Titan Company Ltd Directors Report.

To the Members of Titan Company Limited

The Directors are pleased to present the Thirty Fifth Annual Report and the Audited Financial Statements for the year ended 31st March 2019:

1. FINANCIAL RESULTS

(र in Crore)

Standalone Consolidated
2018-2019 2017-2018 2018-2019 2017-2018
Revenue from Operations 19,070 15,656 19,779 16,156
Other Income 178 86 183 89
Total Income 19,248 15,742 19,961 16,245
Expenditure 17,068 13,922 17,787 14,511
Profit before exceptional items, finance costs, depreciation and taxes 2,181 1,820 2,174 1,734
Finance Costs 44 48 53 53
Depreciation / Amortisation 139 110 163 131
Profit before share of profit/(loss) of an associate and joint venture and exceptional items and taxes 1,997 1,662 1,959 1,549
Share of profit/(loss) of an associate and Jointly controlled entity - - (2) (3)
Profit before exceptional items and taxes 1,997 1,662 1,957 1,546
Exceptional items 70 92 - 17
Profit before taxes 1,927 1,571 1,957 1,530
Income taxes
- Current 602 446 618 450
- Deferred (49) (39) (49) (22)
Profit for the year 1,374 1,163 1,389 1,102
Attributable to
- Shareholders of the Company 1,374 1,163 1,404 1,130
- Non-controlling interests - - (16) (28)
Profit brought forward 1,903 1,268 1,792 1,190
Appropriations
Deletion on account of sale of subsidiary - - 4 -
Acquisition of non-controlling interest in subsidiary - - 31 -
Dividend on Equity Shares (excluding tax) (333) (231) (333) (231)
Tax on dividends (68) (47) (68) (47)
Transfer to general reserve - (250) - (250)
Closing Balance in Retained Earnings 2,876 1,903 2,759 1,792

1a) STANDALONE NUMBERS:

During the year under review, the Companys total revenue grew by 21.81% to D 19,070 compared with D 15,656 crore in the previous year.

The Company had invested D 145 crore in the Inter

Corporate Deposits issued by Infrastructure Leasing & Financial Services Limited (IL&FS Group). Owing to the defaults made by the IL&FS Group effective October

2018, the Company has, based on assessment made pertaining to recovery of these investments in the Group, has made provision for the entire investment of D 145 crore in FY 2018-19.

During the year, the Company took an additional impairment of D 70 crore pertaining to investment in Favre Leuba AG, a wholly owned subsidiary, after considering the past performance of the brand.

Profit before tax grew by 22.7 % to D 1,927 crore and the net profit increased by 18.2 % to D 1,374 crore despite provisions made for IL&FS and Favre Leuba AG.

The year witnessed aggressive expansion of the Companys retail network. As on 31st March 2019, the Company had 1,595 stores, with over 2.05 million square feet of retail space delivering a retail turnover of over D 19,000 crore.

The Watches division of the Company recorded revenue of D 2,441 crore, a growth of 14.8% which was achieved through meticulous planning and execution of key initiatives. The revenue from Jewellery division grew by 23% touching D 16,030 crore. The revenue from

Eyewear division grew by 23.2 % to D 511 crore. The revenue from other divisions recorded a sale of D 133 crore, a growth of 40.4%.

New Businesses, viz Taneira and SKINN recorded revenue of D 80.59 crore, a growth of 40.5% over the previous year. While Taneira grew by 51%, SKINN recorded a growth of 40%.

1b) CONSOLIDATED NUMBERS

At the consolidated level, the revenue stood at Rs. 19,779 crore as against D 16,156 crore in FY 2017-18.

This was primarily due to robust performance of Titan Engineering & Automation Limited (TEAL), a wholly owned subsidiary and Carat Lane Trading Private Limited, a subsidiary company. The details of the performance of the Companys subsidiaries are covered in point 15 below of this Report.

The Management Discussion and Analysis report, which is attached, dwells into the performance of each of the business division and the outlook for the current year.

