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Your Directors have pleasure in presenting their Twenty-Eighth Annual Report, together with the Audited Financial Statements of your Company for the year ended March 31, 2016.
FINANCIAL HIGHLIGHTS :
The financial performance of the Company for the year ended March 31, 2016 is summarized below:
(Rs. in lakhs)
|March 31, 2016||March 31, 2015||March 31, 2016||March 31, 2015|
|Revenue from Operations||35830||41146||45104||44326|
|Profit before Depreciation / Interest / Tax||32004||34296||41889||42525|
|Profit / (Loss) before Tax||1663||1634||(3818)||1204|
|Add : Extraordinary item||||350||||350|
|Add / (Less) : Provision for Tax||(327)||(504)||(376)||(743)|
|Excess / (Short) provision for taxation in respect of earlier years||671||313||687||266|
|Deferred Tax credit / (charge)||155||(497)||151||(501)|
|Prior Period Adjustments (net)||(32)||(221)||(97)||(445)|
|Minority Interest / Share of Profit / (Loss) from associates companies / pre-acquisition loss||||||579||(74)|
|Capital reserve written back on dilution||||||||17|
|Net Profit / (Loss) for the Year||2130||1075||(2874)||74|
|Balance Profit brought forward from Previous Year||70158||68233||61690||60766|
|Reversal of proposed equity dividend and tax thereon||||850||||850|
|Amount available for appropriation||72288||70158||58816||61690|
|Debenture Redemption Reserve|||||||||
|Dividend Distribution Tax|||||||||
|Balance carried to Balance Sheet||72288||70158||58816||61690|
|Earnings per Share before Extraordinary Item (Rs. ) (EPS)||2.93||1||(3.95)||0.1|
|Earnings per Share after Extraordinary Item (Rs.) (EPS)||2.93||1.48||(3.95)||0.1|
As a prudent economic measure and in order to conserve the scarce liquid resources of the Company, the Directors do not recommend any dividend on the equity shares for the year under review.
During the year under review, on a consolidated basis, your Companys :
Total Revenue stood at Rs. 49,384 lakhs;
Operational Expenditure was Rs. 7,495 lakhs;
Operating Profit (EBITDA) was Rs. 41,889 lakhs;
Loss before Tax stood at Rs. (3,818) lakhs; and
Loss after Tax for the year was Rs. (2,874) lakhs
On a standalone basis, your Companys :
Total revenue stood at Rs. 39,010 lakhs;
Operational Expenditure was Rs. 7,006 lakhs;
Operating Profit (EBITDA) was Rs. 32,004 lakhs;
Profit before Tax stood at Rs. 1,663 lakhs; and
Profit after Tax for the year was Rs. 2,130 lakhs
TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND:
Pursuant to the provisions of Section 124 of the Companies Act, 2013, the unclaimed dividend amount of Rs. 10,157/- for the year ended March 31, 2008 was transferred to the Investor Education and Protection Fund (IEPF) after giving due notices to the members.
During the financial year 2016-2017, the dividend declared by the Company for the Financial Year 2008-2009 remaining unclaimed in terms of Section 124 of the Companies Act, 2013 will be transferred to IEPF.
TRANSFER TO RESERVES :
No amount is proposed to be transferred to Reserves out of the profits earned during the Financial Year 2015-2016.
NATURE OF BUSINESS :
The Company is engaged in the business of execution and development of real estate projects. There was no change in the nature of the business of the Company during the year under review.
CHANGES IN SHARE CAPITAL :
During the year under review, there were no changes in the share capital of the Company. The Company has not issued shares with differential voting rights or sweat equity shares or granted stock options during the year under review.
During the year under review, the Company had not made any fresh issue of debentures or redeemed any of the existing debentures.
BUSINESS OVERVIEW :
Your Company is one of Indias leading real estate companies, engaged in the business of execution and development of real estate projects and currently operates both - on its own and through its subsidiaries / joint ventures / associate companies, partnerships firms and public private partnerships encompassing the construction and development of Residential and Commercial Premises, and Build Operate Transfer (BOT) Projects. The Company has a Western India focus with presence in major cities such as Mumbai, Thane, Pune, Ahmedabad, Surat, Vadodara and Mehsana.
OVERVIEW OF THE COMPANYS PROJECTS
(includes projects being developed / to be developed through subsidiaries / associates / joint ventures / public-private partnerships)
Project completed :
Hubtown Sunmist B Wing Andheri (East)
Hubtown Shikhar Andheri (East)
Hubtown Countrywoods Phase I Kondhwa, Pune
|Hubtown Sunmist A Wing - Andheri (East)||Hubtown Countrywoods Phase II Kondhwa, Pune|
|Hubtown Seasons Chembur||Hubtown Serene Bandra (East)|
|Hubtown Gardenia Mira Road||Hubtown Celeste Worli|
|Hubtown Greenwoods Thane||Hubtown Premiere Andheri (West)|
|Hubtown Heaven Matunga (East)||Rising City Ghatkopar-Mankhurd Link Road|
|Hubtown Vedant Sion (East)||Hillcrest Andheri (East)|
|Hubtown Sunstone Bandra (East)|
Twenty Five South Prabhadevi ; Hubtown Divinity Thane ; Hubtown Square Thane; Hubtown Jewell Andheri (West)
Hubtown Solaris Phase I Andheri (East) ; Hubtown Viva Andheri (East)
Hubtown Solaris Phase II Andheri (East) ; Hubtown Central Surat
Hubtown Central Ahmedabad ; Hubtown Central Mehsana ; Hubtown Central Vadodara
IT SEZ and Township:
Sunstream City Phase I - Mulund-Thane
MANAGEMENT DISCUSSION AND ANALYSIS :
The Management Discussion and Analysis Report, forming part of the Board Report for the year under review as stipulated under Regulation 34 (2) (e) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is discussed herein below.
REAL ESTATE SECTOR OVERVIEW :
The last few years have seen Indian real estate sector witness a quiet revolution, owing to a growing economy and a positive government attitude, which includes a liberalized foreign direct investment regime. The IT and ITES sector growth further had a domino effect since for every square foot of developed office area, around 10 sq. feet of residential space needed to be developed for accommodation of the employees. Almost 80 % of real estate developed in India is residential space and the rest comprises of offices, shopping malls, hotels and hospitals. After agriculture, real estate sector is the second largest employment generator in India and contributes heavily towards gross domestic product (GDP). The growth in the sector, supported by a series of reforms, has not only resulted in significant growth in residential and commercial real estate, but also complemented the development of physical and social infrastructure of the country. Five percent of the countrys GDP is contributed by the housing sector. In the next five years, this contribution to GDP is expected to rise further.
Real estate sector is also responsible for the development of over 250 other ancillary industries such as cement, steel, paints, glass, etc. The construction industry ranks third among 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.
In the year 2015, Indian real estate sector witnessed regulatory changes that included relaxing of foreign direct investment laws and the Union Cabinet approving the much awaited Real Estate Bill.
The Government of India has been supportive to the real estate sector. In August 2015, the Union Cabinet approved 100 Smart City Projects in India. The Government has also raised FDI limits for townships and settlements development projects to 100 per cent. Real estate projects within the Special Economic Zone (SEZ) are also permitted 100 per cent FDI. In Union Budget 2015-16, the government allocated US$ 3.72 billion for housing and urban development. The government has also released draft guidelines for investments by Real Estate Investment Trusts (REITs) in non-residential segment.
SEGMENT WISE PERFORMANCE : (KNIGHT FRANK RESEARCH)
Residential real estate growth in 2015 was not as good as expected. H1 2015 saw overall absorption exceeding the new supply for the first time in three years across the major cities. But the year 2015 ended with lowest number of new launches and sales volumes across top eight cities of India since 2010. While the sales volume during the year was similar to that of 2014, new launches fell sharply, by 22 percent. However, H2 2015 witnessed a marginal recovery in both launches and absorption as compared to H1 2015.
