Radico Khaitan Ltd Directors Report.

Dear Members,

Your Directors take pleasure in presenting the Thirty Sixth Annual Report on the business and operations together with the Audited Financial Statements of your Company for the year ended March 31,2020.

Summary of Standalone Financial Performance

(Rs. in Crore) FY2020 FY2019 Change(%)
Revenue from Operations (Gross) 9,417.89 8,058.00 16.9%
Revenue from Operations (Net) 2,427.04 2,096.95 15.7%
Other Income 9.19 13.29 (30.9)%
Income from Operations 2,436.23 2,110.23 15.4%
Cost of Goods Sold 1,247.21 1,035.43 20.5%
Excise Duty on Finished Goods1 8.46 (21.10) -
Employee Benefit Expenses 186.08 171.38 8.6%
Selling & Distribution Expenses 311.25 297.23 4.7%
Depreciation 52.53 42.44 23.8%
Finance Cost 31.61 35.48 (10.9)%
Other Operating Expenses 302.23 263.67 14.6%
Total Expenses 2,139.37 1,824.52 17.3%
Profit Before Tax & Exceptional Item 296.85 285.71 3.9%
Exceptional Item (24.17) 0.00
Profit Before Tax 272.69 285.71 (4.6)%
Current Tax 70.95 85.73
Deferred Tax (25.76) 11.91
Net Profit 227.50 188.06 21.0%
Net Income Margin (%)

9.4%

9.0%

Other Comprehensive Expenses / (Income) 2.70 0.72
Total Comprehensive Income 224.80 187.35 20.0%
Total Comprehensive Income Margin (%)

9.3%

8.9%

Basic EPS (Rs.) 17.05 14.10
Gross Profit1 1,179.83 1,061.52 11.1%
Gross Margin (%)

48.6%

50.6%

EBITDA2 368.19 349.23 5.4%
EBITDA Margin (%)

15.2%

16.7%

Paid-up Equity Share Capital (Face Value of Rs. 2 each) 26.71 26.68
Reserves & Surplus 1,493.82 1,288.26
Transfer to General Reserve - -
Proposed Dividend and tax thereon 26.71 19.30

Note:

1. Gross Profit adjusted for the excise duty component on the finished stock of country liquor transferred to depot as per IND AS accounting treatment

2. EBITDA for 12M FY2020 adjusted for Rs.24.17 Crore pertaining to exceptional items: Write off of debtors in Bihar of Rs. 8.56 Crore in Q4 FY2020; Rs. 8.59 Crore paid under the SV Scheme during Q3 FY2020 and Environmental Compensation of Rs.7.02 Crore paid during H1 FY2020. SV Scheme is Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 which became effective from September 2019 as per the Finance Act, 2019

Performance Review

Revenue from Operations

Volume (Million Cases) FY2020 FY2019 Change (%)
Prestige & Above 7.05 6.12 15.2%
Regular & Others 17.25 15.48 11.4%
Total Volume 24.30 21.61 12.5%
Prestige & Above as % of Total

29.0%

28.3%

Revenue from Operations (Net) grew by 15.7%. Total IMFL volumes increased by 12.5%. This volume growth was led by a strong Prestige & Above category volume increase of 15.2%. Volume growth was broad based across key states and key IMFL brands. Our new brands such as 8PM Premium Black whisky and 1965 The Spirit of Victory rum continued their strong growth trajectory and made meaningful contributions to the overall volumes. IMFL sales value during the same period increased by 18.5%. Non-IMFL sales value growth was 5.0%. In value terms, Prestige & Above brands contributed to about 49.5% of total IMFL sales value. IMFL sales value accounted for 81.5% of the total Revenue from Operations (net) of the Company compared to 79.6% last year.

Gross Profit

Gross Profit was adjusted for the excise duty

component on the finished stock of country liquor transferred to depot as per Ind AS accounting treatment. Gross Margin declined by over 200 bps to 48.6%. On Y-o-Y basis, increase in raw material prices is partly offset by higher IMFL price realization and higher contribution from IMFL business. The Company also experienced a consolidation trend in ENA prices in the fourth quarter.

EBITDA

EBITDA, adjusted for exceptional items of Rs. 24.17 Crore, increased by 5.4% y-o-y with margins of 15.2% (down 150 bps y-o-y). Exceptional items included write off of debtors in Bihar of Rs.8.56 Crore in Q4 FY2020, Rs. 8.59 Crore paid under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 during Q3 FY2020 and Environmental Compensation of Rs.7.02 Crore paid during H1 FY2020.

