huhtamaki india ltd share price Directors report


Your Directors have pleasure in presenting the 74th Annual Report of Huhtamaki India Limited (‘Company‘) along with the Audited Statements of Accounts for the year ended December 31, 2023.

FINANCIAL HIGHLIGHTS

Your Companys financial performance during the year was as under:

(B in Million)

Particulars 2023 2022
Net Sales 24,813.2 29,165.0
Profit/(Loss) before Tax & Exceptional Item 1,305.1 559.3
Exceptional Item Income/(Expenses) 3,695.3 -
Profit/(Loss) after Exceptional items & before Tax 5,000.4 559.3
Less: Provision for Current Tax 803.8 172.9
Provision for Deferred Tax 100.3 (110.0)
Profit/(Loss) for the year 4,096.3 496.4
Opening balance of Retained Earnings 5,805.0 5,390.4
Other Comprehensive Income/(Loss) for the year 1.5 (6.3)
Dividend on Equity Shares for the year (151.0) (75.5)
Adjustment relating to prior periods - -
Closing balance of Retained Earnings 9,751.8 5,805.0

BUSINESS PERFORMANCE

The Company registered net sales of B24,813 Million, as compared to B29,165 Million for the previous year representing 15% decrease. Profit before Exceptional Items and Tax stood at B1,305 Million as compared to B559 Million for the previous year. While there has been an erosion in the topline during the year, partly due to strategic position taken and partly due to lower offtake in some specific categories, the Company has reported more than double the Profit before Exceptional Items and Taxes and delivered an impressive PBT. We accelerated the strategy execution with network optimisation, consolidation of Manufacturing footprint, Operational efficiency and Cost productivity initiatives to deliver better profitability.

The Company has reported an income of B3,695 Million (Net) categorised as Exceptional Income for the Year, primarily stemming from the divestment of Land and Building at two former manufacturing sites. This income was partially offset by costs incurred in implementing the Voluntary Retirement Scheme (VRS) for employees at the Khopoli and Hyderabad Plant, along with minor expenses related to the restructuring of manufacturing facilities.

The Company continues to focus on enhancing the efficiency of its manufacturing network, reducing operational wastage through World-Class Operations (WCO) initiatives and aims to optimise the efficiency of its sourcing and supply chain network, leveraging raw material procurement efficiencies. Simultaneously, the Company strategises to scale up its profitable core business while driving transformational projects. across the organisation.

DIVIDEND

Your Directors have recommended a dividend of B5/- per equity share of B2/- each (250%). This dividend is subject to the approval of the Members at the forthcoming annual general meeting and if approved, Members whose name appear on the register of Members on April 24, 2024 will be entitled to the dividend.

This would involve a total cash outflow of B 377.6 Million. The declaration of dividend is in accordance with the Companys Dividend Distribution Policy which is available on the Companys website and can be accessed at https:// www.huhtamaki.com/en-in/flexible-packaging/investors/ corporate-governance-and-policies/policies/.

PUBLIC DEPOSITS

The Company did not invite or accept deposits covered under Chapter V of the Companies Act, 2013 and there are no deposits outstanding with the Company.

BORROWINGS

The Company continued to optimise borrowings during the year by focusing on cash flows and working capital management. During the year, the Company has availed Working Capital Demand Loan and issued Commercial Papers for funding Working Capital. The Company has repaid the entire short-term borrowing from proceeds received on account of sale of its land at Thane. Borrowings as of December 31, 2023, have reduced by B1,632 Million compared to December 31, 2022.

TRANSFER TO RESERVES

The Company is not required to transfer any amount to its reserves and accordingly no amount is transferred to reserves during the year under review.

SUBSIDIARY COMPANIES AND FINANCIAL STATEMENTS

The Company does not have a subsidiary and Form AOC-1 is not required to be provided. In accordance with the provisions of Section 136 of the Companies Act, 2013, the audited financial statements, and related information of the Company are available on the website of the Company: www.flexibles. huhtamaki.in.

