Spencers Retail Ltd Directors Report.

Dear Members,

Your Directors have the pleasure of presenting the Third Annual Report on the business and operations of the Company together with the audited financial statements for the financial year ended 31st March 2020.

Financial highlights

Rs. lakhs
Particulars FY2019-20 FY2018-19
Total Income 240,283.86 221,497.50
EBITDA 10,881.36 4,172.23
Finance costs 6,087.09 744.65
Depreciation and amortisation 10,496.18 2,454.86
Profit/(Loss) before tax (5,701.91) 972.72
Tax expenses - 178.52
Profit/(Loss) aftertax (5,701.91) 794.20
Other comprehensive income/(loss) (141.80) (143.43)
Total comprehensive income for the year (5,843.71) 650.77

The financial statements have been prepared in accordance with the Indian Accounting Standards (IND AS) notified under Section 133 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014.

Performance overview

Spencers Retail Limited (SRL), the retail arm of RP-Sanjiv Goenka Group, opened 10 stores spanning around 0.66 lakh square feet of retail space during the year. These stores cater to all family needs-groceries, home and personal care products, apparel and accessories, consumer durables and lifestyle products. During the year 2019-20, the Company registered same-store sales growth of 1.81% as compared to last year same-store sales growth of 3.10%.

The financial performance of the Company as on 31st March, 2020 is Rs. (57.02) crores compared to previous year PAT of Rs.7.94 crores. The Company continues to focus on growing the topline, keeping costs under control and improving the performance of the stores

During the Financial Year 2020-21, SRL plans to expand its presence in its existing clusters. This will also help the Company leverage its back-end capabilities and optimise marketing costs. Furthermore, the Company will focus on increasing its non-food business revenues, enhancing the in-store experience and building team capabilities to realize its growth plans for the business. Looking ahead, the company is moving closer towards achieving a much better performance in the coming years with its strategic initiatives

Dividend

Due to accumulated loss in the year 2019-20 and with a view to conserve resources and channelise it towards future endeavours, the Board of Directors of the Company do not declare any dividend for the year ended on 31st March 2020.

Management discussion and analysis

In compliance with Regulation 34 of the SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015, a separate section on the Management Discussion and Analysis (Annexure-A), which includes details on the state of affairs of the Company is annexed hereto and forms a part of this Report.

Corporate governance

A separate Report on Corporate Governance (Annexure-B) alongwith Additional Shareholders Information (Annexure-C), as prescribed under SEBI Regulations, are annexed as a Part of this Report along with the Auditors Certificate thereon.

Extract of annual return

An extract of Annual Return as required to be attached in accordance with Section 134(3)(a) of the Companies Act, 2013, is annexed and form a part of this report (Annexure-D). The same also can be viewed on the website of the Company at www.spencersretail.com.

Business Responsibility Report

Business Responsibility Report as required under SEBI Regulations is annexed elsewhere and forms part of this report (Annexure-E).

Share capital

The Company has not issued any equity shares during the year. As on March 31,2020, the paid up share capital of the Company was Rs.3,976.71 Lakhs comprising 7,95,34,226 equity shares of Rs.5.00 each. The said shares have been listed with NSE, BSE and CSE.

However, subsequent to the approval of the Board of Directors on February 11, 2020, to issue further shares on Rights basis for an amount aggregating upto Rs.8,000.00 Lakhs to existing eligible equity shareholders, your Company had filed the Draft Letter of Offer with the Securities and Exchange Board of India (SEBI) on 12th May, 2020 and with the concerned stock exchanges. The Company has also obtained necessary in-principle approvals from stock exchanges and is in the process to issue and allot the above shares in due course.

Directors and key managerial personnel

In terms of the provisions of Section 152 of the Act and Article 100 of the Articles of Association of the Company, Dr. Sanjiv Goenka (Director Identification Number 00074796), retires by rotation and, being eligible, offers himself for reappointment.

The members of the Company in its Second Annual General Meeting held on 19th July, 2019, had approved the appointment of Dr. Sanjiv Goenka as Chairman and Non Executive Non Independent Director and Mr. Shashwat Goenka as Non Executive Non Independent Director of the Company.

The members in their Meeting held on 19th July, 2019, had approved the appointment of Mr. Utsav Parekh, Ms. Rekha Sethi, Mr. Pratip Chaudhuri and Mr. Debanjan Mandal as Non-Executive Independent Directors on the Board, not liable to retire by rotation, for a period of five years, with effect from their respective dates of appointment, in accordance with the applicable provisions of the Companies Act, 2013 (the Act) and rules made thereunder.