During FY2020, Advertising & Sales Promotion (A&SP) expenses were Rs. 139.61 Crore (up 0.8%). Given the COVID-19 scenario, A&SP expenses during Q4 FY2020 were lower than last year.

The Company continues to make judicious marketing investment which has enabled us to sustain the growth profile. Other Expenses have been higher primarily due to Cow Cess in the state of Uttar Pradesh (effective April 2019).

Finance Cost

Finance Cost for FY2020 decreased by 10.9% y-o-y from Rs. 35.48 Crore to Rs. 31.61 Crore.

Total Comprehensive Income

Total Comprehensive Income increased by 20.0% compared to last year.

Capital Structure, Liquidity and Return Ratios

Share Capital

As of March 31, 2020, Radico Khaitan had an authorized equity share capital of Rs.34 Crore, divided into 17,00,00,000 equity shares of Rs.2 each. The Company also had an authorized preference share capital of Rs.60 Crore, divided into 60,00,000 preference shares of Rs.100 each. As of March 31, 2020, the Company had issued, subscribed and paid-up equity share capital of Rs. 26.71 Crore divided into 13,35,34,265 equity shares of Rs.2 each.

During the year under review, the Company has allotted 1,25,000 equity shares on exercise of stock options under the Employees Stock Option Scheme 2006 to the eligible employees. During the year under review, the Company granted no stock options under the Employees Stock Option Scheme 2006.

General Reserve

Your Directors do not propose to transfer any amount to General Reserve and the entire amount of the profit for the year ended March 31, 2020 forms part of retained earnings.

Borrowings

As of March 31, 2020, Total Debt was Rs.400.28 Crore, Cash & Bank Balances were Rs. 18.24 Crore resulting in Net Debt of Rs.382.04 Crore (vs. Rs. 319.35 Crore as of March 31, 2019). Gross Debt consists of Rs. 397.37 Crore of Working

Capital loans and Rs. 2.91 Crore of Long-Term loans. During this period, working capital has been higher due to increase in average collection period in certain state corporations. However, we do not see any credit risk with these receivables.

Working Capital

As of March 31, 2020, the Company had trade receivables balance of Rs.823.05 Crore (up 28.3% y-o-y), inventories of Rs.374.18 Crore (up 4.0% y-o-y) and trade payables of Rs.264.24 Crore (up 7.9%), resulting in working capital balance of Rs.932.99 Crore (up 23.3% y-o-y). On gross sales basis, working capital turnover was 36 days in FY2020 compared to 34 days in FY2019 and 42 days in FY2018.

Return Ratios

Return on Average Equity (ROE) was 15.9% in FY2020 compared to 15.2% in FY2019. Return on Average Capital Employed (ROCE) was 17.7% in FY2020 compared to 18.1% in FY2019.

Note:

ROE = Total Comprehensive Income / Average Shareholder Equity

ROCE = Earnings Before Interest & Tax (EBIT) / Average Capital Employed

Capital Employed = Shareholder Equity + Total Debt

COVID-19 and its Impact

The outbreak of COVID-19 created a global health calamity and economic crisis. Nationwide lock down in India brought businesses to a halt and disrupted the economy. To fight the pandemic, Radico Khaitan immediately implemented employee health and safety measures in line with health authoritiesRs. guidelines at all our office and factory premises. During the lock down period, IMFL bottling was fully suspended from 24-March to 4-May but manufacturing of ENA was partially operational as we started production of sanitizers to support the nationRs.s fight against Coronavirus. However, we believe that it is a temporary phase for the business and after the lock down is over, we shall return to normalcy soon.

The Company was focused on driving agility and responsiveness across the value chain. Furthermore, we developed and implemented a company-wide policy framework to reflect how systems and processes need to change post COVID-19.

The Company has also undertaken a number of preventive measures to ensure safety of its employees in the offices and manufacturing units. Radico Khaitan has allowed alternate working day for employees to ensure crowd management. Face masks and hand gloves are made mandatory for all employees at all times. Hand sanitizers are placed at the entry/exit points in offices as well as manufacturing units. The Company undertakes regular sanitization and disinfection of all touch-points at the manufacturing units, offices and stores. While social distancing norms of at least one metre within our offices and manufacturing units is followed, we are encouraging virtual meetings and presentations instead of gathering in a conference room. In addition, the Company has also implemented provisions such as flexible work hours and stress management counselling for the staff.

