S H Kelkar & Company Ltd Directors Report.
Your Directors take pleasure in presenting their 63rd Annual Report on the business and operations of S H Kelkar And Company Limited (SHK / the Company) and audited financial statements for the financial year ended March 31, 2019.
Financial Highlights & Business Review
(Currency : Indian Rupees in crores)
|2018-19||2017-18||Growth %||2018-19||2017-18||Growth %|
|Sales (excluding Excise Duty / GST)||692.09||680.79||1.66||1041.15||1019.27||2.15|
|Other operating income||1.69||0.89||89.88||2.45||1.75||40.22|
|Profit before Tax (PBT) before exceptional items||62.21||103.16||(39.69)||114.85||156.01||(26.38)|
|Profit before Tax (PBT) after exceptional items||62.21||103.16||(39.69)||114.85||143.16||(19.77)|
|Profit after Tax (PAT)||44.97||68.96||(34.79)||87.84||92.58||(5.12)|
|Share of profit from Associates||-||-||-||0.41||1.30||(68.46)|
|Total Profit after Tax (PAT)||44.97||68.96||(34.79)||88.25||93.88||(6.00)|
Keva (consolidated SHK) is a leading innovator of sensorial experiences, co-creating unique products that consumers taste, smell, or feel in fine fragrances and cosmetics, detergents and household goods, food and beverages. Kevas flavour and fragrance compounds combine a number of ingredients to produce proprietary formulae created by its flavorists and perfumers. Keva believes that its diversified business platform, wide geographic coverage, broad product portfolio and customer base, position it to achieve long-term growth as the flavours and fragrances markets expand.
Financial Year 2018-19 has been a challenging fiscal for Keva as it witnessed multiple macro-headwinds that impacted its performance in certain customer categories. Despite these broader market challenges, Keva has gained a higher wallet share in its key customer accounts during the fiscal gone by. Kevas internal analysis of industry trends post GST implementation also suggests that there has been a structural shift towards larger and mid-sized players, leading to a notable decline in smaller accounts.
On a consolidated basis, sales (excl. excise duty / GST) in FY 2018-19 stood at Rs. 1,041.15 crore, higher by 2.15%. On the profitability front, EBITDA during FY 2018-19 stood at Rs. 159.96 crore, with margins at 15%. Pricing pressures on key raw materials continued to impact profitability margins on a YoY basis. Gross margins in FY 2018-19 stood at 43% as against 45% in FY 2017-18 due to the change in customer mix. Finance costs during the year increased to Rs. 13.95 crore from Rs. 3.97 crore in FY 2017-18, primarily owing to the commissioning of new facility at Mahad. Fragrance segment continued to account for 90% of the total business in FY 2018-19, similar to 89% in FY 2017-18. The overseas business saw an increased momentum with both flavours and fragrance segments growing at a healthy rate of 14% leading to change in domestic and export segment constitution from 68:32 in FY 2017-18 to 65:35 ratio in FY 2018-19.
Fragrance division delivered a steady topline growth of 3% in FY 2018-19. Domestic revenues were lower by 2% led by a slowdown in the demand environment in certain customer categories; while overseas revenues grew by 14%. The volatility in raw material prices resulted in subdued operating profit during the year, which stood at Rs. 130 crore as against Rs. 140 crore in FY18. Operating margins stood stable at 14% in FY 2018-19.
Flavours division reported subdued performance during the period with a decline in domestic revenues, down by 5%. The domestic business saw a decline of 19%, while overseas business marked a growth of 14% YoY. In FY 2018-19, the segment recorded an operating profit of Rs. 15 crore, with margins at 14%.
On a standalone basis, the Company achieved a topline growth of 2% due to growth in domestic fragrance business despite the macro-headwinds faced by the business and the challenging environment. EBITDA stood at Rs. 102.40 Cr and the company achieved a net profit of Rs. 44.97 Cr.
A new state- of- art herbal extraction manufacturing facility has been set-up by Keva at Vapi during the year. With the growing consumer preference for natural and herbal products over chemical-based products, there lies a huge potential for growth in this market.
The aroma ingredients manufacturing facility at Mahad, Maharashtra was successfully commissioned during the year and we have reached optimal utilization levels. With a total installed capacity of 1,200 MTPA, the facility is one of the largest manufacturing facilities for Tonalid worldwide. Operationalization of this facility will help improve availability of key raw materials, leading to increased cost efficiencies for Keva going forward.
Keva made its foray into extension of its BSP (Branded Small Packs) Segment by launching an extensive portfolio of roll-ons in the retail market during the year. Keva Roll-ons portfolio that boasts of 47 variants spread over traditional, Arabic and French notes is made to satiate the needs of varied consumer base.
During the year, Keva launched a new range of food flavours under a new brand – Auris. The products are available for purchase on e-commerce sites.