MANAGEMENT DISCUSSION AND ANALYSIS

A review of the performance and future outlook of the Company and its businesses, as well as the state of the affairs of the business, along with the financial and operational developments have been discussed in detail in the Management Discussion and Analysis Report, which forms part of the Annual Report.

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

Information pursuant to the provisions of Section 134 of the Companies Act, 2013 and the rules framed thereunder, relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, forms part of this Report and is given at Annexure 1.

DIRECTORS & KEY MANAGERIAL PERSONNEL

Mr. Stefan Lotz retires at the forthcoming Annual General Meeting by rotation and being eligible, has offered himself for re-appointment. Details of the proposed re-appointment have been provided in the Explanatory Statement to the Notice of the 74th Annual General Meeting of the Company pursuant to Section 102 of the Companies Act, 2013. The Board has recommended his re-appointment.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received necessary declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and SEBI Listing Regulations, 2015 and the same has been noted by the Board of Directors.

The Board of Directors are of the opinion that Mr. Murali Sivaraman, Ms. Seema Modi and Mr. Ashok Kumar Barat, Independent Directors of the Company meet the necessary criteria for continuing as Independent Directors of the Company, including having cleared the proficiency self-assessment test conducted by the Institute notified under sub-section (1) of Section 150 of the Act.

PERFORMANCE EVALUATION AND REMUNERATION POLICY

The Nomination and Remuneration Committee follows a robust process for evaluation of the Board and the Committees, including each other and the Chair. Every member of the Board and Committees independently rates the performance of the Board, Committees, the other Directors and the Chair, against the criteria prescribed by the NRC and offers their feedback. The Corporate Governance Report, annexed to the Annual Report, details the process followed.

The Company has in place a policy for appointment and remuneration of Directors and Key Managerial Personnel, encompassing the criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Section 178(3) of the Act, and Part D of Schedule II of the Listing Regulations. The above policy along with the criteria for selection is available on the Companys website at https://www.huhtamaki.com/en-in/ flexible-packaging/investors/corporate-governance-and-policies/policies/.

MEETINGS OF THE BOARD

During the year, the Board met 6 (six) times. Particulars of attendance of directors at the said meetings are given in the Corporate Governance Report, which forms part of the Annual Report.

AUDITORS AND AUDITORS REPORT

M/s. BSR & Co. LLP, Chartered Accountants, (Firm Registration No. 101248W/W-100022) were appointed as the statutory auditors of the Company for a term of five years from the conclusion of the 70th Annual General Meeting till the conclusion of the 75th Annual General Meeting.

The Auditors Report to the Members on the Accounts of the Company for the year ended December 31, 2023, is a part of the Annual Report. The said Audit Report does not contain any qualification, reservation, or adverse remark.

There are no instances of fraud which are required to be reported by the auditors under Section 143(12) of the Act and rules framed thereunder, either to the Company or to the Central Government.

COST RECORDS AND COST AUDITORS

The Company is required to maintain the cost records as specified by the Central Government in terms of Section 148(1) of the Companies Act, 2013 and accordingly such accounts and records are prepared and maintained by the Company.

On the recommendation of the Audit Committee, the Board of Directors appointed M/s. R. Nanabhoy & Co., Cost Accountants as the Cost Auditors of the Company for conducting the audit of the cost records maintained by the Company for the Financial year 2024. M/s. R. Nanabhoy & Co., have confirmed that they are free from any disqualifications as specified under Section 141(3) and proviso to Section 148(3) read with Section 141(4) of the Companies Act, 2013. They have further confirmed their independent status. Pursuant to the provisions of Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules 2014, a resolution seeking members approval for the ratification of remuneration payable to the Cost Auditors for the Financial Year 2024 forms part of the notice of the 74th Annual General Meeting of the Company and the same is recommended for your consideration and approval.

