V-Mart Retail Ltd Directors Report.

Dear Members,

Your Companys Directors are pleased to present the 17th Annual Report of the Company, along with Audited Accounts, for the financial year ended 31 st March, 2019.

FINANCIAL RESULTS

The operating results of the Company for the year under review are as follows:

(Rs. in Lakhs)

Particulars For the year ended 31.3.2019 For the year ended 31.3.2018
Revenue 1,43,967 1,22,651
Profits/(Loss) 13,724 13,540
Less: Depreciation 2,763 2,293
Profit before exceptional item & tax 9,981 11,247
Exceptional Items 980 -
Less: Tax Expense 3,818 3,476
Prior period items-(income)/expenses - -
Net profit for the period 6,163 7,770
Less: Utilized for Dividend Issue 437 272
Other comprehensive income (36) 29
Balance carried forward to Balance Sheet 5,690 7,527

PERFORMANCE REVIEW

India is considered to be Asias third-largest and the worlds fourth-largest retail market after the US, China, and Japan. It is one of the fastest growing major economies in the world, in turn leading to high growth in consumer and retail markets. The retail sector contributes over 10% to Indias GDP and employs around 8% of the total workforce. It is the worlds fifth-largest global destination in the retail space.

The retail industry in India is projected to grow from USD 795 billion in 2017 to USD 1,200 billion by 2021. The sector has been experiencing solid growth, with retail development taking place across the country, but is more pronounced in Tier II & III cities

Resonating the trend, the Net Sales of the Company increased by 17 % to Rs. 1,43,217 Lakhs in financial year 2018-19 from Rs. 1,22,097 Lakhs in F.Y. 17-18. The Company has posted Operating Profits (EBITDA) of Rs. 13,293 Lakhs in F.Y. 18-19. The Company posted Profitafter Tax (PAT) of Rs. 6,163 Lakhs in the current financial year as against a PAT of7,770 Lakhs and EBITDA of 13,279 Lakhs in the previous financial year.

A detailed analysis of Companys operations in terms of performance in markets, business outlook, risks and concerns forms part of the Management Discussion and Analysis, a separate section of the Annual Report.

OPERATIONS REVIEW

During the year under review, your Company continued to focus on enhancing the organizational scalability across all dimensions including as Sourcing, Supply Chain, Logistics, Technology, Business Intelligence, and People etc. to make it more robust and future-ready for supporting scalable growth. Towards the achievement of this goal, your Company has been taking a number of initiatives such as:

Expansion to new markets

During the year, your Company continued with its existing approach to endeavour to establish its growth pattern in the Retail Industry with a chain of stores under the V-Mart brand in the north, western and eastern parts of India. Marking a new milestone, your company has opened 44 new stores and closed one store in the previous year. With this addition, the cumulative count of the companys stores increased to 214, spread over an area of 18 Lakhs sq.ft. V-Mart added three new states i.e. Assam, Meghalaya, and Himachal Pradesh to expand the footprint to 17 states. The value fashion markets are witnessing a new level of adoption, wherein Tier IV towns are eagerly adopting the trend in Tier-II and III towns of seeking affordable & fashionable apparel and, your company aims to replicate success in exploring & harnessing opportunities in Tier IV markets also.

Optimizing Supply Chain for enhancing Operational excellence

Improved the average inventory sales days from 86 to 81 days for faster replenishment of merchandise with the latest trends Express delivery from the centralized distribution centre to north-east for the sustenance of store freshness Capacity building at the warehouse for catering to growth requirements the operations Launched an automated online requirement portal and requests management system for enhancing efficiency and serving internal customers

Revamping Sourcing & Product Assortment:

• Congruency in buying and planning processes with regional fashion tastes and preferences for optimal procurement

• Sustaining growth through increasing share of private labels to 65%

• Launching new ranges of fresh products across all customer segments

• Identification & development of vendors for long term growth

Building robust and future-ready operations

• Built new pillars of leadership sustenance by on boarding a new Independent Director, Chief Operating Officer (COO), Strategy Head and Head of Retail Operations at the leadership level.