Management Discussion and Analysis Report
A detailed analysis of your Companys performance is discussed in the Management Discussion and Analysis Report, which forms part of this Annual Report.
Keva is committed to the highest standards of corporate governance and considers it as more of an ethical requisite than a regulatory necessity. Our goal is to promote and protect the long-term interest of all stakeholders and to that end, our philosophy of Corporate Governance is built on a foundation of ethical and transparent business operations and is designed to inspire trust among all stakeholders, strengthen the Board and management accountability.
A Report on Corporate Governance along with a Certificate from the Statutory Auditors of the Company confirming of corporate governance requirements as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as Listing Regulations) forms an integral part of this Annual Report.
Business Responsibility Report
A detailed information on the initiatives of the Company as enunciated in the ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, 2011 is provided in the Business Responsibility Report, a copy of which will be available on the Companys website www.keva.co.in. For Business Responsibility Report as stipulated under Regulation 34 of the Listing Regulations, kindly refer to Business Responsibility Report section which forms part of this Annual Report.
In consonance with the dividend distribution policy of the Company, the Board has not recommended any dividend for the financial year ended March 31, 2019. The Company continues to be committed to distributing the distributable profits to the shareholders in an efficient manner to maximize the value for shareholders.
The list of unpaid dividend declared upto the financial year 2017-18 is available on Companys website www.keva.co.in. Shareholders are requested to check the said list and if any dividend due to them remains unpaid in the said list, can approach the Company for release of their unpaid dividend.
Consolidated Financial Statements
The consolidated financial statements of your Company for the financial year 2018-19, are prepared in compliance with applicable provisions of the Companies Act, 2013, Accounting Standards and as prescribed by Securities and Exchange Board of India (SEBI) under Listing Regulations. The consolidated financial statements have been prepared on the basis of audited financial statements of the Company and its subsidiary companies, as approved by their respective Board of Directors. The Financial Statements as stated above are also available on the website of the Company at www.keva.co.in.
Over the years, your Company has developed extensive and successful experience performing acquisitions and is working towards integrating the acquisitions and exploiting the many commercial and operational synergies they provide, in order to achieve maximum benefit of continued improvement to profit margins and competitive capabilities.
The Company, through its subsidiary Keva Fragrance Industries Pte. Ltd., entered into an agreement to acquire 90% stake in Anhui Ruibang Aroma Co. Ltd. on May 25, 2018 of which 66.7% was acquired during the financial year 2018-19. Headquartered in Fuyang, Anhui is a leading aroma ingredients company in China. The acquisition has given Keva access to alternate tonalid manufacturing facility thereby ensuring no supply disruptions to customers. It has also enabled Keva to consolidate its market position for tonalid.
The Company, through its subsidiary Keva Fragrances Pvt. Ltd., acquired 50% equity stake in Purandar Fine Chemicals Pvt. Ltd. (Purandar) on November 01, 2018. Purandar is in the business of manufacturing and trading of aroma ingredients and has manufacturing facility at Jejuri, Maharashtra with annual production capacity of 180 tons. The acquisition would allow seamless utilisation of Purandar facility together with Mahad and Vapi facilities of the group which would facilitate sharing of resources and deputation of trained personnel for quality enhancement.
Subsidiaries And Joint Ventures
As on March 31, 2019, the Company had subsidiaries and joint ventures in India, United Kingdom, the Netherlands, Italy, Singapore, China and Indonesia as mentioned hereunder:
• Keva Fragrances Pvt. Ltd.
• Keva Flavours Pvt. Ltd.
• Saiba Industries Pvt. Ltd.
• Rasiklal Hemani Agencies Pvt. Ltd.
• Keva Chemicals Pvt. Ltd.
• Creative Flavours & Fragrances S.p.A, Italy
• Keva UK Ltd., United Kingdom
• Keva Fragrance Industries Pte. Ltd., Singapore
• V N Creative Chemicals Pvt. Ltd. (step-down subsidiary)
• Tanishka Fragrance Encapsulation Technologies LLP (step-down subsidiary)
• PFW Aroma Ingredients B.V., the Netherlands (step-down subsidiary)
• PT SHKKEVA Indonesia, Indonesia (step-down subsidiary)
• Anhui Ruibang Aroma Company Ltd, China
• Purandar Fine Chemicals Pvt. Ltd. (Joint Venture)
The Company has incorporated Keva Europe B.V., a wholly owned subsidiary, in the Netherlands on April 02, 2019 in furtherance of Kevas business strategy of consolidating European operations under one company based in Europe.
A statement containing the salient features of the financial statements of the subsidiaries in the prescribed format AOC-1 is appended as Annexure A to this Report.