SECRETARIAL AUDIT & ANNUAL SECRETARIAL COMPLIANCE REPORT

The Board of Directors had appointed M/s. S. N. Anantha subramanian & Co., Company Secretaries, to conduct Secretarial Audit for FY2023 pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The Secretarial Audit Report received from the Secretarial Auditors is annexed to this Report as Annexure 2. The said Audit Report does not contain any qualification, reservation, or adverse remark.

The Annual Secretarial Compliance Report issued in terms of Regulation 24A of the Listing Regulations forms part of the Annual Report and has been submitted to the stock exchanges within 60 days of the end of the financial year. During the Year 2023, your Company has complied with the applicable Secretarial Standards issued by the Institute of Companies Secretaries of India.

HUMAN RESOURCES AND PARTICULARS OF EMPLOYEES

People are our biggest asset and the Company is invested in the holistic development, health and well-being of our employees. The Company has been providing continuous skill upgradation and learning opportunities through structured training programmes, career discussions and individual development plans. A detailed note on Human Resources forms part of the Annual Report.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed to this Report as Annexure 3.

The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms part of this report. In terms of Section 136 of the Companies Act, 2013 the Report and Accounts are being sent to the Members and others entitled thereto, excluding the aforesaid information. Any member interested in obtaining such information may write to the Company at investor.communication@huhtamaki.com and the same will be furnished on request.

PARTICULARS OF CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

During the year under review: a) all contracts/arrangements/transactions entered by the Company with related parties were in its ordinary course of business and on an arms length basis; b) contracts/arrangements/transactions were entered into with related parties in accordance with the Policy of the Company on Materiality of Related Party Transactions and on dealing with Related Party Transactions.

The Company has not entered into any contract/arrangement/ transaction with related parties which is required to be reported in Form No. AOC-2 in terms of Section 134(3) (h) read with Section 188 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The Company has not granted any loans or made any investments or provided any guarantees or security to the parties covered under Sections 185 and 186 of the Act, during the financial year ended December 31, 2023.

CORPORATE SOCIAL RESPONSIBILITY

In compliance with the requirements of Section 135 of the Act, the Company has constituted a ‘Corporate Social Responsibility (CSR) Committee and has also framed a CSR Policy. The details of the policy, composition of the Committee, CSR initiatives, CSR expenditure during the year etc., have been provided as Annexure 4 to this report, as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended.

Your Company is committed to CSR and strongly believes that the business objectives of the Company must be in congruence with the legitimate development needs of the society in which it operates. During the year under review, the Company set off B10.9 Million and incurred additional expenses of B14.6 Million towards CSR activities.

The CSR projects of the Company are primarily focused in the areas of environmental sustainability, healthcare, promotion of education and skill development, social welfare and rural development and providing drinking water, sanitation facilities and hygiene.

ETHICAL BUSINESS PRACTICES AND GOVERNANCE

The Company lives by its values Care Dare Deliver – with integrity. The Company is committed to foster an atmosphere of openness and transparency and maintaining the highest ethical standards in everything it does. The Company sees compliant and ethical business conduct as responsible leadership and something that is relevant for all its employees and in every business transaction that the Company is involved.

Huhtamaki Ethics and Compliance programme focuses on Huhtamakis commitment to integrity and legal compliance across the organisation. The programme serves as a toolkit supporting Huhtamaki in conducting its business in compliance with laws, regulations and ethical standards and ensuring that the Company has adequate procedures in place to prevent it from taking part in any unethical business activities.

RISK MANAGEMENT

Risk Management at Huhtamaki aims to identify potential events that may affect the achievement of Huhtamakis objectives as outlined in its 2030 Strategy. Its purpose is to manage risks to a level that the Company is capable and prepared to accept so that there is reasonable assurance and predictability regarding the achievement of the Companys objectives. The aim is also to enable the efficient allocation of resources and risk management efforts.

The Company has formulated Risk Management Policy to review and control risk and has constituted a Risk Management Committee which oversees and monitors implementation of the Policy, validates the process of risk management and mitigation and periodically reviews and evaluates the Companys Risk Management Policy.