• Reinforcing cluster model for rapid scalability, supply chain efficiencies, procurement flexibility, cost savings, and better implementation by placing new locations strategically within 50-150 km radius from existing cities

• Adding new team to launch and run omnichannel

• Revamped the visual merchandising team and quality team

• Capacity building in terms of adding new office space

• Instituting Zonal Business structures for driving higher ownership & regimental execution

• Made investments in the digital ecosystem by setting up an organization-wide data analytics platform and developing analytics that make the system more agile and responsive

• Launched a unified people management software solution for managing ‘hire to retire processes and mobility for providing an exceptional experience to all employees

• Augmented technical capabilities by adding a new data center, re-innovating replenishment engine, and launching Mobile POS machines at stores

• First-Time Marketing Initiatives - Localizing ATL through TVC of regional festivals, engaging prominent Brand Ambassadors for brand awareness & positioning and enhancing store appeal through better visual merchandising

• Launched fully-integrated Customer Relationship Management & loyalty platform

Embracing Digital Channel - Launching Omnichannel

Your company is in the process of designing a 360 omnichannel experience, seamlessly integrated across the entire customer lifecycle to deliver a digital experience at the stores as well as to online consumers. For responding to an intensifying competition that is also witnessing the entry of global e-retailers, your company aims to unlock and serve the aspirations of more ‘digitally aware customers in all part of the country.

AWARDS & ACHIEVEMENTS

Your Company received several recognitions during the year under review. Your Company & development was recognised of invendors2018 asfor long The Worlds Best Performing Department Store as per data compiled by Bloomberg. Mr. Lalit Agarwal, the Chairman and Managing Director was also conferred the award of the ‘Retail Leader of the Year-2018 by Franchise India. Additionally the Company was the 2018 Winner of Best Practice in Learning Transfer for Improving Business Bottom Line at the World HRD Congress. The Company was also bestowed with the Retail Champion Award for apparel & lifestyle by Retail Association of India.

At the IMAGES Fashion Awards 2019, the Company was well recognized

• as the ‘IMAGES Most Admired Affordable Fashion Retailer of the Year

• with the ‘IMAGES Excellence Awards, North India

• with the IMAGES Most Admired Retailer of the Year (Marketing and Promotion), North India.

In addition your Company won the Indian Retail Champions Awards at the Retail Leadership Summit 2019, and was also recognized as North Indias Best Employer Brand at the 13th Employer Branding Awards and was bestowed the Value Retailer of Choice 2018 recognition by Progressive

OPERATING RESULTS AND BUSINESS

Your Company completes its seventeenth year in the field of fashion retailing. The existing business model of the Company with a focus on the consumption story based on the growing aspiration for fashion in the Tier-II and Tier-III cities continues to provide more promising results.

During the year under review, your company opened 44 new stores across the focus regions. Same Store Sales growth for the year stood at 4%, by value and 8.0% by volume. Other performance metrics also showed good traction. Footfalls improved by 15.1%, well assisted by the various promotions. The increase in footfalls has been accompanied by an increase in bill size too, which is an indication that our strategy is yielding the right results.

Total revenues increased to Rs. 1,43,967 Lakhs compared to Rs. 1,22,651 Lakhs in FY 2017-18. Average inventory sales days improved to 81 days in FY 2018-19 against 86 days in FY 2017-18.

Sales per square foot is lower compared to the previous year, primarily because of the significant opened in the year under review. These stores would understandably take some time to ramp up.

DIVIDENDS

In terms of Dividend Distribution policy, your Directors in its meeting held on 10th May, 2019, recommended a dividend of Rs. 1.70 per share @ 17% excluding the dividend distribution tax, for the financial year ended 31st March, 2019. The proposal is subject to the approval of shareholders at the ensuing Annual General Meeting.

RESERVES

The Company during the year transferred Rs. 6,163 Lakhs to the reserves. Post transfer, the reserves stood at Rs. 29,241 Lakhs for financial year 2018-19.