Financial and operational performance of the subsidiaries and joint ventures is given hereunder:
Keva Fragrances Private Limited:
Keva Fragrances Private Limited (formerly K V Arochem Private Limited) is involved in the business of manufacture and exports of fragrances, flavours and aroma ingredients. The company registered a total revenue from operations of Rs. 373.19 Crores in financial year 2018-19 as against Rs. 316.11 Crores inflnancial yearfi2017-18fiand loss of Rs. 8.32 Crores in financial year 2018-19 as against loss of Rs. 15.00 Crores in financial year 2017-18. Herbal Extraction Plant at Vapi was approved by Food and Drugs Control Administration during the year under review.
Keva Flavours Private Limited:
Keva Flavours Private Limited develops flavours that underpin food and beverage brands in India. The company registered a total revenue of Rs. 49.01 crores in financial year 2018-19 as against Rs. 65.17 crores in financial year 2017-18 and a loss of Rs. 4.69 crores in financial year 2018-19 as against a loss of Rs. 1.43 crores in financial year 2017-18.
Saiba Industries Private Limited:
Saiba Industries Private Limited is involved in the business of manufacture and sale of plant extracts. During the year under review, the company registered an operating revenue of Rs. 1.73 Crores in the financial year 2018-19 as against Rs. 5.07 Crores in financial year 2017-18 and profit after tax of Rs. 0.27 Crores in the financial year 2018-19 as against Rs. 1.57 Crores in financial year 2017-18.
Rasiklal Hemani Agencies Pvt. Ltd.:
Rasiklal Hemani Agencies Pvt. Ltd. was acquired by the Company on April 02, 2016 to strengthen the base in the northern region and reach closer to the customers. During the year under review, the company registered an operating revenue of Rs. 3.03 Crores in the financial year 2018-19 as against Rs. 5.14 Crores in financial year 2017-18 and profit after tax of Rs. 3.53 Crores in the financial year 2018-19 as against Rs. 4.23 Crores in financial year 2017-18.
PFW Aroma Ingredients B.V.:
PFW Aroma Ingredients B.V. is involved in the business of manufacture and sale of aroma ingredients. During the year under review, the company registered an operating revenue of Rs. 146.93 Crores as against Rs. 174.50 Crores during the previous year and profit of Rs. 17.27 Crores as against loss of Rs. 13.20 Crores during the previous year.
Keva UK Limited:
Keva UK Limited is authorised by its constitutional documents to manage the investment of your Company in the Netherlands - PFW Aroma Ingredients B.V. The company did not carry any business during the year. During the year under review, the company did not register any revenue. Loss after tax was Rs. 0.05 Crores as against loss after tax of Rs. 0.25 Crores during the previous year.
Keva Fragrance Industries Pte. Ltd.:
Keva Fragrance Industries Pte. Ltd. is involved in the business of providing sales and marketing assistance to us in South East Asia. In order to spearhead our market access and growth plans of South East Asia, we have formed this Company through which our operating subsidiary has been created in Indonesia. During the year under review, the company registered a revenue of 124.56 Crores as against Rs. 36.05 Crores during the previous year and a profit of Rs. 4.39 Crores as against a profit of Rs. 1.04 Crores during the previous year.
PT SHKKeva Indonesia:
PT SHKKeva Indonesia is involved in the business of trading and distribution of perfumery compounds. During the year under review, the company registered an operating revenue of Rs. 12.02 crores as against Rs. 6.47 crores during the previous year and a loss of Rs. 4.93 crores as against profit of Rs. 0.22 crores during the previous year.
Keva Chemicals Private Limited:
Keva Chemicals Private Limited is involved in the business of aroma ingredients and owns fragrance encapsulation technology. During the year under review, the Company registered an operating revenue of Rs. 0.23 crores as against Rs. 0.20 crores in Financial Year 2017-18. Company incurred a loss of Rs. 0.27 crores as against a loss of Rs. 0.42 crores during the previous year.
VN Creative Chemicals Private Limited:
VN Creative Chemicals Private Limited was acquired for setting up of India Tonalid manufacturing facility at Mahad. During the year under review, Company registered an operating revenue of Rs. 24.67 crores. During the previous year, Company earned no income from operations as the Company undertook no business activity. The company incurred a loss of Rs. 1.63 crores as against a loss of Rs. 0.58 crores.
Creative Flavours & Fragrances S.p.A:
Creative Flavours & Fragrances S.p.A (Italy) is a leading fragrance company in Italy having presence throughout Europe. During the year ended December 31, 2018, the company registered an operating revenue of Rs. 266.19 crores and a profit of Rs. 5.50 crores.
Tanishka Fragrance Encapsulation Technologies LLP:
The Company, through Keva Chemicals Pvt. Ltd., step-down subsidiary of the Company, acquired Fragrance Encapsulation Technology from Tanishka Fragrance Encapsulation Technologies LLP (TFET LLP) in April 2017. During the year under review, no business activity was undertaken by TFET LLP.