2. INTERNATIONAL OPERATIONS

Business Environment in the international markets remained unfavourable in Q4 and declining trends were witnessed in the category across countries. For Titan, high-contributing Middle East markets continued to decline while younger markets like the Philippines, Thailand and the US stayed on the plan to deliver impressive retail growths on the back of several sales & marketing initiatives. The business delivered the budgeted bottom-line for FY18-19, but steep declines in Middle East markets left the overall business with a 10% decline for the year. FY19-20 plans will continue the journey of reducing dependence on Middle East markets and continue with investments in newer consumer bases (locals, across Middle East), markets (US, EU) and channels (e-commerce).

3. DIVIDEND

The Directors are pleased to recommend the payment of dividend on equity shares at the rate of 500% (i.e. D 5 per equity share of D 1 each), subject to approval by the shareholders at the ensuing Annual General Meeting (AGM).

4. TRANSFER TO GENERAL RESERVE

The Board of Directors has decided to retain the entire amount of profits for FY 2018-19 in the Retained Earnings.

5. FINANCE

Excellent top line growth and good working capital management helped the Company generate significantly higher levels of cash in the financial year. This resulted in substantially higher interest and other income from the surplus cash generated. However, as part of the treasury operations which were in line with the Investment Policy approved by the Board, the Company during the year had also invested D 145 crore in the 6 month inter corporate deposits with the IL&FS Group based on the high credit ratings assigned to them and assessment of risk profile at the time of investing. Unfortunately, the financial distress of the IL&FS Group was made evident after credit rating agencies downgraded the ratings to default status from the AAA they had assigned earlier when the Company had invested. The Company has therefore, as a measure of prudence, fully provided for this investment. The Company has also revisited its Investment Policy and created an Investment Committee of the Board to monitor investments going forward.

The Reserve Bank of India issued a circular in 2018 stopping companies from hedging their gold exposures in commodity exchanges outside the country effective July 2018. The Company had to therefore revert to hedging its gold exposure, which has also gone up significantly with the Companys gold exchange programs doing very well, in the local commodity exchanges. Given the current status of development of the market, the Company is not able to hedge gold for longer periods as required, making the process inefficient. The Company is working with authorities to remedy this situation as early as possible

6. PUBLIC DEPOSITS

The Jewellery Division of the Company was successfully operating customer schemes for jewellery purchases for many years. When the Companies Act, 2013 (the "Act") became substantially effective from 1st April 2014, the Company had around seven lakh subscribers contributing to these schemes. However, these schemes were exempt under the Companies Act, 1956 relating to acceptance of public deposits as such schemes were not covered in the definition of deposits. Under the Act and Rules made there under (‘Deposit Regulations) the scope of the term "deposit" was enlarged and therefore a view was taken that the jewellery purchase schemes offered by the Company to its customers would be treated as public deposits. Thereupon, the Company discontinued fresh enrolment of subscribers and initiated steps to close the erstwhile customer schemes, which were wound down by 31st August 2014.

Under the Deposit Regulations as amended from time to time, a company is permitted to accept deposits subject to applicable provisions, to the extent of 10% of the aggregate of the paid-up share capital, securities premium account and free reserves from its Members & 25% of the aggregate of the paid-up share capital, securities premium account and free reserves from the Public after prior approval by way of special resolutions passed by the Members in this regard. Requisite approval was obtained from the Members of the Company and a new customer scheme for jewellery purchase was launched in November 2014 in compliance with the Deposit Regulations.

The details relating to deposits, covered under Chapter V of the Companies Act, 2013 are as under: (a) accepted during the year: D 2,175.37 crore (b) remained unpaid or unclaimed as at the end of the year: D 1,273.32 crore (c) whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved- (i) at the beginning of the year: Nil (ii) maximum during the year: Nil (iii) at the end of the year: Nil There are no deposits that have been accepted by the Company that are not in compliance with the requirements of Chapter V of the Act.

7. MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN END OF THE FINANCIAL YEAR AND DATE OF REPORT

There have been no material changes and commitments affecting financial position between end of the financial year and the date of the report.

8. SIGNIFICANT AND MATERIAL ORDERS

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Companys operations in future.

9. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Details of loans, guarantees and investments covered under the provisions of Section 186 of the Act are given in the notes to the financial statements.

During the year under review, the Company had invested C 99.99 crore in purchase of additional equity stake in Carat Lane Trading Private Limited (Carat Lane). In addition, the Company has, during the year, provided corporate guarantees amounting to C 40 crore to banks on behalf of Carat Lane.

The Company has not given any loans during the year under review.

10. INTEGRATED REPORT

Last year, the Company has taken its first step to move towards Integrated Reporting in line with its commitment to voluntarily disclose more information to the stakeholders on all aspects of the Companys business. Accordingly, the Company had introduced key content elements of Integrated Reporting <IR> aligned to the International Integrated Reporting Council Framework (IIRC) in the Annual Report of the previous year and has disclosed more qualitative data in the Annual Report of this year. Similar to last year, the relevant information has been provided in this years Annual Report as well.

11. ADEQUACY OF INTERNAL CONTROLS AND COMPLIANCE WITH LAWS

The Company, during the year has reviewed its Internal Financial Control (IFC) systems and has continually contributed to establishment of more robust and effective IFC framework, prescribed under the ambit of Section 134(5) of Companies Act, 2013. The preparation and presentation of the financial statements is pursuant to the control criteria defined considering the essential components of Internal Control - as stated in the "Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI)".

The control criteria ensures the orderly and efficient conduct of the Companys business, including adherence to its policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

Based on the assessment carried out by the Management and the evaluation of the results of the assessment, the Board of Directors are of the opinion that the Company has adequate Internal Financial Controls system that is operating effectively as at 31st March 2019.

There were no instances of fraud which necessitates reporting of material misstatement to the Companys operations.

There has been no communication from regulatory agencies concerning non-compliance with or deficiencies in financial reporting practices.

12. AUDIT COMMITTEE

The details pertaining to the composition of the audit committee and its role is included in the Corporate Governance Report, which is a part of this report.

13. RISK MANAGEMENT

Pursuant to the requirement of Regulation 21 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the "LODR Regulations"), the Company has constituted a Risk Management Committee (RMC), consisting of Board members and senior executives of the Company. The Company has in place a Risk Management framework to identify, evaluate business risks and challenges across the Company both at corporate level as also separately for each business division. The top tier of risks for the Company is captured by the operating management after extensive deliberations on the nature of the risk being a gross or a net risk and thereafter in a prioritized manner presented to the Board for their inputs on risk mitigation/ management efforts. Based on this framework, a Risk Management policy has been adopted. The RMC engages in the Risk Management process and has set out a review process so as to report to the Board the progress on the initiatives for the major risks of each of the businesses that the Company is into.

The Risk Register of each Business gets updated on an annual basis and is placed for due discussions at Board meetings and appropriateness of the mitigation measures to ensure that the risks remain relevant at any point in time and corresponding mitigation measures are optimized.

Further, as mandated under the amendments to the LODR Regulations in December 2018, the Risk Management Committee specifically covers cyber security risk assessment as part of its review at periodic intervals.

14. RELA PARTY TRANSACTIONS TED

There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interests of the Company at large. All related party transactions are placed before the Audit Committee and the Board for approval, if applicable. Prior omnibus approval of the Audit Committee is obtained for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are verified by the Internal Auditor and a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their approval, if applicable, on a quarterly basis. The Company has developed an Internal Guide on Related Party Transactions Manual and prescribed Standard Operating Procedures for purpose of identification and monitoring of such transactions. The Policy on Related Party Transactions as approved by the Board is uploaded on the Companys website. None of the Directors has any pecuniary relationships or transactions vis--vis the Company. There were no transactions during the year which would require to be reported in Form AOC-2.