CREDIT RATING

Investment Information and Credit Rating Agency of India Limited (ICRA) has upgraded its long-term rating to [ICRA] AA- (pronounced ICRA double A minus) from [ICRA] A+ (pronounced ICRA A plus) on the Rs. 110 crore cash credit limits of V-Mart Retail Limited (VMPL).ICRA has also reaffirmed its short-term rating at [ICRA] A1+ (pronounced ICRA A one plus) on the 15 crore non-fund-based limits of the company. The outlook on the long-term rating is revised to Stable from Positive.

The rating upgrade factors in the improvement in Companys performance over the last few quarters with the company reporting a year-on-year (YOY) increase in turnover and net profits by 22% and 77%, respectively in FY2018. The top line and bottom line further registered a YOY increase of 15% and 11%, respectively in Q1 FY2019. The turnover of the company increased because of higher sales volumes in new as well as existing stores due to more footfall. This indicates the growing popularity of the Companys retail chains. The profitability improved because of operational efficiencies including decline in shrinkages, lesser discounts during the year and benefits on account of imposition of GST. The ratings continue to take into account the established track record of the promoters and the long presence of the Company in the value-retail industry. The revised credit rating of the Company is as under:

Facilities Earlier Rating Revised Rating
Long term bank limits [ICRA] A+ (ICRA A plus) [ICRA] AA- (ICRA double A minus) (with stable outlook)
Short term bank limits [ICRA] A1+ (ICRA A one plus) ICRA A1+ (ICRA A one plus)

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis for the period under review as required under Schedule V read with Regulation 34(2)(e) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 has been dealt with extensively in a separate section forming part of number of stores the Annual Report.

LISTING

The equity shares of your Company continue to be listed at BSE Ltd. (BSE) and the National Stock Exchange of India Ltd. (NSE)

Exchange Scrip Code ISIN
NSE VMART INE665J01013
BSE 534976

The listing fees for fiscal 2019 have been paid for all of the above stock exchanges where the equity shares of the Company are listed.

EXTRACT OF ANNUAL RETURN

Pursuant to the provisions of Section 92(3) of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 the extracts of Annual Return in prescribed form MGT – 9 is appended as Annexure-A to this Report.

CORPORATE GOVERNANCE

Pursuant to the provisions of the SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015, the detailed Report on Corporate Governance is appended as Annexure to this Report.

NUMBER OF MEETINGS OF THE BOARD

The Board met four times (4) during the financialyear 18- 19, the details of which are given in Corporate Governance report Forming part of this report. The intervening gap between any two meetings was within the period prescribed by the Companies Act, 2013 & SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015.

BOARD EVALUATION

The annual evaluation process of the Board of Directors (Board), Committees and individual Directors was carried out in the manner prescribed in the provisions of the Companies Act, 2013 and as per the Corporate Governance requirements prescribed by the Securities and Exchange Board of India (Listing Obligations and Disclosures Requirements) Regulations, 2015 (SEBI Listing Regulations).

The Board and the Nomination & Remuneration committee reviewed the performance of the Board, Committees and individual Directors on the basis of the criteria and framework adopted by the Board.

The evaluation criteria included various aspects such as, functionality of Board, compositions, process & procedures including adequate & timely information, attendance, delegation of responsibility, decision making, roles & responsibility including monitoring, benchmarking, feedback relationship with the stakeholders and as provided by the Guidance Note on Board Evaluation issued by SEBI on 5thJanuary 2017.

In a separate meeting of the Independent Directors, performance of the Non-Independent Directors, the Board as a whole and the chairman were also evaluated, basis a set out criterion.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Board of Directors consists of six members, of which four are Independent Directors. The Board also comprise of one Woman Independent Director.

In pursuance of section 203 of the Companies Act, 2013, the key managerial personnel of the Company are – Mr. Lalit Agarwal, Chairman & Managing Director, Mr. Anand Agarwal, Chief Financial Officer and Ms. Megha Tandon, Company Secretary.

In accordance with the provisions of Section 152 of the Companies Act, 2013, Mr. Madan Gopal Agarwal (DIN: 02249947) is liable to retire by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for re-appointment. The Board of Directors recommends his reappointment and the matter is being placed for the approval of members at the ensuing Annual General Meeting of the Company.