Anhui Ruibang Aroma Company Ltd, China
Headquartered in Fuyang, Anhui is a leading aroma ingredients Company in China having tonalid manufacturing facility. During the year, the company registered an operating revenue of Rs. 28.30 crores and a loss of Rs. 0.70 crores.
Purandar Fine Chemicals Pvt. Ltd.
During the year under review, the company registered a total revenue of Rs. 3.88 crores as against Rs. 1.72 crores during the previous year and a profit of Rs. 0.35 crores as against loss of Rs. 0.17 crores during the previous year.
There has been no change in the capital structure during the year under review. The Company has not issued shares with differential voting rights nor granted stock options nor sweat equity.
Your Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014 during the year.
Particulars of Loans given, Investments made, Guarantees given and Securities provided
Particulars of loans given, investments made, guarantees given and securities provided as covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.
Contracts or Arrangements With Related Parties
Particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act, 2013 in the prescribed Form AOC-2 is appended as Annexure B to this Report.
Mr Amit Dixit stepped down as Non-Executive Director on May 25, 2018. Mr Deepak Raj Bindra and Mr Shrikant Oka were appointed as Non-Executive Director and Independent Director respectively on May 25, 2018 and the said appointments were approved by the Members at the Annual General Meeting held on August 09, 2018. In the forthcoming Annual General Meeting, Mr Amit Dalmia will retire by rotation and will be considered for re-appointment because of his eligibility.
Mr Ramesh Vaze, 78 years, has expressed his desire to relinquish his role of Managing Director and continue guiding the Company and mentoring the leadership team by acting as Non-Executive Director and Chairman of the Board. Considering his request, the Board of Directors of the Company, at its meeting held on May 22, 2019, has approved the change in role and designation of Mr Ramesh Vaze from Managing Director to Non-Executive Director and Chairman of the Board with effect from September 01, 2019 subject to the approval of Members. Mr Ramesh Vazes experience of over 45 years in the F&F industry will immensely benefit the Company to move upward in its growth trajectory and achieve its vision.
Neither the Managing Director nor the Whole-time Director of the Company receives any remuneration or commission from any of its subsidiaries. None of the Directors of the Company has been disqualified to be a Director of the Company on account of non-compliance with any of the provisions of the Companies Act, 2013. The Independent Directors have been familiarised with the Company, their roles, rights and responsibilities in the Company etc. The details of the Familiarization Programme are available on the website of the Company www.keva.co.in. All the Independent Directors have given their declaration of independence as required under Section 149(6) of the Companies Act, 2013. This has been noted by the Board of Directors.
During the year, 7 (seven) Board Meetings were convened and held on 25.05.2018, 09.08.2018, 24.09.2018, 01.11.2018, 10.01.2019, 06.02.2019 and 25.03.2019. The particulars of attendance of the Directors at the said meetings are detailed in the Corporate Governance Report of the Company, which forms a part of this Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and Listing Regulations.
Meeting of Independent Directors
The Independent Directors of the Company meet without the presence of the Managing Director or Executive Director or other Non-Independent Directors. These meetings are conducted in an informal and fiexible manner to enable the Independent Directors to discuss matters pertaining to, inter alia, review of performance of Non-Independent Directors and the Board as a whole, assess the quality, quantity and timeliness of flow of information between the Company Management and the Board that is necessary for the Board to effectively and reasonably perform its duties. One such meeting was held during the year on March 25, 2019.
Committees of the Board
The Company has constituted various Board level committees in accordance with the requirements of Companies Act, 2013. The Board has the following committees as under:
- Audit Committee
- Nomination & Remuneration Committee
- Corporate Social Responsibility Committee
- Stakeholders Relationship Committee
Details of the above Committees alongwith composition and meetings held during the year under review are provided in the Corporate Governance Report forming part of this Report.
Annual Evaluation of Boards Performance
Pursuant to the provisions of the Companies Act, 2013 read with Rules issued thereunder and the Corporate Governance requirements as prescribed by Listing Regulations, the Board has carried out an annual evaluation of its own performance and that of its Committees and individual Directors.
The performance of the Board and individual Directors was evaluated by the Board seeking inputs from all the Directors. The performance of the Committees was evaluated by the Board seeking inputs from the Committee Members. The Nomination and Remuneration Committee reviewed the performance of the individual Directors. A separate meeting of Independent Directors was held to review the performance of Non-Independent Directors, performance of the Board as a whole and performance of the Executive Directors of the Company. This was followed by a Board Meeting that discussed the performance of the Board, its Committees and individual Directors.