Further the members of the Company in its Meeting held on 19th July, 2019, had also approved appointment of Mr. Rahul Nayak as Whole-time Director and Mr. Devendra Chawla as CEO and Managing Director, for a period of three years, with effect from their respective dates of appointment.

Mr. Arvind Kumar Vats resigned as Chief Financial Officer and Mr. Kumar Tanmay was appointed as the Chief Financial Officer of the Company (categorised as a key managerial personnel), with effect from 14th August 2019 as per the provisions of the Act.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under the Act.

Number of meetings of Board of Directors

The details of the number of meetings of the Board of Directors held during the Financial Year 2019-20 form a part of the Corporate Governance Report.

Listing

The equity shares of the Company continue to be listed at BSE, NSE and CSE. The Company has paid the requisite listing fees to the Stock Exchanges up to the financial year 2020-21.

Public deposits

During the year, the Company did not accept any deposit, and as such, no amount of principal or interest was outstanding as on the date of the Balance Sheet.

Auditors

During the year, M/s. Batliboi, Purohit & Darbari, Chartered Accountants (Firm Registration No. 303086E) have resigned as Statutory Auditors of the Company from the conclusion of the meeting of the Board of Directors of the Company (the Board) held on 14 November, 2019, due to the recent increase in the volume of operation of the Company, its geographical spread and consequential operational complexities in handling the audit.

M/s. S.R. Batliboi & Co. LLP, Chartered Accountants (Firm Registration No. 301003E/E300005), were appointed as the Statutory Auditors of the Company to fill the casual vacancy and will hold the office till the conclusion of the ensuing Annual General Meeting

Considering the services and performance, your Board is in the view that continuance of M/s. S.R. Batliboi & Co. LLP, Chartered Accountants as Auditors of the Company will be beneficial to the Company, shareholders and other stakeholders as well, therefore recommends their appointment as the Auditors of the Company for further period of five years from the conclusion of the ensuing Annual General Meeting till the conclusion of Annual General meeting to be held in the year 2025.

M/s. S.R. Batliboi & Co. LLP, Chartered Accountants, have conveyed their consent to be appointed as the Statutory Auditors of the Company along with the requisite confirmation that, their appointment, if made by the members, would be within the limits prescribed under the Companies Act, 2013.

Auditors report

The Board has examined the Auditors Report to the accounts and clarifications, wherever necessary, have been included in the notes to the accounts.

Secretarial audit

Secretarial audit of secretarial and related records of the Company was conducted during the year by M/s. S.M. Gupta & Co., Company Secretaries, and a copy of the secretarial audit report is annexed and forms a part of this report (Annexure-F). The secretarial audit report does not contain any qualifications, reservations or adverse remarks.

Related-party transactions

All the Related Party Transactions (RPT) that were entered into, during the financial year, were at arms length basis and were in the ordinary course of business and as per the RPT policy of the Company. Hence, the provisions of Section 188 of the Companies Act, 2013 as amended are not attracted. Thus, disclosure in Form AOC-2 is not required. Further, there are no materially significant Related Party Transaction(s) during the year under review made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons, which may have a potential conflict with the interest of the Company at large.

The policy on Related Party Transactions as approved by the Board is posted on the Companys website and may be accessed at www.spencersretail.com

Particulars of loans, guarantees or investments

During the financial year under review, your Company has complied with the provisions of Section 186 of the Companies Act, 2013 in respect to loans given and investments made. Further the Company has not given any guarantees or provided any security during the financial year.

Committees of the Board

Currently, the Board has four committees: Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and Corporate Social Responsibility Committee. A detailed note on the composition of the Board and its committees is provided in the Corporate Governance Report section of this Report.

Directors responsibility statement

Pursuant to Section 134 (3)(c) of the Companies Act, 2013, your Directors, to the best of their knowledge and belief, confirm that:

a) in the preparation of the accounts for the financial year ended 31st March, 2020, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b) appropriate accounting policies have been selected and applied consistently and judgments and estimates have been made that are reasonable and prudent so as to give a tme and fair view of the state of affairs of the Company at the end of the financial year and of the loss of the Company for the period;

c) proper and sufficient care has been taken for the maintenance of 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 annual account have been prepared on a going concern basis;

e) internal financial controls laid down by the directors have been followed by the Company and that such internal financial controls were adequate and operating effectively and;

f) proper systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

Board evaluation

Pursuant to the provisions of the Companies Act, 2013, SEBI Listing Regulations and Circulars and Guidance Notes issued by SEBI in this regard, the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Audit, Nomination and Remuneration and other Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report, which is annexed hereto.