Recommendations/Observations of the Risk Management Committee are taken to the Board. The Committee and the Board review the Risk Assessment procedures periodically to ensure that risk including Information technology and Cyber Security risks are controlled/mitigated by the management. In 2023, the management identified and assessed strategic, operational and financial risks and opportunities. Risk treatment actions were defined in order to reach acceptable risk levels at each stage. The risks were reviewed by the Risk Management Committee twice during the year and taken note of by the Board of Directors.

INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY

Internal control is an essential part of the corporate governance and management of the Company. The Company has defined the operating principles for internal control. The Audit Committee monitors the effectiveness and efficiency of the internal control systems and the correctness of the financial reporting. The aim of internal control is to ensure reliability of financial reporting, effectiveness and efficiency of operations as well as compliance with laws and regulations. Control of financial reporting assures that financial statements are prepared in a reliable manner. The aim is also to ensure that all financial reports published and other financial information disclosed by the Company provide a fair view on the Companys financial situation. Control of operations is aimed at ensuring effectiveness and efficiency of operations and achievement of the Companys strategic and financial objectives. Control of compliance ensures that the Company follows applicable laws and regulations. Details in respect of adequacy of internal financial controls with reference to the Financial Statements are given in the Managements Discussion and Analysis, which forms part of the Annual Report.

Internal audit: The objective of the internal audit is to improve the effectiveness of supervising obligation of the Board. Internal audit aims at ensuring that the Companys operations are efficient, information is adequate and reliable and that set policies and procedures are properly followed by the organisation.

The internal audit function reports to the Audit Committee. The Audit Committee approves the annual internal audit plan. Audit Committee has two meetings in a year dedicated exclusively to focus on internal audit observations, key findings, conclusions and recommendations for control improvements. The implementation of the action plan is followed up periodically by the line management and reviewed by Internal Audit function.

ANNUAL RETURN

As required under Section 92(3) of the Act, the Company has placed a copy of the annual return on its website and the same is available in the Investors Section on the Companys website at the link given below. The Annual Return for the year would be updated once the same is filed with the Registrar of Companies in due course. https://www.huhtamaki.com/en-in/flexible-packaging/ investors/financials/annual-reports/

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 134(3)(c) and 134(5) of the Act, the Board of Directors of the Company confirms: a) that in the preparation of the annual financial statements for the year ended December 31, 2023, the applicable accounting standards have been followed along with proper explanation relating to material departures if any; b) that such accounting policies as mentioned in Note 2 of the Notes to the Accounts have been selected and applied consistently and judgement 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 as on December 31, 2023, and of the profit of the Company for the year ended on that date; c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) that the annual financial statements have been prepared on a going concern basis; e) that proper internal financial controls have been laid down to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and f) that the proper systems to ensure compliance with the provisions of all applicable laws are in place and were adequate and operating effectively.

INSOLVENCY AND BANKRUPTCY CODE 2016

Neither any application has been made nor any proceeding is pending in respect of the Company under the provisions of Insolvency and Bankruptcy Code 2016.

OTHER DISCLOSURES/REPORTING

• The Company has not issued any equity shares with differential rights as to dividend, voting or otherwise;

• The Company has not issued any shares (including sweat equity shares) to employees of the Company under any scheme;

• Neither the Executive Director nor the Whole-Directors of the Company receive remuneration commission from any of its subsidiaries;

• No significant or material orders were passed by Regulators or Courts or Tribunals which impact the going concern status and Companys operations in future;

• There have been no material changes and commitments, if any, affecting 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.

APPRECIATION AND ACKNOWLEDGEMENT

The Board wishes to place on record its gratitude for the confidence reposed in the Company by our bankers, government authorities, customers, vendors and all shareholders. The Board further wishes to record its sincere appreciation for the significant contributions made by employees at all levels for their commitment, dedication and contribution towards the operations of the Company.

By Order of the Board

For Huhtamaki India Limited

Murali Sivaraman

Chairman

(DIN 01461231)

Date: March 22, 2024