The criteria for performance evaluation of the Board included aspects like Board composition and structure, effectiveness of Board processes, information and functioning etc. The criteria for performance evaluation of Committees of the Board included aspects like composition of Committees, effectiveness of Committee meetings etc. The criteria for performance evaluation of the individual Directors included aspects on contribution to the Board and Committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings etc.
Nomination and Remuneration Policy
The broad objectives of the Nomination and Remuneration policy are
i) to guide the Board in relation to appointment and removal of Directors, Key Managerial Personnel and Senior Management;
ii) to evaluate the performance of the members of the Board and provide necessary report to the Board for further evaluation of the Board;
c) to recommend to the Board on Remuneration payable to the Directors, Key Managerial Personnel and Senior Management.<P>The guiding principles of the policy are to ensure that:
- The level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Directors of the quality required to run the Company successfully
- Relationship of remuneration to performance is clear and meets appropriate performance benchmarks and
- 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 goals.
In accordance with the Nomination and Remuneration Policy, the Nomination and Remuneration Committee formulates the criteria for appointment as a Director, Key Managerial Personnel and Senior Management, identifies persons who are qualified to be Directors and nominates candidates for Directorships subject to the approval of Board, evaluates the performance of the individual directors, recommends to the Board, remuneration to Managing Director
/ Whole-time Directors, ensures that the remuneration to Key Managerial Personnel, Senior Management and other employees is based on Companys overall philosophy and guidelines and is based on industry standards, linked to performance of the self and the Company and is a balance of fixed pay and variable pay and recommends to the Board, sitting fees/commission to the Non-Executive Directors.
The remuneration has been paid as per the Nomination and Remuneration Policy of the Company. The policy may be accessed on the website of the Company at www.keva.co.in.
Key Managerial Personnel
During the year under review, Mr Ratul Bhaduri ceased to be Executive Vice President and Group CFO of the Company. Mr Shrikant Mate was appointed as Executive Vice President and Group CFO with effect from December 04, 2018.
The Key Managerial Personnel in the Company as per Section 2(51) and 203 of the Companies Act, 2013 as on March 31, 2019 are as follows:
• Mr Ramesh Vaze - Managing Director
• Mr Kedar Vaze - Whole Time Director and Group Chief Executive Officer
• Mr Shrikant Mate - Executive Vice President and Group Chief Financial Officer
• Mrs Deepti Chandratre - Company Secretary & DGM – Legal
Directors Responsibility Statement
In terms of Section 134 (5) of the Companies Act, 2013, the directors would like to state that:
a) In the preparation of the annual accounts, the applicable accounting standards have been followed alongwith proper explanation relating to the material departures (if any);
b) The directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year under review;
c) The directors have taken proper and sufficient 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;
d) The directors have prepared the annual accounts on a going concern basis;
e) The directors have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and are operating effectively; and
f) The directors have devised proper system to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
M/s. B S R & Co. LLP (Registration No. 101248W) were appointed as Statutory Auditors of the Company for a period of 5 years from the conclusion of the 58th Annual General Meeting until the conclusion of 63rd Annual General Meeting (i.e. from FY 2014-15 to Financial year 2018-19). Prior to M/s. B S R & Co. LLP, its affiliates M/s. B S R & Co were serving as Statutory Auditors of the Company in respect of financial years 2011-12 to 2013-14. As per the provisions of Section 139 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules 2014, an audit firm can be appointed as statutory auditor for not more than two terms of five consecutive years. M/s. B S R & Co. LLP having served as statutory auditors (by itself/through its afiliated firms) for a period of 8 financial years, can be re-appointed as statutory auditors for a further term of 2 years. Accordingly, it is proposed to re-appoint M/s. B S R & Co. LLP as Statutory Auditors of the Company for a period of two years to hold office from the conclusion of 63rd Annual General Meeting (i.e. ensuing Annual General Meeting) until the conclusion of 65th Annual General Meeting to be held in 2021.
The Statutory Auditors have confirmed their eligibility to the effect that their re-appointment is within the prescribed limits under the Companies Act, 2013 and that they are not disqualified for appointment.
The Auditors Report on the Annual Accounts of the Company is unqualified and when read with notes on financial statements, is self- explanatory, and hence, does not call for any further comments under Section 134 of the Companies Act, 2013.
In terms of Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, M/s. Kishore Bhatia & Associates, Cost Accountants, have been appointed as the Cost Auditors of the company for financial year 2019-20. Cost records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013, as required to be maintained by the Company had been made and maintained during the year.
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company had appointed M/s. Mehta & Mehta, Practising Company Secretaries, as its Secretarial Auditor to undertake the secretarial audit for the financial year 2018-19. The Secretarial Audit Report for the financial year ended March 31, 2019 is annexed herewith as Annexure C to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.