15. SUBSIDIARIES / JOINT VENTURE / ASSOCIATE COMPANY

As on 31st March 2019, the Company had the following subsidiaries/ Associate/ Joint Venture:

Name of the Subsidiary/ Associate/ Joint Venture

Relationship

1 Favre Leuba AG, Switzerland Wholly-owned Subsidiary
2 Titan Watch Company Limited, Hong Kong Wholly-owned Subsidiary
3 Titan Engineering & Automation Limited (TEAL) Wholly-owned Subsidiary
4 Carat Lane Trading Private Limited Subsidiary
5 Green Infra Wind Power Theni Limited Associate
6 Montblanc India Retail Private Limited Joint Venture

Titan TimeProducts Limited (TTPL) ceased to be a subsidiary of the Company with effect from 18th June 2018 consequent upon the Company transferring its entire stake in TTPL.

During the year 2018-19, Favre Leuba AG had registered a turnover of CHF 1 million i.e D 6.82 crore against the previous years figures of CHF 0.9 million, i.e. D 6.05 crore and loss of CHF 7.37 million, i.e. D 52.01 crore (2017-18: 7.5 million, i.e. D 50.21 crore). During the year FY 2018-19, the Company has invested CHF 7 million in Favre Leuba AG.

Titan Watch Company Limited is a subsidiary of the Companys subsidiary Favre Leuba AG and hence is a subsidiary of the Company. It has a capital of HK

$ 10,000 and no Profit and Loss account has been prepared as it has not yet commenced business.

During the year 2018-19, TEAL generated sales income of D 343.21 crore against the previous years figures of

D 252.13 crore and the profit before tax was D 58.06 crore against the previous years figures of D 19.70 crore.

Carat Lane Trading Private Limited (Carat Lane) is engaged in the business of manufacture of jewellery products and has significant online presence. During the year 2018-19, Carat Lane has registered a turnover of D 416.39 crore (previous year: D 290.18 crore) and the loss amounted to D 46.13 crore against the previous years figures (loss) of D 83.88 crore. During the year FY

2018-19, the Company had invested D 99.99 crore in purchase of additional equity stake in Carat Lane and accordingly increased its holding to 69.47%.

The annual accounts of these subsidiary companies/JV were consolidated with the accounts of Titan Company Limited for 2018-19. None of these subsidiary companies declared a dividend in 2018-19.

The Company holds a 49% equity stake in Montblanc India Retail Private Limited (Montblanc), a joint venture entered into with Montblanc Services B.V., the Netherlands for operation of retail boutiques in India for Montblanc products. Montblanc registered a turnover of D 57.04 crore and the loss amounted to D 1.22 crore

(Profit After Tax).

The Company holds 26.79% stake in Green Infra Wind Power Theni Limited which supplies energy to the Company.

The statement containing salient features of the financial statement of subsidiaries/associate company/joint ventures in Form AOC-1 forms part of the Annual Report.

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

The particulars as prescribed under sub-section (3) (m) of Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, are furnished in Annexure-I to the

Boards Report.

17. CORPORATE SOCIAL RESPONSIBILITY (CSR)

In compliance with Section 135 of the Act, the Company has undertaken CSR activities, projects and programs as provided in the CSR policy of the Company and as identified under Schedule VII to the Act and excluding activities undertaken in pursuance of its normal course of business. In addition to the projects specified as CSR activities under Section 135 of Act, the Company has also carried out several other sustainability / responsible business initiatives and projects.

A report on CSR is attached in Annexure-II.

18. EXTRACT OF ANNUAL RETURN

As provided under Section 92(3) of the Act, the extract of annual return is given in Annexure-III in the prescribed

Form MGT-9, which forms part of this Report.

19. DIVIDEND DISTRIBUTION POLICY

The Dividend Distribution Policy is annexed as

Annexure-IV.

20. VIGIL MECHANISM

The Company has a whistle blower mechanism wherein the employees can approach the Management of the Company (Audit Committee in case where the concern involves the Senior Management) and make protective disclosures to the Management about unethical behaviour, actual or suspected fraud or violation of the Companys Code of Conduct and Insider Trading Code. The Whistle Blower Policy requires every employee to promptly report to the Management any actual or possible violation of the Code or an event an employee becomes aware of that could affect the business or reputation of the Company. The disclosures reported are addressed in the manner and within the time frames prescribed in the policy. A mechanism is in place whereby any employee of the Company has access to the Chairman of the Audit Committee to report any concern. No person has been denied access to the

Chairman to report any concern. Further, the said policy has been disseminated within the organisation and has also been posted on the Companys website.