Capital Market Ratings

Radico KhaitanRs.s long-term and short-term credit facilities are rated by CARE Ratings. The Companys long-term credit facilities are rated CARE AA- (Double A Minus) with stable outlook and short-term credit facilities are rated CARE A1+ (A One Plus).

CARE AA rated instruments are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk. CARE A1 rated instruments are considered to have very strong degree of safety regarding timely payment of financial obligations. Such instruments carry lowest credit risk. Modifiers (+/-) reflect the comparative standing within the category.

Directors

During the year under review, the Company appointed Ms. Sushmita Singha as an Additional Independent Director with effect from April 1, 2019 and Mr. Tushar Jain and Mr. Sharad Jaipuria as Additional Independent Directors with effect from August 8, 2019, subject to approval of shareholders at the 35th Annual General Meeting. At the 35th Annual General Meeting, the shareholders approved their appointment as Independent Directors of the Company, not liable to retire by rotation and to hold the office for a term of five consecutive years commencing from the date of 35th Annual General Meeting. Details of Directors retiring by rotation / seeking appointment / reappointment at this Meeting are provided in the annexure to the Notice.

Ms. Shailja Devi resigned from the Board of the Company on personal grounds and she ceased to be a Director of the Company with effect from May 7, 2019. Mr. K.S. Mehta and Mr. Ashutosh Patra were appointed as Independent Directors of the Company from September 30, 2014 for a period of five years. They ceased to be Directors of the Company from the date of 35th Annual General Meeting. The Board puts on record its appreciation for the valuable guidance provided by all the Directors during their tenure.

The Company has a Nomination & Remuneration Committee and formulated the criteria for determining the qualifications, positive attributes and independence of a Director ("the Criteria"). The policy relates to the remuneration of the Directors, Key Managerial Personnel and other employees, as required under Section 178(3) of the Act. The criteria includes that a person to be appointed on the Board of the Company should possess in addition to the fundamental attributes of character and integrity, appropriate qualifications, skills, experience and knowledge.

Board Meetings

During FY2020, the Board of Directors met four times on May 2, 2019, August 8, 2019, November 6, 2019 and January 23, 2020. The gap between any two consecutive meetings of the Board of Directors of the Company was not more than 120 days. The details regarding composition, number of Board Meetings held and attendance of the Directors during FY2020 are set out in the Corporate Governance Report which forms part of this Annual Report.

Meeting of Independent Directors

The Independent Directors of the Company met separately on January 23, 2020 without the presence of the Non-Independent Directors and the members of management. The meeting was conducted informally to enable the Independent Directors to discuss matters pertaining to the Companys affairs and put forth their combined views to the Board of Directors of the Company. In accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"), following matters were, inter-alia, discussed in the meeting:

1. Review of the performance of NonIndependent Directors and the Board as a whole;

2. Review of the performance of the Chairperson of the Company, taking into account the views of Executive Directors and Non-Executive Directors;

3. Assess the quality, quantity and timelines of flow of information between the Company management and the Board that is necessary for the Board to effectively and reasonably perform their duties

Declaration by Independent Directors

The Companys Independent Directors have submitted requisite declarations confirming that they continue to meet the criteria of independence as prescribed under Section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations. The Independent Directors have also confirmed that they have complied with Schedule IV of the Act and the Companys Code of Conduct. The Company keeps a policy of transparency and armRs.s length while dealing with its Independent Directors. No transaction was entered with Independent Directors during the year which could have any material pecuniary relationship with them. Apart from sitting fee, no other remuneration was paid to any of the Independent Directors.

The Ministry of Corporate Affairs ("MCA") vide Notification Number G.S.R. 804(E) dated 22nd October 2019 and effective from December 1st, 2019 has introduced the provision relating to inclusion of names of Independent Directors in the Data Bank maintained by Indian Institute of Corporate Affairs (IICA). All Independent Directors of the Company are registered with IICA.

In the opinion of the Board, the Independent Directors hold highest standard of integrity and possess the requisite qualifications, experience, expertise and proficiency.

Board Evaluation

The Board of Directors of Radico Khaitan is committed to transparency in assessing the performance of Directors. In accordance with the Companies Act, 2013 and Rules made thereunder, Schedule - IV of the Act and Regulation 4(2)(f) of the Listing Regulations, Radico Khaitan has framed a policy for the formal annual evaluation of the performance of the Board, Committees and individual Directors. The Company has put in place a robust framework for evaluation of the Board, its Committees, the Chairman, individual Directors and the governance processes that support the BoardRs.s functioning. This framework covers specific criteria and the grounds on which all Directors in their individual capacity are evaluated. The key criteria for performance evaluation of the Board and its Committees include aspects such as composition and structure, effectiveness of board processes, information sharing and functioning.