Internal Control Systems
Your Company believes that internal control is a prerequisite of the principle of governance. The Company implemented suitable controls to ensure its operational, compliance and reporting objectives are achieved. The Company has adequate policies and procedures in place for its current size as well as the future growing needs. These policies and procedures play a pivotal role in the deployment of the internal controls. The management, Statutory and Internal Auditors undertake rigorous testing of the control environment of the Company to identify areas, where business process controls are inefiective or may need enhancement. Corrective actions, if any, are taken promptly by the respective functions.
A summary of the Internal Audit Reports containing significant findings by the Internal Auditor alongwith follow-up actions thereafter is placed before the Audit Committee periodically for review. The Audit Committee reviews the comprehensiveness and effectiveness of the report and provides valuable suggestions and observations from time to time.
The risk landscape in the current business environment is changing dynamically. To effectively mitigate the risks impacting the organisation, Keva has employed an integrated enterprise risk management framework which helps proactively identify, prioritize, monitor, mitigate and report key risks that impact its ability to meet the strategic objectives. There is an overarching risk management policy in place that was reviewed and approved by the Board. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.
The Company promotes ethical behaviour in all its business activities and in line with the best governance practices, has implemented Vigil Mechanism through Whistle Blower Policy and Fraud Risk Management Policy. The policies provide for adequate safeguards against victimisation of persons who use such mechanism and make provision for direct access to the Chairman of the Audit Committee. The Audit Committee periodically reviews the status of complaints received under this policy on a quarterly basis.
The policy may be accessed on the website of the Company at www.keva.co.in. During the year under review, no protected disclosure from any Whistle Blower was received by the designated officer.
Going Concern Status
During the year under review, no significant or material orders were passed by the Regulators or Courts or Tribunals which may impact the going concern status and Companys operations in future.
Disclosure on Sexual Harassment of Women at Workplace
Appreciating the diversity, Keva firmly believes in creating a respectful workplace. The Company has a gender neutral policy on prevention of sexual harassment at workplace and framework for employees to report sexual harassment cases at workplace and its process ensures complete anonymity and confidentiality of information. An Internal Complaints Committee (ICC) has been constituted in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules thereunder.
On an ongoing basis, Kevas employees and managers are oriented on creating a safe and conducive work culture. During the year, an e-learning module on Prevention of Sexual Harassment was launched to sensitize and raise awareness on appropriate workplace conduct amongst all. Kevas ICC members underwent skill development program to judiciously handle complaints and discharge their responsibilities.
During the year, no complaints with allegations of sexual harassment were reported.
Stock Appreciation Rights Scheme
In terms of SEBI (Share based Employee) Benefits Regulations, 2014, as amended from time to time (‘SEBI Regulations), the Nomination and Remuneration Committee of the Board, inter alia, administers and monitors the SH Kelkar Stock Appreciation Rights Scheme, 2017 of your Company.
Your Company has lent Rs. 75 crore to SH Kelkar Employee Benefit Trust (Trust) for making secondary acquisition of equity shares, subject to statutory ceilings. The Trust has purchased 33,73,663 equity shares of the Company upto March 31, 2019 representing 2.33% of paid up capital of the Company.
The Nomination and Remuneration Committee, at its meeting held on February 20, 2019, has granted 10,26,403 Stock Appreciation Rights (STARs) under SH Kelkar Stock Appreciation Rights Scheme, 2017 to the eligible employees. Each STAR is represented by one equity share of the Company.
The disclosures in compliance with SEBI (Share Based Employee Benefits) Regulations, 2014, and Section 62 1(b) read with Rule 12(9) of the Companies (Share Capital & Debentures) Rules, 2014 are set out in Annexure D.
Corporate Social Responsibility
Keva strives for a positive impact in the communities where we operate. Towards this end, your Company adopted a comprehensive CSR Policy that defines the framework for your Companys CSR Programme. The CSR Policy may be accessed on the Companys website at the link: www.keva.co.in.
The Company focuses on areas like environmental sustainability, conservation of energy, child education and empowerment, equipping and upgradation of educational infrastructure set-up with an aim to provide improved and advanced education system, support visually challenged people through perfumery trainings and employability and rural development. It also partners in relief operations in rural areas in case of natural calamity or disaster.
The Company also undertakes other need based initiatives in compliance with Schedule VII to the Companies Act, 2013. During the year, the Company has spent Rs. 1.85 Crore on CSR activities. The Annual Report on CSR activities is annexed herewith marked as Annexure E.
Conservation of Energy
The Company has crafted extensive strategies to ensure sustainable consumption of energy, water and other resources in its businesses. Some of the measures adopted across the Company for energy conservation are as under:
- Replacement of reciprocating compressor by new energy efficient noiseless screw compressor
- Use of PNG fuel in canteens instead of LPG.