Absorption surpassed new completions for the second straight year across the top six cities of India, pushing vacancy levels to an eight year low. At around 35 million sq. ft., office space absorption was the second highest in the country after 2011. Vacancy levels reached 15.6 percent in H2 2015, significantly lower from the peak of 21 percent in 2012. The IT/ITES sector continued to lead in terms of absorption across the top six cities in H2 2015. The other services sector, which constitutes e-commerce, media, consulting and telecom, among others, accounted for 23 percent of the total office space absorbed in H2 2015. Commercial/office space rental increased across most cities in 2015.
The year 2015 saw hardly any quality retail space come in. The year 2015 witnessed a consolidation of retail real estate by brands and retailers who focused on their profit-making stores and closed down loss-making ones. Further, with the relaxation of FDI norms, it became easier for single-brand retail companies to explore the Indian market and set up e-commerce businesses independently.
Capital market transactions in real estate :
A number of big-ticket capital market deals in real estate were witnessed during 2015. Residential projects attracted significant investments but the majority of funds were routed into income-yielding office projects in 2015. In 2016, capital market deals in real estate are expected to scale a new high.
OPPORTUNITIES : (source KPMG Indian real estate Opening doors)
Real estate in India is a big opportunity. The rapid urbanization, nuclear family concept, higher disposable incomes, easier availability of credit, younger population, growing Indian economy, government focus on development of infrastructure, etc. will lead to huge demand. This demand will spread across all segment of the real estate sector.
Residential segment opportunity
The residential segment which contributes about 80 percent to the real estate sector is expected to grow significantly over the next few decades. It is estimated that Indian cities need to develop at-least two million houses annually for the growing population. Increased incomes, easy availability of finance, favourble interest rates and tax benefits have ensured that there will be a huge demand for residential properties. The opportunity is limited not only to the metros but percolates to Tier II and Tier III cities as well. Further, there was a housing shortage of about 18.7 million in 2012 (15th five year plan). Thus, India needs to develop almost 45-50 million housing units by 2028 (KPMG analysis).
Commercial segment opportunity
The commercial real estate market comprises of office, retail and industrial segments. It is primarily dependent on the growth in services (IT/ITES/BFSI) and industrial (logistic, warehouse and manufacturing) sectors of the economy.
IT/ITES sector is the major occupier of office space in India absorbing 52 percent of new office space which came up since 2010. Banking, Financial Services and Insurance (BFSI) are the second largest space occupiers in India occupying about 16 percent of the total office space. A major driver for commercial real estate could be the awarding of new banking licences by Reserve Bank of India, which would create demand for about 4.5-5 million sq. feet of office space in short term.
Retailing in India is expected to increase at CAGR of 8 percent from US $ 518 billion in 2012 to US $ 957 billion by 2020. The organized retail is expected to increase from US $ 41 billion to US $ 191 billion during the same period. However, 2016 is expected to witness a continued shortage of quality retail spaces.
The Indian Government is taking significant measures to promote growth in the manufacturing sector, a key driver of industrial real estate. Among the most prominent is the 1483 km long Delhi-Mumbai Industrial Corridor which is expected to significantly boost demand from industrial real estate.
Warehouse realty :
E-commerce has emerged as one of the main drivers for warehouse realty demand across the country after Third Party Logistics operators. An approximately 2 million sq. ft. of warehousing space was taken up by e-commerce firms in 2015, a significant jump as the share of the sector rose from a meager 2 percent of the total warehousing demand in 2012 to around 22 percent during 2015. The office space demand from e-commerce firms witnessed a 170 percent year-on-year growth from 0.7 million sq. ft. in 2014 to 2 million sq. ft. in 2015.
Healthcare and Education :
Growing and emerging residential nodes will enable growth in the healthcare and education sectors. The education sector is poised to see major growth in the future, as India will have the worlds largest population in the 18-24 age group and the second largest graduate talent pipeline globally by the end of 2020.
The healthcare sector is expected to nearly double in value from the current USD 144 billion to USD 280 billion by 2020.
RISKS AND CONCERNS :
Real Estate Specific Risks :
Fluctuations in market conditions may affect the ability to sell units at expected prices, which could adversely impact revenues and earnings.
Competition from existing as well as new players, both domestic as well as foreign.
Increase in interest rates may dampen the growth rate of demand for housing units.
Real estate price cycles have the maximum impact on the margins of the developers.
Unfavourable changes in government policies including change in tax structure would affect the growth of the real estate sector.
Liquidity Risk liquidity crisis on account of stoppage of lending funds to real estate sector by banks, financial institutions and other lending agencies, leading to stoppage of development activity.
Operational Risks longer gestation period for acquisition of land, non-availability of critical raw materials such as cement and steel, failure to comply with rules and regulations.
Shortage or sharp increase in prices of building materials could impact the project schedule and impact thereby the revenues and margins.
Delays in obtaining approvals from regulatory authorities.
Perennial shortage of semi-skilled and skilled labour.
Economic uncertainty and political fluidity can adversely impact the economy.
Human Resource Risk high attrition of skilled/trained manpower.
Retrospective policy changes and regulatory bottlenecks could impact the performance of real estate companies.
IT Risk loss/theft of important and confidential data and breakdown of IT system may adversely affect the Companys ability to monitor progress of the project, etc. and provide timely information about the projects to the customers,
Legal and Statutory Risk ownership and land title issues.
Lack of supporting infrastructure such as roads, highways, electricity, water, sewerage can hamper the growth of real estate.
Shift in consumer preference may adversely affect the Companys business and operating results.
Absence of land title insurance.
The real estate sector offers ample opportunities for development across verticals, but there are certain intrinsic challenges that hinder growth of the sector. The challenges in the Indian real estate can be broadly classified under five categories which are lack of suitable developable land, delays in obtaining approvals, issues in land title and insurance, inadequate funding challenges and shortage of manpower.
Lack of suitable developable land : Suitable developable land with basic infrastructure has become scarce in Indian cities. This has resulted in significant surge in land prices in the urban areas.
Strict and prolonged regulatory process leading to delays : The process of obtaining construction permit has become difficult over the last several years and is among the major reasons contributing to the delays in real estate development. The delay in obtaining approvals and adhering to regulatory processes results in avoidable time and cost overruns.
Land related issues : Lack of clear land titles and title insurance often makes difficult to acquire suitable land parcels. Absence of clear land titles sometimes results in long-drawn and expensive litigation for developers. Further, there is no single land policy in India and each state has its own policy which adds to the complexities.
Inadequate funding channels : Reserve Bank of India has set threshold for the total maximum exposure to real estate, including individual housing loans and lending to developers for construction finance. Absence of long term funding from banks results in developers tapping alternative sources of funds, most of which do not offer aflordable interest rates and hence the supply stified.
Shortage of manpower and technology : Despite being the second largest employer in the country, the real estate sector as a whole faces manpower shortage. The sector is heavily dependent on manual labour, faces longer time lines for construction completions, which results in supply getting deferred.
High construction costs : As the raw material costs increase over a period, it becomes very difficult to provide housing at a reasonable cost.
Uneven development of urban infrastructure.
OUTLOOK : (source KPMG Indian real estate Opening doors)
The real state sector which is deeply linked to the economic performance is expected to be a major beneficiary in the expected strong Indian economic growth. The major drivers supporting real estate sector include urbanization, rising income level, young population, and growing number of nuclear families and strong expected growth in the manufacturing and service sector. The share of the real estate sector in GDP is expected to increase from 6.3 percent in 2013 to 13 percent by 2028. In absolute terms, the size of the sector is expected to increase seven times to US $ 853 billion in 2028 from US $ 121 billion in 2013.
