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b) that such accounting policies have been selected and applied consistently, and such judgments and estimates have been made 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 and of the profit or loss of the Company for that period;

c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company, for preventing and detecting fraud and other irregularities;

d) that the annual accounts have been prepared on a going concern basis.

e) that the proper policies and procedures have been adopted for ensuring the orderly and efficient conduct of its business, including adherence to code of conduct and policies, the safeguarding of 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 and that such policies and procedures are adequate and were operating effectively.

f) that proper systems are in place to ensure compliance of all laws applicable to the Company and that such systems are adequate and operating effectively.

Corporate Governance

As required by the existing Regulation 34(3) of the Listing Regulations, a detailed report on Corporate Governance is included in the Annual Report. The Auditors have certified the Company’s compliance of the requirements of Corporate Governance in terms of Regulation 34(3) of the Listing Regulations and the same is annexed to the Report on Corporate Governance.

Disclosures and Information under the Companies Act, 2013

Pursuant to section 134 and any other applicable sections of the Act, following disclosures and information is furnished to the shareholders:

(a) Conservation of Energy, Technology absorption and Foreign Exchange Earnings and Outgo

‘Annexure D’ to this Report gives information in respect of Conservation of Energy, Technology absorption and Foreign Exchange Earnings and Outgo, required under Section 134(3)(m) of the Act and forms a part of the Boards’ Report.

(b) Extract of Annual return

The extract of the annual return as provided under sub section (3) of Section 92 of the Act is given in Form No. MGT 9 as ‘Annexure E’, attached and forms a part of this report.

(c) Board meetings

The Board of Directors of your Company met 5 (five) times during the year under review. The details of Board meetings and the attendance of the Directors are provided in the Corporate Governance Report.

(d) Loans, Guarantees & Investments

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act are given in the notes to the Financial Statements.

(e) Related Party Transactions

All related party transactions entered into by your Company during the financial year were on an arm’s length basis and were in the ordinary course of business. There were no materially significant related party transactions made by the Company with related parties. Prior omnibus approval of the Audit Committee was obtained for those transactions which were of routine nature. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3) (h) of the Act in Form AOC-2 is not applicable. Attention of members is also drawn to the disclosure of transactions with related parties set out in Note No. 40 of Standalone Financial Statements, forming part of the Annual Report. None of the Directors has any pecuniary relationships or transactions vis--vis the Company.

The policy on Related Party Transactions is uploaded on the Company’s website http://www.godrejindustries.com/Resources/ pdf/compliances/Policy-on-Related-Party-Transaction.pdf.

(f) Particulars of Employees:

Disclosures with respect to the remuneration of Directors and employees as required under Section 197 of the Act and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 has been appended as Annexure ‘F’ to this Report. The information required pursuant to Section 197 of the Act read with Rule 5(2) & (3) of the

Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of your Company is available for inspection by the members at registered office of the Company during business hours on working days up to the date of the ensuing Annual General Meeting. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary, whereupon a copy would be sent.

(g) Risk Management

Your Company had formed a Risk Management Committee consisting of the Managing Director and the Whole time Directors. The Committee identifies, evaluates business risks and opportunities. This Committee has formulated and implemented a policy on risk management to ensure that the company’s reporting system is reliable and that the company complies with relevant laws and regulations. The Board of Directors of your Company are of the opinion that, at present, there are no elements of risks which may threaten the existence of the Company.

Your Company has a vigil mechanism named Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Whistle Blower Policy are explained in the Corporate Governance Report and also posted on the website of the Company.

(h) Nomination & Remuneration Policy for Senior Management

The details relating to ratio of the remuneration of each director to the median remuneration of the employees of the Company for FY18 is given in ‘Annexure F’ attached and forms part of this Report.

The policy of your Company on director’s appointment and remuneration of the directors, key managerial personnel and other employees including criteria for determining qualifications, positive attributes, independence of a director, is stated below:

TOTAL REWARDS PHILOSOPHY

GODREJ INDUSTRIES LIMITED (the "Company")

Our Total Rewards Framework aims at holistically utilising elements such as fixed and variable compensation, long-term incentives, benefits and perquisites and non-compensation elements (career development, work life balance and recognition).

Highlights

The rewards framework offers you the flexibility to customise different elements, basis need. It is also integrated with our performance and talent management processes and designed to ensure sharply differentiated rewards for our best performers.

The total compensation for a given position is influenced by three factors: position, performance and potential. As a broad principle, for our high performers and potential employees, we strive to deliver total compensation at the 90th percentile of the market.

Total Compensation

The total compensation has three components:

1. ‘Fixed Compensation’ comprises of basic salary and retirement benefits, like provident fund and gratuity

2. ‘Flexible Compensation’ is a fixed pre-determined component of the compensation.

3. Variable Compensation (Performance Linked Variable Remuneration)’ rewards one for delivering superior business results and individual performance. It is designed to provide a significant upside earning potential without cap for over achieving business results. It has a ‘Collective’ component, which is linked to the achievement of specified business results, measured by Economic Value Added or other related metrics, relative to the target set for a given financial year and an ‘Individual’ component, based on the performance, as measured by the performance management process.

Long Term Incentives (Employee Stock Grant Scheme)

This scheme aims at driving a culture of ownership and focus on long-term results. It is applicable to senior managers. Under this scheme, performance based stock grants are awarded on the basis of performance.

(i) Financials

There are no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year to which the financial statement relates and the date of the report.

There are no qualifications, reservations or adverse remarks in the Auditors Report and the Secretarial Audit Report for FY18.

(j) Share Capital

During the year under review your company allotted 1,32,945 equity shares of Rs. 1 each upon exercise of stock option under Company’s Employee Stock Grants Scheme. Consequently, the paid up share capital of your Company has increased from Rs. 33,61,39,786/- divided into Rs. 33,61,39,786 equity shares of Rs. 1 each to Rs. 33,62,72,731/- divided into 33,62,72,731equity shares of Rs. 1 each.

(k) Significant Court Order received - None

(l) Amalgamation

The Board of Directors of your Company approved the Scheme of Amalgamation of Vora Soaps Limited with Godrej Industries Limited and their respective Shareholders (‘Scheme’) in their meeting held on 14th December, 2017. The Scheme was subject to the approval of the Hon’ble National Company Law Tribunal (‘NCLT’), shareholders and/ or creditors and such other competent authority as may be directed by the Hon’ble NCLT. Accordingly, the Scheme was filed with the Stock Exchanges for their approval and upon receipt of their no-objection letters, the company proceeded with filing an application u/s 230-232 with the Hon’ble NCLT which was admitted on 17th May, 2018. Pursuant to the directions of the Hon’ble NCLT, a meeting of the Equity Shareholders of the Company will be held and convened for the purpose of considering and if thought fit, approving with or without modifications the Scheme.

Additional Information

The consolidated financial statements of the Company forms a part of this Annual Report. Accordingly, this Annual Report of your Company does not contain the financial statements of its subsidiaries. The Audited Annual Accounts and related information of the Company’s subsidiaries will be made available upon request. These documents will also be available for inspection during business hours at the Company’s registered office in Mumbai, India. The subsidiary companies’ documents will also be available for inspection at the respective registered offices of the subsidiary companies during business hours.

Acknowledgement

Your Directors thank the Union Government, the Governments of Maharashtra and Gujarat as also all the Government agencies, banks, financial institutions, shareholders, customers, employees, fixed deposit holders, vendors and other business associates, who, through their continued support and co-operation, have helped as partners in your Company’s progress.

For and on behalf of the Board of Directors

A. B. Godrej
Chairman
Mumbai, May 23, 2018.