The criteria for performance evaluation of the individual Directors include aspects such as professional conduct, competency, and contribution to the Board and Committee meetings. The criteria for performance evaluation of the committees of the Board include aspects such as the composition of committees and effectiveness of committee meetings. The performance evaluation of the Independent Directors was done by the entire Board excluding the Director being evaluated. The performance evaluation of the Chairman and the Non-Independent Directors was carried out by the Independent Directors. The Board of Directors expressed their satisfaction with the evaluation process.

Policy on Nomination, Remuneration and Board Diversity

The Board of Directors has framed a policy which lays down a framework in relation to the remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. This policy also lays down criteria for selection and appointment of Board Members as well as diversity of the Board. Radico Khaitan recognizes the benefits and importance of having a diverse Board of Directors in terms of skill set and experience. The Company has an optimum mix of executive and non-executive, independent directors and woman director.

The detail of the policy is explained in the Corporate Governance Report and full policy is also available on the Companys website at the following link: http://www.radicokhaitan.com/ investor-relations/

Roles and Responsibilities of Board Members

The Company has a clearly laid out policy defining the structure and role of the Board Members. The Company has an Executive Chairman and Managing Director, presently Dr Lalit Khaitan; a Managing Director, currently Mr. Abhishek Khaitan and an optimum combination of executive and non-executive independent directors. The duties of the Board Members including Independent Directors have been elaborated in the Listing Regulations, Section 166 of the Companies Act, 2013 and Schedule IV of the said Act. There is a clear segregation of responsibility and authority amongst the Board Members.

Risk Management Policy

Radico KhaitanRs.s business is exposed to a variety of risks which are inherent to a liquor manufacturing company in India. In this volatile, uncertain and complex operating environment, only companies that manage their risk effectively can sustain. Risk management is embedded in Radico KhaitanRs.s corporate strategies and operating framework, and the risk framework helps the Company meet its objectives by aligning operating controls with the corporate mission and vision. The Company has in place comprehensive risk assessment and minimization procedures, integrated across all operations and entails the recording, monitoring and controlling enterprise risks and addressing them timely and comprehensively. The risks that the Company faces as strategic, financial, liquidity, security, regulatory, reputational and other risks are reviewed by the Risk Management Committee, the Audit Committee and the Board from time to time and new risks are identified based on new business initiatives and the same are assessed, minimisation framework and controls are designed and appropriately implemented.

Insurance of Fixed Assets

Your Company has adequately insured all its properties including Plant and Machinery, Building and Stocks.

Awards and Recognition

During the year, Radico Khaitan was ranked as the no. 1 mid-cap company in Fortune IndiaRs.s "The Next 500" list, the first comprehensive ranking of IndiaRs.s midsize companies. The Next 500 list represents the most promising companies in India, outside the Fortune 500. Radico Khaitan has consistently improved its ranking in this list from 60th in 2015 to 28th in 2019 and jumped 27 places to first rank in 2020.

The Company also continued to shine at the Monde Selection Quality Awards in 2020 with one grand gold and eight gold awards. Radico KhaitanRs.s Old Admiral Brandy emerged as the Brandy Brand Champion in the Spirits Business Magazine 2020 and ranked first. 8 PM whisky ranked 7th on the Indian Whisky Brand Champion list, Contessa rum ranked 9th on the Rum Brand Champion list and Magic Moments Vodka ranked 11th on the Vodka Brand Champion list. Rampur India Single MaltRs.s Double Cask expression has been awarded with the Rs.Best World Whisky Gold Medal 2020Rs. by The Fifty Best, New York.

Employee Stock Option Scheme

Radico KhaitanRs.s employee stock option scheme was implemented to provide the employees with an opportunity to share in the growth of the Company and to reinforce long term commitment.

The ESOP Compensation Committee, at its meetings held on 09.12.2019 granted 88,000 stock options, and on 23.01.2020 granted 37,000 stock options, to the eligible employees, as per the Employees Stock Option Scheme 2006. The particulars of the options as required by SEBI (Share Based Employee Benefits) Regulations, 2014 are appended as Annexure - A and forms part of this report.