Drivers of the real estate sector :
Economic growth :
Indian economy is expected to be the fastest growing economy for the next few decades.
The growth could primarily be driven by infrastructure investment and the rising manufacturing and service sector.
Within the service sector, the growing IT and banking sectors are expected to significantly add to the demand for commercial real estate.
Rising income level :
The per-capita income in urban India is expected to triple from US $ 2,800 in 2012 to US $ 8,300 in 2028.
The rising income supports the growth of retail and residential real estate.
About 10 million people are moving to Indian cities every year.
Urban areas are expected to contribute 70-75 percent to nations GDP by 2025.
About two million houses are required to be developed each year, typically in the affordable segment.
Young and smaller families :
The average household size is expected to decrease from 4.8 currently to just above 4.4.
The fall in household size is expected to add about demand for 10 million new housing units.
About 35 percent of Indias population is between 15-35 age bracket which is expected to drive the demand for housing for over the next fifteen years.
In the mid-to-long term, the real estate sector can derive indirect but significant benefits of pro-growth initiatives launched by the Government of India viz. the Smart Cities Mission, Atal Mission for Rejuvenation and Urban Transformation (AMRUT), and the Housing for All Mission, all of which can help set off a new beginning in Indias urban areas, which are potentially key drivers of high rate economic growth. The relaxation in FDI norms for construction and realty bodies well for the future of the sector, as do initiatives such as Make in India, the introduction of GST (as and when) and the development of dedicated freight corridors, which can foster growth in key industries that support demand for industrial real estate.
High demand for ready-to-move in projects and increased focus on project completion will set the contours for the realty sector outlook in 2016.
Over the next five years, the Indian real estate market is expected to grow at a CAGR of 20 percent, driven by 18-19 percent growth in the residential segment, 55-60 percent in the retail real estate and 20-22 percent in the commercial real estate.
The investment activity in commercial real estate is also expected to heighten over the next couple of years with the government streamlining taxation and other issues related to real estate investment trusts (REITs).
FINANCIAL PERFORMANCE OVERVIEW :
During the year under review, the overall markets remained sluggish and slow. Your Companys performance was to a greater extent impacted due to continued inflation dampening investor sentiment, increased cost of capital, increased cost of construction and restrained demand from end-users. The operational cashflows were adversely impacted for major part of the year under review, resulting in intense pressure on profit margins.
The salient features of the financial performance for 2015-2016 are as hereunder :
Consolidated basis :
Income from operations stood at Rs. 45,104 lakhs as against Rs. 44,326 lakhs in the previous year;
Operational Expenditure was lower by 33.47 % at Rs. 7,495 lakhs as against Rs. 11,266 lakhs in the previous year;
Operating Profit (EBITDA) was lower by 1.5 % at Rs. 41,889 lakhs from Rs. 42,525 lakhs in the previous year;
Loss before Tax was Rs. (3818) lakhs as against profit of Rs. 1,204 lakhs in the previous year.
Loss after Tax, Minority Interest and Other Items was Rs. (2,874) lakhs as against profit of Rs. 74 lakhs in the previous year;
Earnings per Share before and after Extraordinary Item Rs. (3.95);
Networth of the Company stood at Rs. 170,695 lakhs as against Rs. 169,910 lakhs in the previous year.
Standalone basis :
Income from operations stood at Rs. 35,830 lakhs as against Rs. 41,230 lakhs in the previous year;
Operational Expenditure was lower by 37.15 % at Rs. 7,006 lakhs as against Rs. 11,148 lakhs in the previous year;
Operating Profit (EBITDA) was lower by 6.68 % percent to Rs. 32,004 lakhs from Rs. 34,296 lakhs in the previous year;
Profit before Tax and Extraordinary Item was marginally higher at Rs. 1,663 lakhs as against Rs. 1,634 lakhs in the previous year;
Profit after Tax and Other Items was Rs. 2,130 lakhs, higher by 98.14 % as against Rs. 1,075 lakhs in the previous year;
Earnings per Share before and after Extraordinary Item Rs. 2.93;
Networth of the Company stood at Rs.173,273 lakhs as against Rs. 171,143 lakhs in the previous year.
HUMAN RESOURCES :
The Company recognizes that its people are the key to the success of the organization and in meeting its business objectives. The Human Resources function endeavours to create a congenial work environment and synchronizes the working of all the departments of the organization to accomplish their respective objectives, which in turn helps the Company to build and achieve its goals and strategies. Employee relations during the year remained cordial.
The Company had 269 employees on its payroll as on March 31, 2016.
INTERNAL FINANCIAL CONTROLS :
The Company has in place adequate internal financial controls with reference to the financial statements. These are routinely tested and certified by the Statutory as well as Internal Auditors. Significant audit observations and follow-up action thereon are reported to the Audit and Compliance Committee.
Your Companys control system and procedures are regularly reviewed for relevance and effectiveness and changed as per the needs of business environment.
Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the Internal, Statutory and Secretarial Auditors and the reviews performed by the Management, the Board is of the opinion that the Companys internal financial controls were adequate and effective during the Financial Year 2015-2016.
DIRECTORS AND KEY MANAGERIAL PERSONNEL:
Mr. Arvind Kumar Joshi, an Independent Director resigned from the Board of Directors of the Company effective April 29, 2016. Your Directors place on record its sincere appreciation of the invaluable contribution made by Mr. Arvind Kumar Joshi to the deliberations of the Board and the Committees of the Board of which he was a member during his tenure.
In accordance with the provisions of Section 152 (6) (e) of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Vyomesh M. Shah (DIN : 00009596), Director of the Company, who retires by rotation, and being eligible, offers himself for reappointment.
Based on the recommendations of the Nomination and Remuneration Committee, Mr. Hemant M. Shah and Mr. Vyomesh M. Shah, were reappointed as Executive Chairman and Managing Director respectively for a period of five years each, effective January 01, 2017 to December 31, 2021, by the Board of Directors in its meeting held on June 22, 2016, subject to the approval of the shareholders in the ensuing Annual General Meeting.
The Notice convening the ensuing Annual General Meeting includes the proposals for appointment / reappointment of Director/Executive Chairman/ Managing Director.
DECLARATION BY INDEPENDENT DIRECTORS :
Pursuant to the provisions of Section 149 (7) of the Companies Act, 2013, the Company has received individual declarations from all the Independent Directors confirming that they meet the criteria of independence under Section 149 (6) of the said Act and Regulation 16 (1) (b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
NO. OF MEETINGS OF THE BOARD OF DIRECTORS :
The Board of Directors met 4 times during the financial year ended March 31, 2016 in accordance with the provisions of the Companies Act, 2013 and the Rules made thereunder and Regulation 17 (2) of of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. During the year ended March 31, 2016, the Independent Directors held a separate meeting in compliance with the requirements of Schedule VI to the Companies Act, 2013 and Regulation 25 (3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. For details, kindly refer to the section on Corporate Governance forming part of this Annual Report.
COMMITTEES OF THE BOARD
There are currently five Committees of the Board, as under:
Audit and Compliance Committee
Corporate Social Responsibility Committee
Nomination and Remuneration Committee
Stakeholders Relationship Committee
Risk Management Committee
Details of the aforesaid Committees including their composition, terms of reference and meetings held during the year under review, are provided in the section on Corporate Governance, which forms part of this Annual Report.