21. SECRETARIAL STANDARDS

The Directors state that the applicable Secretarial Standards i.e SS-1 and SS-2, issued by the Institute of Company Secretaries of India, relating to Meeting of Board of Directors and General Meetings respectively have been duly complied with.

22. DISCLOSURES AS PER THE SEXUAL

HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has been at the forefront in ensuring a safe and secure work place for all its employees. In particular, as per the mandated policy of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules thereunder, prevention and redressal of complaints of sexual harassment at workplace are actively cascaded. The Company has adopted a zero tolerance for sexual harassment at workplace.

The selection and training of Internal Complaints Committee (ICC) members follows a stringent process to ensure that the most suitable person is part of the committee. This year, the Company has also empaneled its unionized employees at each of its manufacturing units for a better representation and reach of the employees. All members undergo the Prevention of Sexual Harrasment (POSH) training and are equipped to handle communication as well as redressal.

During the year under review, the total number of ICC members was at 64 as against 43 in 2016-17 and 2017-18.

All stakeholders viz. employees, contract and agency hires, vendors and associates are part of the communication cascades. The cascades are designed in a simple but effective manner by the use of regional theatre to demonstrate violations and the consequences. The core Ethics team comprising of the ICC Chairperson, the Chief Ethics Counsellor (CEC) and the regional heads or manufacturing heads are part of the Q&A at the end of the session at their respective locations. This has impacted positively with more and more stakeholders becoming familiar with the policy and gaining confidence to raise concerns with the respective office bearers. About 24 such events were held across the country covering over 10,000 stakeholders.

In terms of engagement, a short film competition was launched for the employees to participate and share their understanding of policies and unique situations of violations that may arise in their eco-systems in the form of a 2 minute silent film. This has gained popularity with an increased participation over last year. The details of the short film competition are as under:

Year Registrations Submissions – Ethical Violation Films Submissions – POSH _lms Winners
2017-18 100 13 10 8
2018 -19 148 22 13 7

During the financial year 2018-19, the Company had received 8 complaints on sexual harassment, 6 were disposed-off with appropriate action taken and 2 complaints remain pending as of 31st March 2019.

23. DETAILS IN RESPECT OF FRAUDS REPORTED BY AUDITORS UNDER SUB-SECTION (12) OF SECTION 143 OTHER THAN THOSE WHICH ARE REPORTABLE TO THE CENTRAL GOVERNMENT

The Statutory Auditors of the Company have not reported any fraud as specified under the second proviso of Section 143(12) of the Companies Act, 2013 (including any statutory modification(s) or re-enactment(s) for the time being in force).

24. CORPORATE GOVERNANCE

As per LODR Regulations, Management Discussion and Analysis, Corporate Governance Report and Practicing Company Secretarys Certificate regarding compliance of conditions of Corporate Governance forms part of this Report.

25. BUSINESS RESPONSIBILITY REPORT

As per LODR Regulations, a Business Responsibility Report is attached and forms part of this Report.

26. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. T.K. Balaji, Mrs. Hema Ravichandar, Mrs. Ireena Vittal, Mr. Ashwani Puri, Mr. B Santhanam and Mr. Pradyumna Vyas were the Independent Directors during the Financial Year 2018-19 and all have given declarations that they continue to meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 & Regulation 16(1)(b) of the LODR Regulations and that they are not debarred from holding the office of director by virtue of any SEBI order or any other such authority.

Prof. Das Narayandas, Independent Director resigned from the Board effective 25th January 2019 due to his increased pre-occupation with his academic assignments at Harvard Business School.

Mr. Pradyumna Vyas was appointed as an Additional

Director and Independent Director on the Board of the Company with effect from 25th March 2019.

In accordance with the provisions of the Act and in terms of the Memorandum and Articles of Association of the Company, Mr. Harish Bhat retires by rotation at the Annual General Meeting.

Ms. Shilpa Prabhakar Satish was appointed as an Additional Director on the Board of the Company on 29th March 2018 but subsequently resigned effective 10th May 2018.