During the year Mr. Govind Shridhar Shrikhande (DIN: 00029419 ) was appointed to the Board as Independent Director of the Company w.e.f. 2nd November 2018, for the period of five years subject to the approval of the members of the Company. The Company has received declaration from Mr. Shrikhande confirming that he meets with the criteria of Independence as prescribed under Section 149(6) of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Board of Directors recommend his appointment and the matter is being placed for the approval of members at the ensuing Annual General Meeting of the Company.

Mr. Aakash Moondhra (DIN 02654599) Independent Director whose current period of office is expiring on 22nd September, 2019. and who has submitted a declaration confirming the criteria of Independence under Section 149 of the Companies Act, 2013 read with the Listing regulations, as amended from time to time, and who is eligible for reappointment for a second term under the provisions of the Companies Act, 2013, Rules made thereunder and the Listing Regulations. The Board of Directors recommends his re-appointment for a term of 5 years and the matter is being placed for the approval of members at the ensuing Annual General Meeting of the Company.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received necessary disclosures from each of its four Independent Directors under Section 149(7) of the Companies Act, 2013 that he/she meets all the criteria laid down in Section 149(6) of the Companies Act, 2013 and Regulation 16 of the SEBI (Listing Obligation and Disclosures Requirement) Regulations, 2015 and there has been no change in the circumstances which may affect their status as Independent Director during the year.

During the year, the Non-Executive Directors of the Company had no pecuniary relationship or transactions with the Company, other than payments towards the sitting fees, commission and reimbursement of expenses incurred by them for the purpose of attending meetings of the Company.

POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION

The policy of the company aims to have a mix of Independent and Executive Directors on its Board and to separate out its functions of governance and management.

The policy of the Company on Directors appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under sub-section (3) of Section 178 is appended as Annexure-B to this report.

The appointment of Directors and remuneration paid during the financial year 2018-19 is as per the provisions of the Companies Act, 2013 and as per the terms laid down in the Nomination & Remuneration policy of the Company.

TRAINING OF INDEPENDENT DIRECTORS

Every new Independent Director of the Board attends an induction program. Every Senior-Management Personnel makes a presentation to inductees about the Companys strategy, operations, product and market, finance, risk management etc.

The details of familiarization programme have been provided under Corporate Governance Report forming part of this Report.

RETIREMENT BY ROTATION

In terms of the provisions of Section 152 of the Companies Act, 2013 and Articles of Associations of the Company, Mr. Madan Gopal Agarwal, Director is liable to retire by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re-appointment.

COMMITTEES OF THE BOARD

At present, there are five Board committees namely: Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Corporate Social Responsibility Committee and Risk Management Committee.

A detailed note on the Board and its Committees is provided under the Corporate Governance report section which is forming part to this Annual Report.

DISCLOSURE REQUIREMENTS

As per SEBI Listing Regulations, Corporate Governance Report with auditors certificate thereon and Management Discussion and Analysis are attached, which form part of this report.

The Company has also complied with disclosing the required details on the website of the company on www.vmart.co.in which are as follows: Details of its business Composition of various Committees

PRACTISING COMPANY SECRETARYS CERTIFICATE ON CORPORATE GOVERNANCE

As required under Schedule V, Clause E read with Regulation 34(3) and of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Practicing Company Secretarys certificate on Corporate Governance is enclosed as Annexure to the Board Report.

SHARE CAPITAL

a) Buy Back of Securities: The Company has not bought back any of its securities during the year under review.

b) Issue of Sweat Equity: The Company has not issued any sweat equity shares during the year under review.

c) Issue of Bonus Shares: The Company has not issued any bonus shares during the year under review.

d) Employees Stock Option / Restricted stock units: The Company has adopted ESOP Scheme, 2012 as per the applicable SEBI regulations and approved by the members at Annual General Meeting.