ANNUAL EVALUATION OF PERFORMANCE :
During the year under review, the Board has carried out an evaluation of its own performance, the directors individually as well as the evaluation of the working of its Committees of the Board. The evaluation of the Board and its Committees was based on objective and tangible criteria, including the composition, performance of the Company, accomplishment of long term strategic objectives, blending of ethics and business and the development of management, etc. The evaluation of individual director was based on the effective contribution by the director concerned, the commitment to the role including commitment of time for Board and Committee meetings and any other duties.
The performance evaluation of the Independent Directors was carried out by the entire Board excluding the Director being evaluated. The performance of Non-Independent Directors and the Chairman of the Company was carried out by the Independent Directors at their duly convened meeting.
POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION :
The Nomination and Remuneration Policy of the Company on Directors appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under Section 178 (3) of the Companies Act, 2013 and Regulation 19 (4) (Part D of Schedule II) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is appended as Annexure A to this Annual Report.
DIRECTORS RESPONSIBILITY STATEMENT :
Pursuant to sub-section (3) (c) of Section 134 (5) of the Companies Act, 2013, in relation to the audited financial statements of the Company for the year ended March 31, 2016, the Directors of your Company, to the best of their knowledge and belief and on the basis of the information and explanations received by them, hereby state and confirm that :
(i) in the preparation of the Annual Accounts for the year ended March 31, 2016, the applicable accounting standards read with the requirements under Schedule III to the said Act have been followed alongwith proper explanation relating to material departures, if any;
(ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year on 31st March, 2016, and of the profit of the Company for the year ended on that date;
(iii) they have taken proper and suficient 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;
(iv) the annual accounts have been prepared on a going concern basis;
(v) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
(vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively.
SUBSIDIARIES, JOINT VENTURE ENTITIES AND ASSOCIATE COMPANIES :
As on March 31, 2016, the Company had 21 subsidiaries, 7 joint venture entities and 5 associate companies. There has been no change in the nature of business of the any of the said subsidiaries, joint venture entities and associate companies.
During the year under review :
(i) Devkurpa Build Tech Limited, ceased to be a wholly owned subsidiary and instead became a subsidiary of the Company;
(ii) Citywood Builders Private Limited became a wholly owned subsidiary of the Company;
(iii) Sheshan Housing and Area Development Engineers Limited ceased to be a subsidiary of the Company;
(iv) Yellowcity Builders Private Limited and Comral Realty Private Limited respectively ceased to be associates of the Company.
A statement pursuant to Section 129 (3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, containing the salient features of the performance and the financial statements of the subsidiaries, joint venture entities and associates companies for the financial year ended March 31, 2016 in the prescribed Form AOC 1 is appended to the consolidated financial statements as Schedule - I.
The Policy for determining material subsidiary under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as approved is posted on the Companys website at the link: http://hubtown.co.in/admin/uploaddir/Policy%20on%20Subsidiaries%20.pdf .
In accordance with third proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company, containing therein its standalone and the consolidated financial statements has been placed on the website of the Company at the link: http://hubtown.co.in/admin/uploaddir/ Annual%20Report%20-%202015-2016.pdf .
Further, as per fourth proviso of the said Section, the audited annual accounts of each of the subsidiary companies has also been placed on the website of the Company at the link: http://hubtown.co.in/admin/uploaddir/All%20Subsidiaries-BS-2015(1).pdf.
The Company shall provide a copy of the annual accounts of its subsidiary companies to the members of the Company and also to the members of subsidiary companies on their request. The annual accounts of the subsidiary companies will also be available for inspection at the Registered Office of the Company between 11.00 a.m. and 1.00 p.m. on all working days.
During the financial year ended March 31, 2016, the Company was not required to appoint an Independent Director of the Company on the Board of any of its non-listed Indian subsidiary under Regulation 24 (1) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Additional information as required under Schedule III to the Companies Act, 2013 in respect of entities consolidated as subsidiaries/associates/joint ventures is furnished in Note 1 to the consolidated financial statements.
REPORT ON THE PERFORMANCE AND THE FINANCIAL POSITION OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES :
As required under Section 129 of the Companies Act, 2013 and SEBI Listing Regulations, the consolidated financial statements have been prepared by the Company in accordance with the applicable accounting standards and form part of this Annual Report. A statement on the performance and the financial position of subsidiaries, associates and joint ventures companies included in the consolidated financial statements is appended in Form No. AOC 1 as Schedule I to the consolidated financial statements and hence not repeated here for the sake of brevity.
Statutory Auditors :
M/s. Dalal Doshi & Associates, Chartered Accountants, (Firm Registration No. : 121773W) (DDA) were reappointed as Statutory Auditors of the Company to hold office from the conclusion of the 26th Annual General Meeting (AGM) held on September 25, 2014 until the conclusion of the 29th AGM of the Company to be held in the year 2017 (subject to ratification of their appointment by the members at every AGM held after the AGM held on September 25, 2014).
The Board, in terms of Section 139 of the Companies Act, 2013, on the recommendation of the Audit and Compliance Committee, has recommended for the ratification of the members, the appointment of DDA as Statutory Auditors from the conclusion of the ensuing AGM till the conclusion of the next AGM to be held in the year 2017.
The Company has received a certificate from the said Auditors to the effect that their reappointment, if made, would be in accordance with the Companies Act, 2013 and the Rules framed thereunder and that they satisfy the criteria prescribed in Section 141 of the Companies Act, 2013.
As required under Regulation 33 (d) of the Listing Regulations, the Statutory Auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.
A resolution for ratification of the appointment of the said Auditors is included in the Notice of Annual General Meeting for seeking approval of the members.
Further, there have been no instances of fraud reported by the Auditors under Section 143 (12) of the Companies Act, 2013 and the Rules made thereunder either to the Company or to the Central Government.
Cost Auditors :
Based on the recommendation of the Audit and Compliance Committee, the Board has appointed M/s. D. C. Dave & Co., Cost Accountants (Firm No. : 000611) in place of M/s. N. I. Mehta & Co., Cost Accountants as Cost Auditors to conduct audit of the cost records of the Company for the year ending March 31, 2017, subject to the ratification of the remuneration payable to them by the members in the ensuing Annual General Meeting pursuant to Section 148 of the Companies Act, 2013.
COST AUDIT REPORT :
The Cost Audit Report for the Financial Year 2015-2016 pursuant to the Companies (Cost Accounting Records) Rules, 2011 will be filed within the period stipulated under the Companies Act, 2013.
Secretarial Audit Report :
Pursuant to the provisions of Section 204 (3) of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors has appointed M/s. Ashish Bhatt & Associates, Practicing Company Secretary, to conduct the Secretarial Audit of the Company.
In terms of Section 204 (1) of the Companies Act, 2013, the Report of the Secretarial Auditor on the Companys Secretarial Audit is appended to this Report as Annexure B. The said Report does not contain any qualifications or observations or adverse remarks or disclaimers requiring explanation from the Board under Section 134 (3) of the Companies Act, 2013.
AUDIT AND COMPLIANCE COMMITTEE :
As on March 31, 2016, the Audit and Compliance Committee comprised of three Independent Directors namely Mr. Abhijit Datta as Chairman of the Committee, Mr. Arvind Kumar Joshi (upto April 29, 2016) and Mr. Sunil C. Shah and one Non-Independent Executive Director Mr. Vyomesh M. Shah.
Kindly refer to the section on Corporate Governance under the heading Audit and Compliance Committee for matters relating to constitution, meetings and functions of the said Committee.
AUDIT AND COMPLIANCE COMMITTEE RECOMMENDATIONS :
During the year under review, all the recommendations put forth by the Audit and Compliance Committee were duly considered and accepted by the Board of Directors. There were no instances of non-acceptance of such recommendations.