Dividend

The Company has a dividend policy that balances the dual objective of appropriately rewarding its shareholders and retaining capital to support future growth. Your Directors are pleased to recommend a dividend of Rs.2.00 per equity share or 100% on face value of Rs.2.00 each for the year ended March 31, 2020. The total dividend pay-out for the financial year will be Rs. 26.71 Crore. This higher dividend pay-out is to demonstrate our commitment towards our shareholders. The dividend is subject to approval of shareholders at the Annual General Meeting on Monday, August 31, 2020 and will be paid to the shareholders whose names appear in the Register of Members as on the date of book closure, i.e. August 25, 2020 to August 31, 2020.

Dematerialisation

During the year 313,315 shares of the Company constituting 0.23% of the issued and subscribed Share Capital of the Company, were dematerialised. As on March 31, 2020, 98.95% of the shares of the Company have been dematerialized. Your Directors would request all the members who have not yet converted their holdings into dematerialized form, to do so thereby facilitating trading of their shares.

As per SEBI guidelines it is mandatory that the shares of a company are in dematerialized form for trading.

Public Deposits

During the year under review, your Company has neither invited nor accepted any fixed deposits from the public within the meaning of Section 73 of the Companies Act, 2013, read with the Companies (Acceptance of Deposits) Rules, 2014.

Subsidiaries and Joint Ventures

During the year under review, the Company has no subsidiary. Radico Khaitan has one joint venture, namely, Radico NV Distilleries Maharashtra Limited ("RNV"). The Company has 36% stake in the said joint venture. In terms of the Section 129 (3), financial results of RNV are consolidated with the accounts of the Company. In terms of the section 129 (3) of the Companies Act, 2013, the salient features of the financial statement of the joint venture company is set out in the prescribed form AOC - 1 and is attached herewith as a separate Annexure - B.

Transfer to Investor Education & Protection Fund

Section 124 of the Companies Act, 2013 mandates that a company should transfer dividend, that has been unclaimed for a period of seven years, from the unpaid dividend account to the Investor Education and Protection Fund (IEPF). To ensure maximum disbursement of unclaimed dividend, the Company sends reminders to the concerned investors, before transfer of dividend to IEPF. Unclaimed dividend has been transferred to IEPF as per below table:

Financial Year Date of Declaration of Dividend Total Dividend Unclaimed Dividend as on 31-3-2020 Due Date of Transfer to IEPF account
FY2002 16.07.2002 38,579,176.00 730,556.00 22.08.2009
FY2003 19.07.2003 34,721,258.40 914,312.00 24.08.2010
FY2004 17.07.2004 38,579,176.00 973,284.00 22.08.2011
FY2005 16.11.2005 42,437,093.60 983,341.00 21.12.2012
FY2006 25.09.2006 48,223,970.00 1,135,840.00 30.10.2013
FY2007 26.09.2007 51,231,109.50 922,432.00 05.11.2014
FY2008 30.09.2008 51,231,109.50 1,065,509.00 16.10.2015
FY2009 15.09.2009 30,738,665.70 699,978.00 07.10.2016
FY2010 09.09.2010 79,300,632.60 1,620,668.00 26.10.2017
FY2011 09.09.2011 92,853,567.80 1,630,738.00 24.09.2018
FY2012 24.09.2012 106,195,503.20 2,312,827.00 11.10.2019

Key Managerial Personnel

There has been no change in Key Managerial Personnel during the year under review.

Remuneration of the Directors and Employees

Your Companys approach is to have performance-based compensation culture to attract and retain high quality talent. The remuneration policy, therefore, is market- led and takes into account the competitive nature of the business so as to attract and retain quality talent and leverage performance significantly. The remuneration payable to each Executive Director is based on the remuneration structure as determined by the Board and is revised from time to time depending upon individual contribution, the Companys performance and the provisions of the Companies Act, 2013.

Particulars of Employees and Remuneration

In terms of the first proviso to Section 136 of the Act, the Reports and Accounts are being sent to the shareholders excluding the information required under Rule 5 (2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Any shareholder interested in obtaining the same may write to the Company Secretary at the Registered Office of the Company on any working day of the Company up to the date of the 36th Annual General Meeting.

The statement containing information as required under the provisions of Section

197(12) of the Act read with Rule 5 (1), Rule 5(2) and Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in Annexure - C and forms part of this Report.

Audit Report

The observations made in the Auditors Report as enclosed with this Report are selfexplanatory and therefore do not call for any further comments under Section 134 of the Companies Act, 2013.

Statutory Auditor

M/s. BGJC & Associates LLP, Chartered Accountants are the Statutory Auditors of the Company for a period of five years with effect from July 11, 2016. M/s. BGJC & Associates LLP have confirmed to the Company that they are not disqualified under Section 141 of the Companies Act, 2013, or any other applicable provisions for the time being in force and are eligible for being appointed as statutory auditors of the Company. M/s. BGJC & Associates LLP have also confirmed to the Company that their appointment is within the limits prescribed under the Companies Act, 2013.