- Installation of solar power generation units at Mulund and Vashivali Units.
- Installation of Energy Efficient LED lights in place of conventional lights
- Introduction of auto on-off system of exhaust fan in lift rooms
- Use of light sensors for street lights
- Motion sensor for wash room passage
- Installation of Solar day light reflector for better illumination on the shop floor.
The capital expenditure on energy conservation during the year under review was not substantial.
Environment, Health and Safety
The Company believes that natural resources are for everyone and nobody has the right to damage them. The Company has made substantial investments to ensure all its units have necessary infrastructure to restrict pollution emanation and minimise impact on environment.
To provide its employees with a safe working environment, the Company endeavours to follow best practices in health and safety management across its operations. The Company is committed to ensure safety of its workers. The Companys goal is to enhance safety in its units and prevent accidents.
During the year, Keva has installed robotic fire fighting system at its aroma ingredients facility in Mahad and has become the first company in India to install such avant garde system. Robotic
fire fighting systems are designed to perform tasks like analyzing and locating fires, conducting search and rescue and the primary task of fire control and suppression.
Other EHS initiatives taken by Keva are as under:
- Installation of foodie machines at Mulund and Vashivali Units which convert waste food into manure.
- Segregation and sale of waste to the authorized recyclers for recycling.
- Installation of Reverse Osmosis Plant and Multi Effect Evaporator
- Distribution of cloth bags to employees at Vapi Unit to promote message of Say No To Plastic.
- Non-hazardous paper & cardboard wastes are given to a NGO called Sampurn Earth for recycling. Sampurn Earth returns the writing pads prepared from the waste to company, for use in office stationary work.
- Participation of employees in Environment, Health & Safety trainings organised by National Safety Council.
- Celebration of Road Safety Week, National Safety Week, Fire Service Week, World Environment Day
- Participation in Best Safety Practises competition organised by Directorate of Industrial Safety & Health (DISH).
- Participation in On site and Off site mock drills organized by Directorate of Industrial Safety & Health and Mutual Aids Response Group
- Annual Health Check-up was organized for the employees
- Implementation of online incident reporting system at Mulund Unit. Accident Incident Management System (AIMS) is an integrated online application system for capturing records of accidents and incidents at Corporate office and Plant locations.
- Celebration of National Safety Week, Fire Service Week, World Environment Day
- Imparting training in first aid, road safety, fire safety, ergonomics, use of PPEs, safe handling of chemicals, contract labour safety, SCBA training etc
Innovation is essential for Kevas future success and creates opportunities for business as well as cutting-edge solutions for customers. Innovation is at the heart of what Keva commits to its customers: creating and discovering new fragrances and flavours that delight consumers with the unexpected. Your Company considers its R&D infrastructure to be one of its key competencies in driving innovation and focusses and invests substantial resources in the research and development. The Discovery and R&D teams focus on the development of novel molecules, technologies and sensory solutions to enable us to create high-performing, consumer preferred fragrances. The flavourists focus on innovation to support its business strategy and to help build the growth of Kevas food and beverage customers brands.
Kevas Creative Centres at Amsterdam, Jakarta, Mumbai and Milan (CFF) are continuously striving for innovative creations through research activities. Keva recently established a Creation and Development Centre (CDC) in Singapore to sharpen focus on certain categories and strengthen foothold in South East Asian markets. The CDC in Singapore will help the team to carry out local market and consumer research, thereby enabling stronger knowledge of local preferences that will help Keva to develop innovative products and further enhance its presence in South East Asia. You would be glad to know that Keva has also established a Food Innovation Centre in Mumbai recently.
Your Company has a strong Intellectual Property Rights support team, which enables it to patent its innovations globally and in developing unique products. With the robust product pipeline, your Company is confident that impactful innovations will fuel the Companys growth in the years to come. Expenditure on R & D and creative development during the year under review was Rs. 54.75 Crores on standalone basis and Rs. 64.77 Crores on consolidated basis.
Rotary Extractors and Distillations for Herbal extraction were installed during the year at Vapi Unit which has reduced production cycle time for each batch from 6 days to 2 days. It has led to drastic improvement in product yields resulting in cost optimization. ETO (Ethylene Oxide gas) Steriliser for in-house ETO Sterilization of Powder Extracts has been installed at Vapi Unit. HPLC (High-Performance Liquid Chromatography) for quality control has been installed at Vapi plant where active marker component of our product can be measured with precision.
Foreign Exchange Earnings and Outgo
The Foreign Exchange earned in terms of actual inflows during the financial year 2018-19 was Rs. 30.18 Crores as against Rs. 7.35 Crores in financial year 2017-18. The Foreign Exchange outgo in terms of actual outflows during the financial year 2018-19 was Rs. 217.96 Crores as against Rs. 133.18 Crores in financial year 2017-18.