AUDITORS REPORT AND AUDIT OBSERVATIONS :
The Statutory Auditors have : (i) stated an Emphasis of Matter and "Other Matters" and made certain observations in clauses (vii) (a) and (ix) of the Annexure referred to in their Report on the Standalone Financial Statements for the year ended March 31, 2016; (ii) stated an Emphasis of Matter and "Other Matters" in their Report on the Consolidated Financial Statements for the year ended March 31, 2016 and the response of your Directors thereto is as follows
Emphasis of Matter
In respect of clauses (a), (b), (c), (d), (e), (f) and (g) of the Auditors Report on Standalone Financial Statements and in respect of clauses (a), (b), (c), (d), (e), (f), (g) and (j) of the Auditors Report on Consolidated Financial Statements, the relevant Notes to the Standalone Financial Statements and the Consolidated Financial Statements respectively are self explanatory and do not call for further clarification/elaboration.
Regarding Clause (h) of the Auditors Report on Standalone Financial Statements and Consolidated Financial Statements respectively with respect to corporate social responsibility expense which is subject to cheque realization by the recipient trust, the Directors have to state that the recipient trust has informed the Company that it was inadvertently and through oversight, the cheque issued by the Company towards CSR expense was not deposited in the bank account of the recipient trust.
Regarding clause (k) of the Auditors Report on the Consolidated Financial Statements with respect to non-availability of consolidated financial statements of two subsidiaries of the Company, footnote (a) to Note 13 of the Consolidated Financial Statements is self explanatory.
Regarding clause (l) of the Auditors Report on the Consolidated Financial Statements with respect to non-availability of financial statements of one associate of the Company, the Directors have to state that the investment by the Company in the said associate is purely temporary in nature and further, the Company does not exert control on the management of the said associate.
In respect of clauses (a) and (b) of the Auditors Report on the standalone financial statements the Auditors observations thereon and Note 12 (footnote e), are self explanatory and do not call for further information/clarification.
As regards the Auditors observations in clauses (vii) (a) and (ix) of the Annexure referred to in their Report on the Standalone Financial Statements for the year ended March 31, 2016, the Directotrs have to state that :
"The delays caused by the Company in making timely payment of the statutory dues and payment of principal and interest on its borrowings have been due to prolonged recession in the real estate industry owing to slowdown in demand, inordinate delays in approval process, inflationary pressures, liquidity crunch and costly debt. The Company is also facing lack of adequate sources of finance to fund development of its real estate projects resulting in delayed realisations from its customers and lower availability of funds to discharge its liabilities. The Company is exploring alternative sources of finance to generate adequate cash inflows for meeting these obligations and to overcome this temporary liquidity shortage and is hopeful that these eflorts will yield fruitful results."
VIGIL MECHANISM :
Pursuant to Section 177 (9) and (10) of the Companies Act, 2013 and Regulation 22 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has established a Whistle Blower Policy as a vigil mechanism for Directors and employees to report their genuine concerns, details of which have been given in the Corporate Governance Report annexed to this Annual Report. The Whistle Blower Policy has been uploaded on the Company website at the link: http://hubtown.co.in/admin/uploaddir/REVSIED%20WHISTLE%20BLOWER%20POLICY%20 29.05.2014%20-%20Copy.pdf.
Risk evaluation and management is an ongoing process within the organization. The Board of Directors of the Company has framed a Risk Management Policy to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified by the functions are systematically addressed through mitigating actions on a continuing basis.
EXTRACT OF ANNUAL RETURN :
Pursuant to the provisions of Section 134 (3) (a) of the Companies Act, 2013, the extract of the Annual Return for the Financial Year ended March 31, 2016 made under the provisions of Section 92 (3) of the said Act in Form No. MGT 9 is appended as Annexure C to this Report.
MATERIAL CHANGES AND COMMITMENTS :
No material changes or commitments which could affect the financial position of the Company have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this Report, other than those disclosed in this Report.
During the year under review, the Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.
PARTICULARS OF LOANS, INVESTMENTS OR GUARANTEES UNDER SECTION 186 OF THE COMPANIES ACT, 2013
The details of the loans given, investments made, guarantees given and securities provided under Section 186 of the Companies Act, 2013, have been provided in the Notes to the Financial Statements.
CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES :
All contracts / arrangements / transactions with related parties that were entered into by the Company during the year under review were on an arms length basis and in the ordinary course of business. There were no materially significant related party transactions with the Companys Promoters, Directors, Key Managerial personnel or their relatives which could have had a potential confiict with the interest of the Company at large. All related party transactions are placed before the Audit Committee and also to the Board for approval.
Attention of the members is drawn to Note 33 to the standalone financial statements and Note 35 to the consolidated financial statements which sets out related party disclosures.
The particulars of a material contract with a related party entered into by the Company during the year under review are furnished in Form No. AOC-2, which is appended as Annexure D.
The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board is uploaded on the Companys website at the link: http://hubtown.co.in/admin/uploaddir/Policy%20on%20Related%20Party%20Transactions.pdf.
CONSOLIDATED FINANCIAL STATEMENTS :
The Consolidated Financial Statements of the Company which have been prepared in accordance with the relevant Accounting Standards (AS) viz. AS 21 Consolidated Financial Statements, AS 23 Accounting for Investments in Associates and AS 27 Financial Reporting of interests in Joint Ventures issued by the Institute of Chartered Accountants of India form part of this Annual Report.
CODE OF CONDUCT :
As prescribed under Part D of Schedule V read with Regulation 17 (5) of the Listing Regulations, a declaration signed by the Managing Director afirming compliance with the Code of Conduct by the Directors and Senior Management Personnel of the Company for the Financial Year 2015-2016 is annexed to and forms part of the Corporate Governance Report.
DISCLOSURE OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY REGULATORS OR COURTS OR TRIBUNAL
During the year under review, there were no significant or material orders passed by any regulatory / statutory authorities or courts / tribunals against the Company impacting its going concern status and operations in future.
CORPORATE GOVERNANCE :
The Report on Corporate Governance as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of the Annual Report. The Certificate from a practising company secretary confirming compliance with the conditions of Corporate Governance as stipulated under Schedule V to the aforementioned Listing Regulations is annexed to and forms part of the Corporate Governance Report.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 :
The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at Work Place (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. The Company afirms that during the year under review, no cases were filed /reported under the provisions of the said Act.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO :
The nature of operations of the Company does not require disclosure of particulars relating to conservation of energy and technology absorption, as prescribed under Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules, 2014. During the year under review, the Company had Nil foreign exchange earnings and had incurred an expenditure of Rs. 134 lakhs in foreign exchange.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES:
The information required to be disclosed in the Directors Report pursuant to Section 197 (12) of the Companies Act, 2013, read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in Annexure E to this Report.
During the Financial Year 2015-2016, 5 (five) persons employed throughout the financial year were in receipt of remuneration of not less than Rs. 60 lakhs per annum and 1 (one) person employed for part of the financial year was in receipt of remuneration of not less than Rs. 5 lakhs per month. The information as per Rule 5 (2) & (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of the employees of the Company, forms part of this Annual Report. However, as per first proviso to Section 136 (1) of the Act and second proviso to Rule 5 (2) of the said Rules, the Annual Report and the Financial Statements are being sent to the members of the Company excluding the statement of particulars of employees under Rule 5 (2) & (3) of the said Rules. Any member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company. The said statement would also be available for inspection by the members at the Registered Office of the Company during business hours on working days upto the date of the ensuing Annual General Meeting.
PAYMENT OF REMUNERATION/COMMISSION TO EXECUTIVE DIRECTORS FROM SUBSIDIARY COMPANIES
During the year under review, neither the Executive Chairman nor the Managing Director were in receipt of any remuneration/commission from any of the subsidiary companies of the Company.