The report of the Statutory Auditors along with notes to Schedules is enclosed to this report. The observations made in the AuditorsRs. Report are self-explanatory and therefore do not call for any further comments. The AuditorRs.s Report does not contain any qualification, reservation or adverse remark.

Cost Auditor

As per the requirement of Central Government and pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 as amended from time to time, your Company has been carrying out audit of cost records relating to Industrial Alcohol every year.

The Board of Directors, on the recommendation of the Audit Committee, has appointed Mr. R. Krishnan, Cost Accountants, as the cost auditor to audit the cost accounts of the Company for the financial year 2020 at a remuneration of Rs.1.10 Lakhs plus applicable government taxes (GST) and reimbursement of out of pocket expenses. As required under the Companies Act, 2013, a resolution seeking memberRs.s approval for the remuneration payable to the Cost Auditor forms part of the Notice convening the Annual General Meeting.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made thereunder, the Company has appointed Mr. Tanuj Vohra, Partner at M/s. TVA & Co. LLP, Company Secretaries, a firm of Company Secretaries in Practice (C.P. No. 5253) to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is included as Annexure - D and forms an integral part of this Report. There is no secretarial audit qualification for the year under review and the Company has received a no disqualification certificate from company secretary in practice.

Particulars of Loans, Guarantees or Investment by the Company under Section 186 of the Companies Act, 2013

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to Financial Statements.

Vigil Mechanism

Pursuant to the requirement of Section 177 (9) & (10) of the Companies Act, 2013, Radico Khaitan has in place a robust vigil mechanism and has adopted a Whistle Blower Policy which allows employees of the Company to raise their concerns relating to fraud, malpractice or any other activity or event which is against the interest of the Company or society as a whole. All employees shall be protected from any adverse action for reporting any unacceptable or improper practice and/or any unethical practice, fraud or violation of any law, rule or regulation. This policy is also applicable to the Directors of the Company. All cases reported as part of whistle-blower mechanism are taken to their logical conclusion within a reasonable timeframe. Details of complaints received and the action taken are reviewed by the Audit Committee. The functioning of the Vigil Mechanism is reviewed by the Audit Committee from time to time. The Vigil Mechanism Policy has been uploaded on the website of the Company at http://www.radicokhaitan.com/ investor-relations/ .

Archival Policy

Pursuant to the Listing Regulations and in line with Radico KhaitanRs.s Policy on Determination of Materiality of Events, the Company shall disclose all such events to the Stock Exchanges and such disclosures shall be hosted on the website of the Company for a period of 5 years and thereafter the same shall be archived so as to be available for retrieval for a further period of three years by storing the same on suitable media. Thereafter the said information, documents, records may be destroyed as per the Companys policy on preservation of documents.

Policy on Dividend Distribution

The Board of Directors have adopted Dividend Distribution Policy in terms of the requirements of Listing Regulations. The Policy is available on the website of the Company at https://www. radicokhaitan.com/investor-relations . The Dividend Distribution Policy forms a part of this Report.

Related Party Transactions

All transactions entered with Related Parties for the year under review were on armRs.s length basis and in the ordinary course of business and that the provisions of Section 188 of the Companies Act, 2013 are not attracted. Thus, disclosure in form AOC-2 is not required. Further, there are no material related party transactions during the year under review with the promoters, directors or key managerial personnel. The Company has developed a Related Party Transactions framework through Standard Operating Procedures for the purpose of identification and monitoring of such transactions.

All Related Party Transactions are placed before the Audit Committee as also to the Board for approval. Omnibus approval was obtained on a quarterly basis for transactions which are of repetitive nature. Transactions entered into pursuant to omnibus approval are audited by the Legal & Compliance Department and a statement giving details of all Related Party Transactions are placed before the Audit Committee and the Board for review and approval on a quarterly basis.

The Policy on Related Party Transactions as amended and approved by the Board of Directors has been uploaded on the website of the Company. The web-link of the same has been provided in the Corporate Governance Report. None of the Directors has any pecuniary relationship of transactions vis-a-vis the Company.