The Company has implemented an Employee Stock Option Scheme, which was approved by the Board of Directors and the shareholders vide resolution dated 2nd July 2012 and 10th July 2012 respectively (‘the V-Mart ESOP Scheme 2012), consequent to which 300,000 equity shares of Rs. 10 each were to be granted upon exercise as stock options (ESOPs) to eligible employees. Subsequently the shareholders in its meeting held on 18th September 2017 approved an amendment in the said ESOP scheme by increasing the total number of stock option from 300,000 to 600,000 options. The exercise price of these options will be determined by the Nomination & Remuneration Committee and the options will vest over a period of 12 months to 36 months of continued employment from the grant date. The grant details under the scheme during the year are as follows:

Grants Vesting Time line
During the financial year 2018-19 3 30% of the Total Grant After 12 months from the date of grant
grants have been made comprising 30% of the Total Grant After 24 months from the date of grant
total 62,717 options 40% of the Total Grant After 36 months from the date of grant

Details of equity shares allotted under ESOP during the year are as follows:

Sr. No. Date of Allotment No. of shares allotted
1 24th May 2018 26,140
2 23rd July, 2018 3,708
3 5th February, 2019 2,790
Total 32,638

Pursuant to the above allotment of shares, the paid up capital of the Company stands increased to Rs. 18,12,99,930 as on 31st March, 2019.

The information required to be disclosed under SEBI (Share Based Employee Benefits) Regulations, 2014 as on 31 st March, 2019 are as follows:

Particulars Details
Date of Shareholders Approval 10th July, 2012
Maximum Terms of options granted Options to be exercised within 8 years of vesting
Sources of Shares Primary Issuance
Variation of terms of options Nil
Number of options outstanding at the beginning of the year 97219
Number of options granted during the year 62717
Number of options forfeited / lapsed during the year 4192
Number of options vested during the year 29711
Number of options exercised during the year 32638
Number of shares arising as a result of exercise of options 32638
Money realized by exercise of options ( in Lakhs) 186.41
Number of options outstanding at the end of the year 123106
Number of options exercisable at the end of the year 25629
Pricing Formula The Nomination & Remuneration Committee is authorized to determine the exercise price of ESOPs.
Person-wise details of options granted during the Financial Year 2018-2019:
i) Senior managerial personnel/key managerial personnel Mr. Samir Misra
Mr. Snehal Shah
Mr. Dinesh Shrivastava
Mr. Ramesh K Agarwal
Ms. Anjali Goel
Mr. M. Srinivasan
Ms. Megha Tandon
Mr. Anand Agarwal
Mr. Syed Ali Athar
Mr. Rajan Sharma
Mr. Ranjan Kumar
ii) No of options granted and its exercise price Name Number of shares Exercise price per share
Mr. Samir Misra 11,658 2,047
Mr. Samir Misra 1,698 2,044
Mr. Snehal Shah 2,585 2,044
Mr. Dinesh Shrivastava 506 2,044
Mr. Ramesh K Agarwal 3,357 2,044
Ms. Anjali Goel 2,748 2,044
Mr. M. Srinivasan 2,069 2,044
Ms. Megha Tandon 646 2,044
Mr. Anand Agarwal 3,648 2,044
Mr. Syed Ali Athar 2,419 2,044
Mr. Rajan Sharma 4,246 2,044
Mr. Ranjan Kumar 3,426 2,286
Particulars Details
ii) Any other employee who received a grant in any one year of options amounting to 5% or more options granted during the year Nil
iii) Identified employees who are granted options during any one year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant. Nil
Fully-diluted EPS pursuant to issue of shares on exercise of options in accordance with relevant Accounting Standards 33.9
Lock-in Nil
Impact of the difference on the profits of the Company and on the EPS Impact on profit: 306.5 Lakhs Impact on EPS: 0.11D>
Difference, if any, between employee compensation cost (calculated according using the intrinsic value of stock options) and the employee compensation cost (calculated on the basis of fair value of stock options) 178.7 Lakhs
Weighted average exercise price of options whose exercise price either equals or exceeds or is less than the market price of the stock Exercise price exceeds market price : Not applicable
Exercise price equals market price : Not applicable
Exercise price is less than market price: As mentioned in below table
Weighted average fair values of options whose exercise price either equals or exceeds or is less than the market price of the stock Exercise price exceeds market price : Not applicable
Exercise price equals market price : Not applicable
Exercise price is less than market price : As mentioned in below table
Method and significant assumptions used to estimate the fair value of options granted during the year The fair market value has been calculated on the basis of the
‘Black Scholes model.
Particulars ESOPs ESOPs ESOPs ESOPs ESOPs ESOPs ESOPs ESOPs ESOPs
Grant I Grant II Grant III Grant IV Grant V Grant VI Grant VII Grant VIII Grant IX
Price per option (In ) 150 450 573 470 900 1260 2047 2044 2286
Risk free return (In%) 8.42 8.32 8.16 7.93 7.80 7.64 7.45 7.42 7.37
Expected Life (In years) 4 4 4 4 4 4 3 3 3
Expected Volatility 25% 41% 38.74% 30.13% 42.48% 50.76% 40.30% 41.49% 22.23%
Dividend Yield 0.27% 0.20% 0.20% 0.24% 0.18% 0.10% 0.10% 0.10% 0.10%
Closing market price 210 539.30 615.40 511.30 1214.85 1413.80 2274.05 2270.95 2540.25
of share as on date of (IPO) (NSE) (NSE) (NSE) (NSE)
option grant (BSE) (BSE) (BSE) (BSE)
614 510 1220.45 1419.8
Weighted average exercise price (In ) 150 450 573 470 900 1,260 2,047 2,044 2,286
Weighted average fair value of stock option (In ) 50.9 263 248 211 673 727 902 913 792