Intellectual capital is one of the key pillars of the Companys growth which ensures business sustainability. The ongoing focus is on attracting, retaining, training and engaging talent with the objective of creating a robust talent pipeline at all levels.
Your Company has laid high emphasis on driving an effective and transparent performance culture. Top performers and high achievers are recognized for their exemplary performance through Keva Star - Kevas Global Employee Recognition Program.
Your Company is committed to creating an environment of learning and development, promote internal talent and develop cross functional expertise. Your Company provides learning opportunities through facilitator led learning, workshops as well as through learning platform - LEAD (Leveraging E-learning for Accelerated Development). LeAP (Leadership Advancement Program) – Kevas Global Talent Management Program, aims to develop its internal talent pool through a focused, customized and guided intervention.
To facilitate open channels of feedback and communication with the CEO on business and strategy of the organization, Keva has instituted half yearly town halls. ‘Ear2Hear is an Employee Assistance Program (EAP) enables employees to reach out to counsellors 24x7 in-person and/or on phone to seek assistance for issues pertaining to personal or professional life.
Disclosures with respect to the remuneration of Directors, Key Managerial Personnel and employees as required under section 197 of the Companies Act, 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given in Annexure F to this Report. Details of employee remuneration as required under provisions of section 197 of the Companies Act, 2013 read with Rule 5(2) & 5(3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 also forms part of this Report. However, as per the provisions of Section 136 of the Companies Act, 2013, the report and accounts are being sent to the Members and others entitled thereto, excluding the said information which is available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in this regard.
In financial year 2018-19, your Company has continued to maintain amicable industrial relation footprint by focusing on increased worker level engagement through formal and informal communication and training forums.
IT systems are the backbone which support timely decisions through conversion of data into actionable information.
The Companys robust IT infrastructure includes:
- Centralised ERP system based on SAP – it is capable of covering business functions across finance, inventory management, procurement and logistics.
- Qlikview - it provides a wide array of data analysis facilities.
- Cupid – it is a a homegrown ERP application for a Customer Project Integrated Development Process which provides a state of the art solution for project management.
- BMango – it is a customer project management application for flavours.
- Success Factors – it is a cloud based online system which is a single HR platform through which employees across the globe have an easy access to HR related information viz. policies, newsletters, news fiash, team information, Performance Development Process, Learning and Development and other HR processes on real time basis.
In yet another digital transformation roadmap, during the year, Keva embarked its journey with cloud CRM (Customer Relationship Management) solution to empower the sales team with cutting edge technology on the go to manage customer engagements. Your Company has also rolled out K4C – Keva4Customer application during the year. With this application, business now shall be able to oversee sales projects on real time basis and keep track of its sales.
Extract of Annual Return
The details forming part of the extract of the Annual Return in Form MGT- 9 in accordance with Section 92(3) of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, are set out herewith as Annexure G to this Report.
Awards and Recognition
Kevas manufacturing plant at Vapi has been certified in Integrated Management System (OHSAS 18001 & ISO 14001) during the year. This certification is an acknowledgement of Kevas compliance towards the requirements set by International Standard Organization (ISO) for Environmental Management and Occupational Health and Safety Management.
With the change in the new international standard for Quality Management Systems (QMS) ISO 9001:2015, which replaces ISO 9001:2008, Kevas Domestic Fragrances and Flavours plant at Vashivali has been recertified for ISO 9001:2015.
Keva has been conferred upon asfiThe National Best Employer Brands 2018 by Employer Branding Institute – India during the 13th Employer Branding Awards in February 2019. Keva was adjudgedfi23rd Dream Company To Work For at the 8th Edition of ET Now – Dream Companies To Work For by the World HRD Congress in February 2019. In its 4th year of participation, Keva has enhanced its ranking over the previous years.
Statements in the Annual Report, including those which relate to Management Discussion and Analysis, describing the Companys objectives, projections, estimates and expectations, may constitute ‘forward looking statements within the meaning of applicable laws and regulations. Although the expectations are based on reasonable assumptions, the actual results might differ.
Your Directors would like to express their sincere appreciation of the positive co-operation received from the Government Authorities, Financial Institutions and the Bankers. The Directors also wish to place on record their deep sense of appreciation for the commitment displayed by all executives, officers, workers and staff of the Company resulting in the successful performance of the Company during the year. The Board also takes this opportunity to express its deep gratitude for the continued co-operation and support received from its valued shareholders.
|For and on behalf of the Board of Directors of|
|S H KELKAR AND COMPANY LIMITED|
|RAMESH VAZE||KEDAR VAZE|
|Mumbai||Managing Director||Director & Chief Executive Officer|
|May 22, 2019||DIN: 00509751||DIN: 00511325|