At a separate meeting of Independent Directors, the performances of Non-Independent Directors, the Board as a whole and the Chairman were evaluated, taking into account the views of Executive Directors and Non- Executive Directors.

Risk management

The Company has laid out a proper mechanism in place to identify the elements of business and other risks and a risk management system to ensure compliance with the applicable laws and relevant standards.

Corporate social responsibility

In accordance with Section 135 of the Act and the rules made thereunder, the Company has formulated a Corporate Social Responsibility Policy, a brief outline of which along with the required disclosures are annexed (Annexure G) as a part of this Report.

Vigil Mechanism/Whistleblower policy

Pursuant to the guidelines laid down under Section 177 of the Act and the Rules made thereunder, the Company has a whistleblower policy (vigil mechanism) in place for reporting genuine concerns pertaining to any instances of irregularity, unethical practice and/or misconduct. The function of the vigil mechanism is reviewed by the Audit Committee from time to time. Further there have been no such incidents/whistles during the period under review. The details of the said policy have been disclosed in the Companys website www.spencersretail.com.

Anti-sexual harassment policy

The Company has in place an anti-sexual harassment policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition b Redressal) Act, 2013 covering all Covering all the employees at workplace. The internal committee has been set up as per the Act. An internal committee has been set up for this purpose and further there is no complaint which is pending as on 31st March, 2020.

Subsidiaries

During the year, the Company acquired 100% paid up share capital of M/s. Natures Basket Limited (NBL), a wholly owned subsidiary of Godrej Industries Limited (GIL), comprising 44,58,30,000 fully paid up equity shares of Rs.10/ - each post approval of the members through postal ballot and accordingly, after acquisition of these shares from GIL, NBL has become a wholly owned subsidiary of the Company w.e.f 4th July, 2019.

As on 31st March 2020, the Company had two wholly- owned subsidiaries, M/s. Omnipresent Retail India Private Limited and M/s. Natures Basket Limited.

The Company has prepared a consolidated financial statement for the Company and its subsidiaries in the form and manner in compliance with the applicable accounting standards and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as the SEBI Listing Regulations) and the same has been audited by M/s. S.R. Batliboi & Co. LLP, Chartered Accountants, the Statutory Auditors of the Company.

The consolidated financial statements for FY2019-20 forms a part of the Annual Report and accounts and shall be laid before the Members of the Company at the Annual General Meeting while laying its financial statements under Sub-section (2) of the said Section. Pursuant to the provisions of Section 129(3) of the Act read with Rule 5 of the Companies (Accounts) Rules, 2014, a statement containing the salient features of the financial statements of the Companys subsidiaries in Form AOC-1 is attached to the financial statements of the Company.

Furthermore, pursuant to the provisions of Section 136 of the Act as amended by the Companies Amendment Act, 2017, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries are available on the website of the Company. Shareholders desirous of obtaining the Accounts of the Companys subsidiaries may obtain the same upon request.

In view of the provisions of the law, Natures Basket Limited, wholly owned subsidiary of the Company, was qualified to be a material subsidiary of the Company, accordingly the requirement under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, towards formulation of a policy for determining material subsidiaries has been complied with and the same is posted on the Companys website and may be accessed at: www.spencersretail.com

Demerger

Except for the demerger of the generation undertaking of CESC Limited and its transfer and vesting into Haldia Energy Limited, a wholly owned subsidiary of CESC Limited, the Composite Scheme of Arrangement amongst the Company, CESC Limited and other eight subsidiaries of CESC and their respective shareholders as sanctioned by the Kolkata Bench of the Honble National Company Law Tribunal has been made effective from 01.10.2017. However, the said demerger proposal of generation undertaking has been withdrawn with effect from 14.11.2019 and it is no longer being pursued with the Honble Bench. This will have no impact on Spencers Retail Limited.

Cost Records

Neither maintenance of cost records nor audit of cost records as required under Section 148 of the Act read with relevant rules made thereunder is applicable to the Company.

Secretarial standards

During the year under review, the Company has complied with the applicable Secretarial Standards, issued by the Institute of Company Secretaries of India and approved by the Central Government pursuant to Section 118 of the Companies Act, 2013.