Mr. Arun Roy was appointed as an Additional Director on the Board of the Company with effect from 26th November 2018.

Mr. N Muruganandam was appointed as an Additional Director on the Board of the Company on 14th March 2019 in place of Mr. K Gnanadesikan whose nomination was withdrawn on 14th March 2019 by TIDCO.

The Board, on the basis of the recommendations made by the Nomination & Remuneration Committee has recommended for your approval, appointment of Mrs. Hema Ravichandar upto 31st July 2020 and

Mrs. Ireena Vittal upto 29th January 2023 as Independent Director for a second term.

Members attention is drawn to Item No. 5 of the Notice for the appointment of Mr. N Muruganandam as a Director of the Company, to Item No. 6 of the Notice for the appointment of Mr. V Arun Roy as a Director of the Company, to Item No. 7 of the Notice for appointment of Mr. Pradyumna Vyas as an Independent Director of the Company, to Item No. 8 of the Notice for re-appointment of Mrs. Hema Ravichandar upto 31st July 2020 and to Item No. 9 for re-appointment of Mrs. Ireena Vittal for a period upto 29th January 2023.

Mr. T K Balaji was appointed at the Annual General Meeting of the Company held on 1st August 2014 for a period of 5 years and will be holding his office till 31st July 2019.

None of the Directors is related to each other within the meaning of the term "relative" as per Section 2(77) of the Act.

27. DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONNEL WHO WERE APPOINTED OR HAVE

RESIGNED DURING THE YEAR

Details of directors who were appointed or resigned during the year are covered in point No. 26 of the Boards Report.

During the year, Mr. A R Rajaram - Vice President - Legal

& Company Secretary retired from the services of the Company effective 30th June 2018 and Mr. Dinesh Shetty was appointed as the General Counsel & Company Secretary effective 3rd August 2018. Pursuant to the provisions of Section 203 of the Act, Mr. Bhaskar Bhat-Managing Director, Mr. S. Subramaniam - Chief Financial Officer and Mr. Dinesh Shetty - General Counsel & Company Secretary are the Key Managerial Personnel of the Company.

28. DIRECTORS RESPONSIBILITY STATEMENT

Based on the framework of Internal Financial Controls and compliance systems established and maintained by the Company, the work performed by the internal, statutory and secretarial auditors and external consultants, including 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 are adequate and operating effectively. Accordingly, pursuant to the requirements of Section 134 (5) of the Act, the Directors hereby confirm that: i. in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures; ii. they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period; iii. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. they have prepared the annual accounts on a going concern basis; v. they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

29. BOARD EVALUATION

The performance evaluation of the Board, its Committees and individual Directors was conducted and the same was based on questionnaire and feedback from all the Directors on the Board as a whole, its Committees and self-evaluation.

Based on the questionnaire and feedback, the performance of every Director was evaluated by the Board Nomination and Remuneration Committee (BNRC).

Some of the key criteria for performance evaluation, as laid down by the BNRC were as follows:

Performance evaluation of Directors:

Contribution at Board / Committee meetings & Guidance/ support to Management outside Board/ Committee Meetings.

Performance evaluation of Board and Committees:

Board structure and composition, Degree of fulfillment of key responsibilities , Establishment and delineation of responsibilities to Committees , Effectiveness of Board Processes, Information and Functioning, Board Culture and Dynamics, Quality of relationship between the Board and Management , Efficacy of communication with External Stakeholders & Committees – strengths and areas of improvement.

30. INDEPENDENT DIRECTORS

A separate meeting of the independent directors ("Annual ID Meeting") was convened, which reviewed the performance of the Board (as a whole), the non-independent directors and the Chairman. Post the Annual ID Meeting, the collective feedback of each of the Independent Directors was discussed by the Chairperson of the BNRC with the Board covering performance of the Board as a whole, performance of the non-independent directors and performance of the Board Chairman.

31. REMUNERATION POLICY

The Board has, on the recommendation of the BNRC framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report.

32. POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION AND OTHER DETAILS

In accordance with the agreement between the promoters, three Directors each may be nominated by Tata Sons Private Limited and Tamilnadu Industrial Development Corporation Limited.

The guidelines for selection of Independent Directors are as set out below: The Board Nomination and Remuneration Committee ("Committee") oversees the Companys nomination process for Independent Directors and in that connection to identify, screen and review individuals qualified to serve as an Independent Director on the Board.

Process for selection

The Committee may act on its own in identifying potential candidates. The Committee shall review and discuss details pertaining to candidates and will conduct evaluation of candidates in accordance with the process that it sees fit and appropriate and thereafter pass on its recommendation for nomination to the Board, based on the following guidelines:

Attributes i) The Committee shall seek candidates who is not a nominee or related to either Promoter of the Company. Such candidates shall possess integrity, leadership skills, managerial qualities, foresight abilities and competency required to direct and oversee the Companys management in the best interest of its stakeholders i.e. shareholders, customers, employees and communities it serves.

ii) The candidate must be willing to regularly attend the meetings of the Board and develop a strong understanding of the Company, its businesses and its needs, to contribute his/ her time and knowledge to the Company and to be prepared to exercise his/her duties with skill and care. Besides these, the candidate should have an understanding of governance concepts and legal duties of a Director. iii) It is desirable that the candidate should have expertise to fill in the gap(s) identified by the Company in the current composition of the Board. iv) Ideally the candidate should possess experience of 5 years on the board of a listed company. v) The candidates age shall not exceed 70 years at the time of joining the Board. vi) Forthrightness and ability to possess foresight abilities in the Governance of a Corporate.

Board Composition

Keeping in mind that women constitute a majority of the Companys customers it would be desirable to have one-third of the Boards strength represented by woman members.

Procedure

1. The Committee may retain search firms or advisors as it deems appropriate to identify candidates.

2. Develop a list of potential candidates of Independent Directors which may be refreshed every year. The Committee to create a list of probable candidates from known sources or from the database of Ministry of Corporate Affairs, Government of India or Stock Exchanges.

3. The Committee may also consider profiles of suitable expatriates.

4. The candidate considered by the Committee as potentially qualified will be contacted to determine their interest in being considered to serve on the Board and if interested will be interviewed. As and when a candidate is shortlisted, the Committee will make a formal recommendation to the Board.

33. OTHER DISCLOSURES

The information required under Section 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below: i) The ratio of the remuneration of each director to the median remuneration of the employees of the Company and the percentage increase in remuneration of each Director, Managing Director, Chief Financial Officer and Company Secretary in the financial year

Name of the director Ratio (times) % Change
Directors remuneration
1 Chairman (nominated by TIDCO)1 6.69 -22
2 Mr. Ramesh Chand Meena 7.71 617
3 Ms. Shilpa Prabhakar Satish2 0.59 100
4 Mr. Arun Roy3 1.40 -
5 Mr. N. N. Tata4 0.49 55
6 Mr. Harish Bhat4 0.79 43
7 Mr. T. K. Balaji 11.35 32
8 Mrs. Ireena Vittal 10.04 2
9 Mrs. Hema Ravichandar 10.04 17
10 Prof. Das Narayandas5 1.19 -
11 Mr. Ashwani Puri 9.72 4
12 Mr. B Santhanam6 5.58 -
13 Mr. Pradyumna Vyas7 0.55 -
14 Mr. Bhaskar Bhat (Managing Director)8 99.00 15
15 Mr. S.Subramaniam, Chief Financial Officer - 44
16 Mr. Dinesh Shetty, General Counsel & Company Secretary9 - -
17 Mr. A R Rajaram10 - -

1 Commission to the Chairman of the Company (the Chairmanship was held by Mr. K Gnanadesikan upto 14th March 2019 and currently Mr. N Muruganandam is the Chairman).

2 Ms. Shilpa Prabhakar Satish, IAS, nominee of TIDCO, was appointed on the Board with effect from 29th March 2018 and resigned effective 10th May 2018.