Environmental Protection Measures Taken by the Company

In view of the corporate responsibility on environmental protection, the Company has adopted a number of measures for improvement in the field of environment, safety and health. Measures such as standard operating procedures, training programmes for all levels of employees regarding resource conservation, housekeeping, Green Belt development and onsite emergency plan have been taken. Sustainable living is a part of long-term business strategy and your Company continuously strives to reduce our environmental footprint, while enhancing the livelihood of people across our product value chain.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo

As per Section 134 (3) (m) read with the Companies (Accounts Rules) 2014, the relevant information and data is given in Annexure - E and forms part of this Report.

Corporate Social Responsibilities (CSR)

CSR at Radico Khaitan is creating sustainable programs that actively contribute to and support the social and economic development of the society. The Company is committed to community development, enhancing livelihood, promoting education and health care including preventive health care and ensuring environmental sustainability. As part of its CSR programmes, the Company partners with the community and addresses issues of water and sanitation, education, health and skill-building. Radico Khaitan also promotes and encourages responsible drinking through engaging with employees, taking preventative action, education and raising awareness and bringing communities on board to address local challenges at their root. The CSR policy of the Company is available on the Companys website.

Composition of the CSR Committee as on March 31, 2020

1. Dr. Lalit Khaitan Chairman
2. Mr. Abhishek Khaitan* Member
3. Mr. K.P. Singh Member
4. Ms. Shailja Devi ** Member
5. Ms. Sushmita Singha Member

The Companys projects are in accordance with Schedule VII of the Companies Act, 2013 and the Companys CSR Policy. The Report on CSR activities as required under Companies (Corporate Social Responsibility Policy) Rules, 2014 is set out as Annexure - F forming part of this Report.

An unspent amount of Rs.25.96 Lakhs, which could not be spent due to sudden lockdown in country from 21st March 2020 due to COVID 19, will be spent together with the eligible spend of FY2021.

Significant and Material Orders Passed by the Regulators or Courts

During the year, the Central Pollution Control Board (CPCB) levied an environmental compensation of Rs.7.02 Crore on the Company and the same was paid by the Company. The operations of molasses plant at Rampur were briefly hampered due to the CPCB order. The loss pertaining to such restriction was around Rs. 15 Crore. The matter pertaining to the CPCB was filed before NGT. Apart from that there has been no significant and material order passed by the Regulators or Courts that would impact the going concern status of the Company and its future operations.

Safety & Wellbeing of Women

Gender equality and women safety is a very important part of Radico KhaitanRs.s human resource policies. The Company has zero tolerance for sexual harassment at workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder for prevention and redressal of complaints of sexual harassment at workplace. The Company has endeavoured to encourage women professionals by creating proper policies to tackle issues relating to safe and proper working conditions and create and maintain a healthy and conducive work environment that is free from discrimination. During the year under review, there were no sexual harassment cases reported to the Company.

Composition of the Sexual Harassment Committee as on March 31, 2020

1. Ms. Roopali Makhija Presiding Officer
2. Ms. Jyoti Negi Member
3. Mr. Amit Manchanda Member
4. Ms. Manu Chaudhary Member
5. Mr. Vinay Padroo Member
6. Mr. Mukesh Arora Member

Business Responsibility Report

The Business Responsibility Report for FY2020, as stipulated under Regulation 34(2)(f) of the Listing Regulations is annexed as a separate report and forms part of this Annual Report.

Extract of Annual Return

Pursuant to Section 92 (3) of the Companies Act, 2013 and Rule 12 (1) of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return is provided in Annexure- G.

Management Discussion and Analysis

Management Discussion and Analysis Report, as required under the Listing Regulations is provided as a separate report and forms part of this Annual Report.

Corporate Governance Report

Report on Corporate Governance along with the certificate from Mr. Tanuj Vohra, Partner at M/s. TVA & Co. LLP, Company Secretaries, confirming compliance with conditions of corporate governance, as stipulated under the Listing Regulations, forms part of the Annual Report.

Reporting of Frauds

There was no instance of a fraud during the year under review which required the statutory auditor to report to the Audit Committee or the Board under section 18 (12) of the Companies Act, 2013 and rules made thereunder.

Cyber Risk

The failure of information Technology (IT) systems due to malicious attacks and / or non-compliance with data privacy laws can potentially lead to financial loss, business disruption and / or damage to the Companys reputation. Radico Khaitan has in place a data protection policy. It also maintains a cyber security infrastructure. The Company uses standardised backup tools, service and procedures to ensure that information and data are stored at two or more diverse locations.

Internal Financial Controls

The Board of Directors of the Company has devised systems, policies, procedures and frameworks, which are currently operational within the Company for ensuring the orderly and efficient conduct of its business, which includes adherence to policies, safeguarding its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information.