Employee Stock Option

Consequent to the approval of the shareholders by way of Special Resolution on July 19, 2019, your Company has constituted the ESOP 2019 Scheme. The objective of the scheme is to (a) encourage ownership of the Companys equity shares by the employees on an ongoing basis; (b) to align employee compensation with the performance of the Company; (c) to benefit the Company by enabling the attraction and retention of the best available talent by enabling them to contribute and share in the growth of the Company and (d) to provide existing Employees an opportunity for investment in the Companys Common Stock in recognition of their efforts to grow and build the Company.

As on the date of this Annual Report, 1,20,000 options have been granted under the ESOP 2019 Scheme.

Awards and recognitions

The Company has been a proud recipient of numerous awards and recognitions during the year 2019-20. The significant ones among them are listed hereunder:

• Certified as a Great Workplace by Great Place to Work Institute, India

• IMAGES Most Admired Launch of the Year-Natures Basket, Kolkata by IMAGES Awards for Excellence in Food and Grocery Retail

• IMAGES Most Admired Marketing Campaign of the Year-Black Friday Sales Campaign Spencers by IMAGES Awards for Excellence in Food and Grocery Retail

• IMAGES Most Admired Large Format Retailer of the Year-Spencers by IMAGES Awards for Excellence in Food and Grocery Retail

• Winner for Apprenticeship Leader by Nexus Malls Retail Awards 2020

Material Changes and Commitments, if any, affecting the Financial Position of the Company

There are no material changes and commitments, affecting the financial position of the Company that have occurred between the close of the financial year ended 31st March 2020 and the date of this Boards Report.

Covid-19

The outbreak of COVID-19 has taken the entire globe by storm and has forcedall the organisations to take measures towards this unprecedented period. Investments which we had made over the years in building our stores both at Spencers b Natures Basket with safe and hygienic environment has helped us in this pandemic.

During the lockdown period all of our Stores were fully operational (to the extent permitted) and we were selling only essential items complying with all the requisite orders of the government on due time. Our revenues from non-food merchandise (Apparel, General Merchandise and Electricals & Electronics) has been adversely affected which have impacted our gross margins and EBITDA disproportionately.

We have taken several measures to mitigate the risk quickly arising with the crisis. Some of them are:

1. Ensured safety for employees & customers by training social distancing to staff & providing free masks to customers not wearing one in-store

2. Motivated & incentivized employees by arranging passes and hired vehicles to commute staff

3. Safeguarded supply side continuity with proactive and non-stop measures by establishing early communications with manufacturers & distributors.

4. Actively managed truck delivery operations by working wiih local government officials

5. Unified focus on Digital which has helped us to expand our reach

6. Transforming our cost structures and other cost savings initiatives to generate adequate liquidity.

Our customer value proposition across segments offers wide range of assortments in hygienic environment along with our various initiatives including "Out of Store delivery, "Stores as back-end for online delivery" will help us combat this severe economic disruption.

Details of significant and material orders passed by the regulators, courts and tribunals

No significant and material order has been passed by the Regulators, Courts and Tribunals impacting the going concern status and the Companys operations in future.

Change in the nature of business

During the year under review, there was no change in the nature of the business of the Company.

Internal control system and their adequacy

The Company maintains adequate internal control system in all areas of its operations. The services of internal and external auditors are sought from time to time as well as in-house expertise and resources. The Company continuously upgrades these systems in line with best-in-class practices.

These reports and deviations are regularly discussed with the Management Committee members and actions are taken, whenever necessary. An independent Audit Committee of the Board periodically reviews the adequacy of the internal control systems.

Conservation of energy, research and development, technology absorption, foreign exchange earnings and outgo

The particulars as prescribed under sub-section (3)(m) of Section 134 of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is annexed hereto and forms part of this Report (Annexure-H).

Particulars of employees

As required under the provisions of Section 197 of the Companies Act, 2013 and Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, particulars of the employees concerned forms a part of this Report. However as per the provisions of Section 136 of the Companies Act, 2013, the Annual Report and Accounts are being sent to all the members of the Company excluding the aforesaid information. Any member interested in obtaining such particulars may write to the Company Secretary of the Company through email on spencers.secretarial<arpsg.in. The same will be replied by the Company suitably.

Disclosure 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, is annexed hereto and forms part of this Report (Annexure-I).

Acknowledgements

Your Directors wish to place on record their appreciation for the valuable services rendered by the employees of the Company, across levels. The Directors would also like to express their appreciation to the bankers, the regulatory authorities, the trade suppliers, the customers, the financial institutions and the shareholders for their continued support and cooperation.

On behalf of the Board of Directors
Dr. Sanjiv Goenka
Kolkata Chairman
June 29, 2020 (DIN 00074796)