CORPORATE SOCIAL RESPONSIBILITY (CSR) :
The Company has constituted a Corporate Social Responsibility Committee in accordance with the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 (the Rules). The details required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 are given in the CSR Report appended as Annexure F to this Report. Further, the CSR Policy has been uploaded on the Company website at the link : http://hubtown.co.in/admin/uploaddir/HUBTOWN%20CSR%20POLICY.pdf.
All the insurable interests of your Company including inventories, buildings and other assets are adequately insured.
CEO AND CFO CERTIFICATION :
A certificate from the Managing Director and the Chief Financial Officer, pursuant to Regulation 17 (8) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 for the year under review was placed before the Board of Directors of the Company at its meeting held on June 22, 2016 which is annexed to and forms part of the Corporate Governance Report.
APPRECIATION AND ACKNOWLEDGEMENTS :
Your Directors place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment. The Directors also take this opportunity to thank all Investors, Suppliers, Vendors, Banks, Financial Institutions, Business Associates, Contractors, Government and Regulatory Authorities and Stock Exchanges for their continued support during the year.
Your Directors would also like to thank the members for reposing their confidence and faith in the Company and its management.
Certain statements made in the Directors Report and the Management Discussion and Analysis may constitute forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Several factors could make significant difference to the Companys operations that include labour and material availability, and prices, cyclical demand and pricing in the Companys principal markets, changes in interest rates, changes in government regulations, tax regimes, economic development within India and other incidental factors. The Company does not undertake any obligation to publicly update any forward looking statements, whether as a result of new information, future events or otherwise.
|For and on behalf of the Board|
|Hemant M. Shah|
|Mumbai, June 22, 2016.||DIN : 00009659|
REVISED NOMINATION AND REMUNERATION POLICY
[Efiective from December 1, 2015]
1. PREAMBLE :
i. Pursuant to Section 178 (2) and (3) of the Companies Act, 2013 (the Act) and Part A of Part D of Schedule II to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI Listing Regulations, 2015), provides inter-alia that :
The Nomination and Remuneration Committee shall formulate the criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board of Directors, a policy relating to, the remuneration of the directors, key managerial personnel and other employees.
The Nomination and Remuneration Committee shall identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down, and recommend to the Board of Directors their appointment and removal and shall carry out evaluation of every directors performance.
ii. Therefore, in order to ensure compliance with the aforesaid provisions of the Act and SEBI Listing Regulations, 2015, the Nomination and Remuneration Committee (N&RC) of the Board of Directors of Hubtown Limited has formulated this Nomination and Remuneration Policy.
iii. This Policy shall replace the existing Nomination and Remuneration Policy recommended by Nomination and Remuneration Committee and approved by the Board of Directors in its meeting held on February 12, 2015).
2. GUIDING PRINCIPLES :
The objectives of this Policy is to ensure that :
i. The level and composition of remuneration is reasonable and suficient to attract, retain and motivate Directors of the quality required to run the Company successfully;
ii. Relationship of remuneration to performance is clear and meets appropriate performance benchmark; and
iii. Remuneration to Directors, Key Managerial Personnel and Senior management involves a balance between fixed and incentive pay reflecting short and long term performance objectives appropriate to the working of the Company and its goal.
3. DEFINITIONS :
i. Board means the Board of Directors of the Company;
ii. Company means Hubtown Limited;
iii. Executive Directors shall mean the Wholetime Director and the Managing Director of the Company;
iv. Independent Director means a director referred to in Section 149 (6) of the Companies Act, 2013;
v. Key Managerial Personnel means
Officer Chief Executive or the Managing Director or the manager;
Chief Financial Officer ; and
Such other officer as may be prescribed
vi. Nomination and Remuneration Committee shall mean a Committee of Board of Directors of the Company, constituted in accordance with the provisions of Section 178 of the Companies Act, 2013 and Regulation 19 (1) of SEBI Listing Regulations, 2015;
vii. Policy or This Policy means the Nomination and Remuneration Policy;
viii. SEBI Listing Regulations, 2015 shall mean Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015;
ix. Senior Management means personnel of the Company who are members of its core management team excluding the Board of Directors. This would include all members of management one level below the Executive Directors including all functional heads. Words and Expressions used in this Policy but not defined shall have the same meaning as given in the Companies Act, 2013 read with the Rules made thereunder and SEBI Listing Regulations, 2015, as may be amended from time to time.
4. TERMS OF REFERENCE OF THE NOMINATION AND REMUNERATION COMMITTEE :
The terms of reference of the Nomination and Remuneration Committee (N&RC) are as under :
i. to identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down in this Policy. recommend to the Board their appointment and removal;
ii. to carry out evaluation of every directors performance;
iii. to formulate the criteria for determining the qualifications, positive attributes and independence of a director, and recommend to the Board a policy, relating to the remuneration for the directors;
iv. to formulate the criteria for evaluation of Independent Directors and the Board;
v. to devise a policy on Board diversity;
vi. to recommend/review the remuneration of the Wholetime Director(s) and the Managing Director based on their performance and defined assessment criteria;
vii. to ensure that the level and composition of remuneration is reasonable and suficient and the relationship of remuneration to performance is clear and meets appropriate performance benchmark;
viii. to assist the Board in ensuring that plans are in place for orderly succession for appointments to the Board and to senior management;
ix. to carry out any other functions as may be mandated by the Board from time to time and/or enforced by any statutory notification, amendment or modification, as may be applicable; and
x. to carry out such other functions as may be necessary or appropriate for the performance of its duties.
5. MEMBERSHIP OF THE N&RC COMMITTEE :
i. The Committee shall consist of atleast 3 (three) Directors, all of whom shall be Non-Executive Directors and atleast half of such Directors shall be Independent Directors;
ii. The Board shall reconstitute the Committee as and when required to comply with the provisions of the Companies Act, 2013 and applicable statutory requirement;
iii. Minimum 2 (two) members shall constitute a quorum for the Committee meeting;
iv. Membership of the Committee shall be disclosed in the Annual Report;
v. Terms of the Committee shall continue unless terminated by the Board.
vi. The Chairperson of the Company may be appointed as a member of the Company but shall not chair such Committee.
6. CHAIRMAN OF THE N&RC COMMITTEE :
i. The Chairman of the Committee shall be an Independent Director;
ii. In the absence of the Chairman, the members of the Committee present at the meeting shall choose one amongst them to act as a Chairman;
iii. The Chairman of the Committee could be present at the Annual General Meeting or may nominate some other member to answer the shareholders queries.
7. FREQUENCY OF MEETINGS :
The meeting of the Committee shall be held at such regular intervals as may be required.
8. N&RC COMMITTEE MEMBERS INTEREST :
i. A member of the Committee is not entitled to be present when his or her own remuneration is being discussed at a meeting or when his or her performance is being evaluated; and
ii. The Committee may invite such Executives of the Company, as it considers appropriate, to be present at the meetings of the Committee.
9. SECRETARY OF N&RC COMMITTEE :
The Company Secretary of the Company shall act as Secretary of the Committee.
10. VOTING AT N&RC MEETINGS:
i. Matters arising for determination at Committee meetings shall be decided by a majority of votes of members present and voting and any such decision shall for all purposes be deemed a decision of the Committee;
ii. In the case of equality of votes, the Chairman of the meeting shall have a casting vote.