EMPLOYEE STOCK OPTION DETAILS:

Grant Date Exercise price Options granted Options vested and exercisable Options unvested Options exercised Options forfeited Options out-standing
20th July, 2012 150 1,53,252 1,53,252 - 1,23,264 29,988 -
5th January, 2015 450 22,350 22,350 - 18,700 3,650 -
28th December, 2015 573 13,645 13,645 - 8,186 - 5,459
30th January, 2017 470 76,225 44,076 32,149 16,357 12,919 46,949
12th July, 2017 900 6,395 1,918 4,477 1,918 - 4,477
09th November, 2017 1,260 9,300 2,790 6,510 2,790 2,772 3,738
24th May, 2018 2,047 18,527 - 18,527 - - 18,527
23rd July, 2018 2,044 40,764 - 40,764 - 234 40,530
2nd November, 2018 2,286 3,426 - 3,426 - - 3,426
Total 3,43,884 2,38,031 1,05,853 1,71,215 49,563 1,23,106

MOVEMENT OF STOCK OPTIONS DURING THE YEAR:

Total for all grants No. of options Weighted average exercise price (K) Weighted average remaining contractual life (Years)
Outstanding at the beginning of the year 97,219 635 NIL
Granted during the year 62,717 2058 6.56
Forfeited/ Cancelled during the year 4192 1080 6.56
Expired during the year NIL - NIL
Exercised during the year 32,638 571 NIL
Outstanding at the end of the year 123,106 1320 NIL
Exercisable at the end of the year 25,629 491.94 NIL

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were on arms length basis and were in the ordinary course of the business. There were no materially significant related party transactions made by the Company with the Promoters, Key Management Personnel or other designated persons and have no potential conflict with interest of the Company at large.

The Company has formulated a policy on Related Party Transaction which is available on the website of the Company at the link http://www.vmart.co.in/corporate.html. The details of related party transactions entered during the year are provided in the accompanying financial statements.

The particular of contract or arrangement with related parties referred in section 188(1) of the Companies Act, 2013 in the prescribed form AOC-2, is annexed as annexure-G to this report.

DEPOSITS

During the FY 2018-19, your Company has not accepted any deposits within the meaning of Section 73 and 76 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 and other applicable laws and as such no amount of principal or interest was outstanding as on date of the Balance Sheet.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013.

Loan, guarantees & investment covered under the provisions of Section 186 of the Companies Act, 2013, if any, form part of the notes to the financial statement provided in this annual report

MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION OF THE COMPANY BETWEEN 31ST MARCH, 2019 AND THE DATE OF BOARDS REPORT

There have been no such material changes and commitments affecting financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report.

SUBSIDIARY COMPANIES, JOINT VENTURES & ASSOCIATE COMPANIES

The Company does not have any Subsidiary, Joint Venture or Associate Company.