The internal financial controls have been documented, digitised and embedded in the business process. Assurance on the effectiveness of internal financial controls is obtained through management reviews, controls self-assessment, continuous monitoring by functional experts as well as testing of the internal financial control systems by the internal auditors during the course of their audits. We believe that these systems provide reasonable assurance that our internal financial controls are designed effectively and are operating as intended.

Management team has assessed the effectiveness of the Companys internal control over financial reporting as at March 31, 2020. The Statutory Auditors of the Company have audited the financial statements included in this Annual Report and issued their report on internal control over financial reporting (as defined under section 143 of the Companies Act, 2013). The Company has appointed reputed firms of Chartered Accountants to carry out Internal Audits. The audit is based on focused and risk-based internal plans, which is reviewed every year in consultation with the Audit Committee. In line with international practices, the focus of Internal Audit is oriented towards the review of internal controls and risks in operations.

Audit Committee

The Audit Committee invites the Chairman & Managing Director, Managing Director,

Chief Financial Officer, Company Secretary, Statutory Auditor(s) and Internal Auditor and Cost Auditors to attend the meetings of the Audit Committee. The Company Secretary acts as Secretary to the Committee. The minutes of each Audit Committee meeting are placed and discussed at the next meeting of the Board. All Members of the Audit Committee are qualified in finance and bring in expertise in the fields of finance, taxation, economics, industry and risk.

Composition of the Audit Committee as of March 31, 2020

1. Mr. Sarvesh Srivastava Chairman
2. Dr. Raghupati Singhania Member
3. Mr. Tushar Jain Member

Statement on Compliance of Secretarial Standards

The Company has followed applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to Rs.Meetings of the Board of DirectorsRs. and Rs.General MeetingsRs., respectively.

DirectorsRs. Responsibility Statement

Based on the framework of Internal Financial Controls and compliance systems established and maintained by the Company, the work Auditors and Secretarial Auditors, including the Audit of Internal Financial Controls over financial reporting by the Statutory Auditors and the reviews performed by Management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Companys internal financial controls were adequate and effective during FY2020.

To the best of knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 134 (3) (c) of the Companies Act, 2013.

1. In the preparation of the Annual Accounts for the year ended March 31, 2020, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

2. The Board has selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2020 and of the profit of the Company for the year ended on that date;

3. The Directors have taken proper and sufficient care 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.

4. The annual accounts have been prepared on a going concern basis;

5. The Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

6. The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Dispatch of Annual Report through Electronic Mode

In compliance with the MCA Circulars and SEBI Circular dated May 12, 2020, notice of the AGM along with the Annual Report 2019-20 is being sent only through electronic mode to those members whose email addresses are registered with the Company/ Depositories. Members may note that the Notice and Annual Report 2019-20 will also be available on the Companys website (https://www.radicokhaitan.com/investor- relations ), websites of the Stock Exchanges, i.e., BSE Limited and National Stock Exchange of India Limited at www.bseindia.com and www. nseindia.com , respectively, and on the website of the Companys Registrar and Transfer Agent, KFin Technologies Private Limited ("KFinTech") at https://evoting.karvy.com .

Acknowledgements

Financial year 2020 had seen unprecedented operating environment due to the outbreak of the pandemic which brought the global economic activity to standstill. It adversely impacted all sectors of the economy. Your Company was no exception and continues to fight adversities. During this difficult time, your trust and confidence has been of immense support. Your Directors take this opportunity to thank our customers for their continued loyalty with our products which has resulted in Radico Khaitan outperforming the industry. This encourages us to continue to deliver consumer satisfaction through our diverse product portfolio. Your Directors take this opportunity to express their sincere appreciation to all the employees for their commitment and contribution to the success of the Company. Their enthusiasm and hard work has enabled the Company to not only face various challenges but also be at the forefront of the industry.

The Board would like to convey their sincere gratitude to the investors and bankers for their continued support during the year.

Your Directors further take this opportunity to acknowledge the support and assistance extended by the Regulatory Authorities such as SEBI, Stock Exchanges and other Central & State Government authorities and agencies, Auditors, Registrars, Legal Advisors and other consultants. The Board also appreciates the support and co-operation your Company has been receiving from its supply chain partners and others associated with the Company as its trading partners. Your Company looks upon them as partners in its progress and has shared with them the rewards of growth.

We look forward to another successful year ahead.

For & on behalf of the Board
Dr. Lalit Khaitan
Place: New Delhi Chairman & Managing Director
Date: July 23, 2020 DIN - 00238222