11. APPOINTMENT AND REMOVAL OF EXECUTIVE AND NONfiEXECUTIVE / INDEPENDENT DIRECTORS, KEY MANAGERIAL PERSONNEL (KMP) AND SENIOR MANAGEMENT PERSONNEL :
Appointment criteria and qualifications :
i. The Committee shall identify and ascertain the integrity, qualification, expertise and experience of the person for appointment as Director, KMP or at Senior Management level and recommend to the Board his/her appointment as per the Companys Policy;
ii. A person should possess adequate qualification, expertise and experience for the position he/she is being considered for appointment, The Committee shall have the discretion to decide whether qualification, expertise and experience possessed by a person is/are suficient / satisfactory for the concerned position; and
iii. The Company shall not appoint or continue the employment of any person as Managing Director/Wholetime Director who has attained the age of seventy years. Provided that the term of the person holding this position may be extended beyond the age of seventy years with the approval of the shareholders by a special resolution based on the explanatory statement annexed to the notice for such motion indicating justification for extension of appointment beyond seventy years.
Tenure of Office :
The Company shall appoint or reappoint any person as its Managing Director or Wholetime Director for a term not exceeding 5 (five) years at a time. No reappointment shall be made earlier than one year before the expiry of the term.
i. An Independent Director shall hold office for a term upto five consecutive years on the Board of the Company and will be eligible for reappointment on passing of a special resolution by the Company and disclosure of such appointment in the Boards Report;
ii. An Independent Directors shall not be liable to retire by rotation.
iii. No Independent Director shall hold office for more than two consecutive terms, but such independent Director shall be eligible for appointment after the expiry of three years of ceasing to be an Independent Director; Provided that the Independent Director shall not, during the said period of three years, be appointed in or be associated with the Company in any capacity, either directly or indirectly; and
iv. At the time of appointment of an Independent Director, the Committee shall ensure that the no. of Boards on which such Independent Director serves is restricted to 7 (seven) listed companies as an Independent Director and three listed companies as an Independent Director in case such person is serving as a Wholetime Director of a listed company.
i. The Committee shall carry out evaluation of performance of each Director on a yearly basis;
ii. The Committee shall monitor and review Board evaluation framework, conduct an assessment of the performance of the Board, each Board Committee, the Independent Directors and the Chairperson of the Board against criteria determined and approved by the Committee;
iii. The performance evaluation of Independent Directors shall be done by the entire Board of Directors, on the basis of recommendations of the Committee (excluding the Director being evaluated);
iv. The Independent Directors shall review the performance of Non-Independent Directors and the Board as a whole;
v. The Independent Directors shall review the performance of the Chairperson of the Company taking into account the view of the Committee, and the Non-Executive Directors; and
vi. The criteria for performance evaluation is given in Annexure I. However, these criteria are only suggestive and the Board /Directors may consider such other criteria as it/they may deem necessary for effective evaluation of performance.
Due to any reason for any disqualification mentioned in the Companies Act, 2013,the Rules made thereunder or under any other applicable Act, Rules and Regulations, the Committee may recommend to the Board with reasons recorded in writing, the removal of a Director, KMP or Senior Management, subject to the provisions and compliance of the said Act, Rules and Regulations and the Policy of the Company.
The Director, KMP and Senior Management shall retire as per the applicable provisions of the Companies Act, 2013 and the prevailing policy of the Company. The Board will have the discretion to retain the Director, KMP and the Senior Management Personnel in the same position / remuneration or otherwise even after attaining the retirement age, for the benefit of the Company.
12. POLICY RELATING TO THE REMUNERATION OF EXECUTIVE AND NONfiEXECUTIVE / INDEPENDENT DIRECTORS, KMP AND SENIOR MANAGEMENT PERSONNEL :
Remuneration Policy for Executive Directors :
i. The remuneration and commission to be paid to the Executive Directors shall be as per the statutory provisions of the Companies Act, 2013 and the Rules made thereunder, for the time being in force;
ii. Payment of remuneration to the Executive Directors is governed by the respective agreements executed between each of such Executive Directors and the Company;
iii. The remuneration / commission to be paid to the Executive Directors will be determined by the Committee and recommended to the Board for approval.
iv. The break-up of the pay scale and the quantum of perquisites and allowances shall be decided by the Committee;
v. The remuneration / commission, etc. shall be subject to prior/post approval of the shareholders of the Company and the Central Government, wherever required;
vi. Increments to the existing remuneration/compensation structure may be recommended by the Committee to the Board which should be within the time scale approved by the shareholders. The effective dates of increments shall be at the discretion of the Board;
vii. If, in any financial year the Company has no profits or its profits are inadequate, the Company shall pay remuneration to its Managerial Person in accordance with the provisions of Schedule V to the said Act and if it is not able to comply with such provision, with the prior approval of the Central Government;
viii. If any Executive Director draws or receives, directly or indirectly by way of remuneration any such sums in excess of the limits prescribed under the Companies Act, 2013 or without the prior sanction of the Central Government, where required, he/she shall refund such sums to the Company and until such sum is refunded, hold it in trust for the Company. The Company shall not waive the recovery of such sum refundable to it unless permitted by the Central Government.
Remuneration Policy for Non-Executive / Independent Directors :
i. The remuneration and commission to be paid to the Non-Executive / Independent Directors shall be in accordance with the statutory provisions of the Companies Act, 2013 and the Rules made thereunder for the time being in force;
ii. The Non-Executive/Independent Directors are paid remuneration by way of fees for attending the meeting of the Board/Committee thereof. Provided that the amount of such fees shall not exceed the maximum amount as provided in the Companies Act, 2013 per meeting of the Board/Committee or such amount as may be prescribed by the Central Government from time to time;
iii. The commission may be paid within the monetary limits approved by the shareholders, subject to the limits not exceeding 1 % of the net profit of the Company computed as per the applicable provisions of the Companies Act, 2013 and
iv. An Independent Director shall not be entitled to any stock option of the Company.
The overall managerial remuneration shall not exceed 11 % (eleven) percent of the net profit of the Company computed in the manner laid down in Section 198 of the Act.
Remuneration for KMP, Senior Managerial Personnel and Other Employees:
i. This Policy aims at attracting, retaining and motivating high caliber talent and ensures equity, fairness and consistency in rewarding the employees.
ii. The performance of the individual, as well as that of the Company forms the basis of this Policy.
iii. The KMP, Senior Management Personnel and other employees of the Company shall be paid monthly remuneration as per the Companys HR Policies and/or as may be approved by the Committee;
iv. The salary structure of the employees including KMP and Senior Management comprises of basic salary, perquisites, allowances and performance incentive. The salary involves a balance between fixed and variable pay which reflects the performance objective of the individual as against the earmarked Key Performance Indicator and the strategic objective and the performance of the Company.
v. The components of total remuneration vary for different grades of employees and are based on the qualifications and experience of the employee, responsibilities handled and the individual performance.
vi. In case any of the relevant Statute/Rules/Regulations require that the remuneration of KMPs, Senior Management or other employees of the Company is to be specifically approved by the Committee and/or the Board of Directors, then such approval(s) shall accordingly be obtained.
13. FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS :
The Company shall familiarize the Independent Directors with the Company, its business model, their roles, rights, duties and responsibilities in the Company, the nature of the industry in which the Company operates, through various programmes.
The details of such programmes shall be disclosed on the Companys website and a web link thereto shall also be given in the Annual Report.
14. INSURANCE POLICY :
Where any insurance policy is taken by the Company on behalf of the Executive Directors, Non-Executive and Independent Directors, KMP, Senior Management Personnel and any other employees of the Company, the premium paid on such insurance shall not be treated as part of the remuneration payable to any such personnel. Provided that if such person is proved to be guilty, the premium paid on such insurance shall be treated as part of the remuneration.
15. IMPLEMENTATION OF THE POLICY :
The N&RC Committee may issue guidelines, procedures, formats, reporting mechanism and manuals as supplement(s) to this Policy and for better implementation thereof.
16. DELEGATION OF AUTHORITY :
The Committee may delegate any of its powers to one or more of its members as may be deemed necessary for proper and expeditious implementation.