3 Mr. Arun Roy, IAS, nominee of TIDCO was appointed effective 26th November 2018.

4 In line with the internal guidelines, no payment is made towards commission to Mr. Harish Bhat and Mr. N N Tata, Non-Executive Directors of the Company, who are in full-time employment with other Tata companies.

5 Prof. Das Narayandas resigned from the Board effective 25th January 2019.

6 Mr. B Santhanam was appointed as an Independent Director on the Board effective 10th May 2018.

7 Mr. Pradyumna Vyas was appointed as an Independent Director on the Board effective 25th March 2019.

8 Inclusive of salary, perquisites, commission (relates to FY ended 31st March 2019 which will be paid during FY 2019-20) and retiral benefits.

9 Mr. Dinesh Shetty was appointed as the Company Secretary and Compliance Officer of the Company effective 3rd August 2018.

10 Mr. A R Rajaram retired from the Company effective 30th June 2018.

ii) The percentage increase in the median remuneration of employees in the financial year: 10.5% iii) The number of permanent employees on the rolls of company: 7,213 iv) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration: The average percentage increase this year has been 10.5% across all levels. Increase in the managerial remuneration is based on market trends and performance criteria as determined by the Board of Directors and on the recommendation of the Board Nomination & Remuneration Committee.

v) Affirmation that the remuneration is as per the Remuneration Policy of the Company: The Companys Remuneration Policy is based on the principle of internal equity, competence and experience of the employee and industry standards. Through its compensation programme, the Company endeavours to attract, retain, develop and motivate a high performance and engaged workforce. The Company follows a compensation mix of fixed pay, benefits and performance based variable pay. Individual performance pay is determined by business performance and the performance of the individuals measured through the annual appraisal process. The Company affirms remuneration is as per the Remuneration Policy of the Company.

34. INFORMATION AS PER RULE 5(2) OF THE CHAPTER XIII, THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

The statement containing names of top ten employees in terms of remuneration drawn and the particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in a separate annexure forming part of this report. Further, the report and the accounts are being sent to the members excluding the aforesaid annexure. In terms of Section 136 of the Act, the said annexure is open for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary.

35. AUDITORS a) Statutory Auditors

Pursuant to the provisions of Section 139 of the Act read with applicable Rules framed thereunder, M/s. BSR & Co., LLP have been appointed as Auditors for a term of five years, subject to ratification by the shareholders, from the conclusion of the 33rd Annual General Meeting till the conclusion of the 38th Annual General Meeting.

The Ministry of Corporate Affairs vide Notification dated 7th May 2018 notified several Sections of the Companies (Amendment) Act, 2017. In view of the said notification, the requirement of ratification of appointment of auditors, under Section 139 of the Companies Act, 2013, at each AGM is no longer required. Hence, the resolution to this item is not being included in the Notice to the AGM.

b) Secretarial Audit

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 has appointed Mr. KT Vijayakrishna, Practicing Company Secretary to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is annexed herewith as (Annexure-V).

36. AUDITORS REPORT AND SECRETARIAL AUDITORS REPORT

There are no disqualifications, reservations, adverse remarks or disclaimers in the auditors report and secretarial auditors report.

37. DISCLOSURES OF TRANSACTIONS OF THE LISTED ENTITY WITH ANY PERSON OR ENTITY BELONGING TO THE PROMOTER/PROMOTER GROUP WHICH HOLD(S) 10% OR MORE SHAREHOLDING IN THE LISTED ENTITY, IN THE FORMAT PRESCRIBED IN THE RELEVANT ACCOUNTING STANDARDS FOR ANNUAL RESULTS. Related Party Transactions with Promoter/ Promoter Group holding 10% or more shares Tamilnadu Industrial Development Corporation Limited and Tata Sons Private Limited hold 10% or more shares in the Company. The details of transactions with promoter/promoter group holding 10% or more shares have been disclosed in the accompanying financial statements.

Acknowledgements

Your Directors wish to place on record their appreciation of the support which the Company has received from its promoters, shareholders, lenders, business associates, vendors, customers, media and the employees of the Company.

On behalf of the Board of Directors,

Bengaluru N N Tata Bhaskar Bhat
8th May 2019 Vice Chairman Managing Director