17. DEVIATIONS FROM THE POLICY :
Deviations from elements of this Policy in extraordinary circumstances, when deemed necessary in the interests of the Company shall be made if there are specific reason to do so in an individual case.
18. EXTERNAL ASSISTANCE :
The Committee, may in its sole discretion, seek the advice of external experts/consultants at the Companys expense for enabling it to discharge its duties and responsibilities.
19. DISCLOSURE OF THE POLICY:
This Policy and the evaluation criteria shall be uploaded on the Companys website and be also disclosed in the Annual Report as part of the Boards Report therein.
20. AMENDMENTS TO THE POLICY :
This Policy is based on the requirements of the Companies Act, 2013 read with the Rules made thereunder and SEBI Listing Regulations, 2015. In case of any amendment(s), clarification(s), circular(s), etc., issued by the relevant authorities, not being consistent with the provisions of this Policy, then such amendment(s), clarification(s), circular(s), etc., shall prevail upon the provisions hereunder and this Policy shall stand amended accordingly from the effective date stated under such amendment(s), The provisions in this Policy would then be modified in due course to make it/them consistent with law.
SUCCESSION PLAN FOR APPOINTMENT TO THE BOARD AND SENIOR MANAGEMENT
1. INTRODUCTION :
Regulation 17 (4) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the Listing Regulations) provides that the Board of every listed company shall satisfy itself that plans are in place for orderly succession for appointment to the Board of Director and Senior Management. Regulation 16 (1) (d) of the Listing Regulations defines Senior Management to mean officers /personnel of the listed entity who are members of its core management and normally this shall comprise all members of the management one level below the executive directors including all functional heads.
2. OBJECTIVE :
The objective of this Policy is to make a plan for orderly succession for appointment to the Board and the Senior Management.
3. PROCESS :
I. Board Level Appointment(s) :
The Nomination and Remuneration Committee of the Board of Directors of the Company shall identify suitable persons from among the existing top management or from the external sources to fill up the vacancy at the Board level. The appointment of such person at the Board level shall be in accordance with the applicable provisions of the Companies Act, 2013 and the Rules made thereunder and the terms of Corporate Governance under the Listing Regulations.
II. Senior Management Level Appointment :
The vacancy at Senior Management Level shall be filled up by the Chairman or the Managing Director as the case may be in line with the HR Policy adopted by the management, keeping in view the Companys mission, vision, values, goals and objectives.
4. REVIEW OF THE POLICY :
The Board shall review the Succession Policy periodically and if required, will make suitable changes keeping in view the regulatory changes or changes in the business/industry norms.
ANNEXURE - I
PERFORMANCE EVALUATION CRITERIA
1. Section 178 (2) of the Companies Act, 2013 stipulates that the Nomination and Remuneration Committee of Directors shall carry out evaluation of every Directors performance.
2. Para A of Part D of Schedule II to SEBI Listing Regulations, 2015 provides that the Nomination and Remuneration Committee shall formulate criteria for evaluation of Independent Directors and the Board.
3. Pursuant to Regulation 25 (3) and (4) of SEBI Listing Regulations, 2015, the Independent Directors shall hold atleast one meeting in a year without the presence of non-independent directors and members of the management to inter-alia : i. Review the performance of the non-independent directors and the Board as a whole; ii. Review the performance of the Chairperson of the Company, taking into account the view of the Executive Directors and Non-Executive Directors; and iii. Assess the quality, quantity and timeliness of the flow of information between the Company management and the Board that is necessary for the Board to effectively and reasonable perform their duties.
4. Pursuant to Regulation 17 (10) of SEBI Listing Regulations, 2015, the performance evaluation of the Independent Directors shall be done by the entire Board excluding the Director being evaluated.
5. Section 134 (3) (p) of the Companies Act, 2013 provides that there shall be attached to the Boards Report, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees and individual Directors.
6. The assessment criteria for determining the effectiveness of Board / Directors performance is given below. However, these criteria are only suggestive / illustrative and the Board/ Directors may consider such other criteria as they may deem necessary for effective evaluation of performance.
BOARD OF DIRECTORS :
3. Contribution to achievement of corporate objectives.
4. Contribution to robust and effective risk management.
5. Communication of expectations and concerns clearly.
6. Assuring appropriate Board size, composition, independence, structure.
7. Timely resolution of issues at meetings.
8. Identify, monitor and mitigate significant corporate risks.
9. Efiective meetings.
10. Companys approach to Corporate Governance.
11. Clearly defining roles and monitoring activities of Committees.
12. Review of Companys ethical conduct.
13. Assess policies, structures and procedures.
14. Communication of the Board with the management team, key managerial personnel and other employees.
15. Regular monitoring of corporate results against projections.
17. Review and approval of strategic operational plans, objectives and budgets.
18. Boards relationships inside and outside the boardroom.
19. Boards handling of crisis or problems.
20. Adequacy and quality of feedback to the management on its requirements.
COMMITTEE OF BOARD OF DIRECTORS :
1. Suitability of matters reserved for the Committee(s).
2. Diversity of experiences, backgrounds and appropriate composition.
3. Committee monitors compliance with corporate governance norms, law, regulations and guidelines.
4. Communication of the Committee(s) with the management team, key management personnel and other employees.
5. Committee demonstrates integrity, credibility, trustworthiness, willingness to actively participate, ability to constructively handle confiict, inter- personal skills, and proactiveness.
6. Committee dedicates appropriate time and resources to execute its responsibilities.
7. Committee meetings are conducted in an effective manner, with time being spent primarily on significant issues.
8. The quality and timeliness of the flow of information to the Committee.
9. Adequacy and quality of feedback by the Committee(s) to the management on its requirements.
NON-EXECUTIVE DIRECTORS :
1. Contribution to corporate leadership and stewardship.
2. Commercial and business acumen.
3. Familiarity with the Companys operations and the industry in which the Company operates.
4. Contribution to achievement of corporate objectives.
5. Constructive contribution to resolution of issues at meetings.
6. Promotion of the Companys interest externally.
7. Interpersonal relationship with other Directors and management.
8. Level of ethical awareness
9. Willingness to devote necessary time including attendance at meetings, extent of preparedness for meetings, willingness to participate in Committee work.
10. Efiective and proactive follow-up on any areas of concern.
11. Updated on the latest developments in areas such as corporate governance framework and financial reporting, the industry and market conditions.
INDEPENDENT DIRECTORS (ID) :
1. Level of preparedness for the meetings of the Board / Committee.
2. Willingness to devote time and eflort to understand the Company and its business model.
3. Quality and value of their contribution to the Board / Committee deliberations.
4. Attendance at the meetings of the Board / Committee(s) of which he/she is a member.
5. Helps in bringing an independent judgment to bear on the Boards deliberations.
6. Relationship with fellow Board members. the management team, key management personnel and other employees.
7. Knowledge and understanding of current industry and market conditions.
8. Efiective and proactive follow-up on any areas of concern.
9. Refrains from any action that would lead to loss of his / her independence.
10. Participates constructively and actively in the Committees of the Board of which he/she is a Chairperson or member.
11. Exercises his / her responsibilities in a bonafide manner in the interest of the Company.
12. Devotes suficient time and attention to his / her professional obligations for informed and balanced decision making.
EXECUTIVE DIRECTORS :
1. Actively manages shareholder, board, management and employee relationships and interests.
2. Meets with the potential investors equity and debt capital.
3. Manages shareholder meetings effectively and promotes a sense of participation in all shareholders and shareholder confidence in the Board.
4. Promotes effective participation of all board members in the decision making process.
5. Demonstrates effective leadership of the Board .
6. Takes action correct deficiencies / short comings noted.
7. Provides opportunities to the Board members to raise issues and express concerns on significant matters.
8. Relationship and communication within the Board is constructive.