REGISTERED OFFICE

Registered Office of the company is situated at 610-611, Guru Ram Dass Nagar, Main Market, Opp. SBI Bank, Laxmi Nagar, New Delhi – 110092.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your Company has constituted a Corporate Social Responsibility Committee of the Board comprising of five members, namely Mr. Lalit Agarwal (Chairman), Mr. Madan Gopal Agarwal, Mr. Aakash Moondhra, Ms. Sonal Mattoo (Members) and Mr. Govind Shridhar Shrikhande (Member). The Committee is responsible for formulating and monitoring the CSR policy of the Company. Details about the CSR policy of the Company and initiatives taken by the Company on CSR during the year are available on the companys website.

As per the Companies Act, 2013, every company having net worth of rupees five hundred crores or more, or turnover of rupees one thousand crores or more or a net profit of rupees five crores or more during any financial year shall spend in every financial year, at least two percent of the average net profits of the company made during the three immediately preceding financial year, in pursuance of its Corporate Social Responsibility Policy. Accordingly our Company was requires to spend Rs. 148 Lakhs on CSR activities during the year. During the year under review your Company has spent amount Rs. 66 Lakhs towards Corporate Social Responsibility.

The annual report on CSR Activities is appended as Annexure-C to this Board Report.

JUSTIFICATION FOR NOT SPENDING THE PRESCRIBED AMOUNT ON CSR ACTIVITIES

Our CSR vision is to enhance the quality of life indicators of the local communities where we conduct our business. This is by way of various initiatives, e.g. in education, sports coaching, skill development and capacity building, social infrastructure upkeep and maintenance (school, parks, etc.) and livelihood programs.

In order to spend the average of 2% of Average Net profits of preceding three financial years, the CSR committee had a number of meetings. Many potential funding avenues and initiatives were discussed and implemented, while several more proposals are being currently evaluated. Since much needed due diligence is involved in this process before finalizingthe real beneficiaries which consumes a lot of time due to which the Company couldnt spent the prescribed full CSR amount under Companies Act, 2013.

We are committed to spending the mandated CSR funds in line with our vision and objectives, and the project pipeline is being streamlined accordingly. We expect to fulfillour accumulated CSR spending commitments in this financial year on projects that are in the impact areas related to our CSR vision.

CONSERVATION OF ENERGY

The operational activity of the Company does not involve large energy consumption. In any case, conservation of energy is considered to be a priority and therefore ensuring minimum consumption by way of better energy conservation programs, training/ awareness of the employees, layout of machines and prompt upkeep is a continuous exercise.

The Company has taken many energy initiatives such as:

• Installation of LED lights and power saving equipments at all stores to conserve electricity usage

• Optimum use of air conditioner (AC) at the stores in order to reduce the electricity consumption

• Automation of processes to reduce use of paper

• Installation of glass doors, walls and windows at the stores to use daylight and reduce electricity consumption

• Plantation of trees for combating air pollution at warehouse

• Elimination of the use of plastic carry bags at the stores

The Company is in process of evaluating the usage of solar penal at the stores; fisability study to implement the same is in process.

TECHNOLOGY ABSORPTION

Your Company is taking care of latest development and advancements in technology and all steps are being taken to adopt the same. We believe that, driven by our strategic road map, sustained efforts to build internal capabilities and organizational structure, improve processes and systems through advanced technology and digitialisation, investments in talent pipeline, and increasing cost efficiencies will propel us on a faster growth path. we are focusing on making our ‘hardware, i.e. the supply chain, logistics, and technology backbone more robust and future-ready to support scalable growth and expansion into new markets, and enhance data-driven decision-making During the year under review, several technological changes have been implemented at the companys Headoffice, warehouse, as well as at the stores which includes: Installation of new business intelligence tool Setting up an organization-wide data analytics platform Adding a new data center Digitalisation of product catalogue Upgradation of network backbone Investment for launching omni enable retail Launching Mobile POS Machine Launched people management software solution Implementation of new design tools and platform Upgradation in replenishment software and rule engine.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Sr. No. Particulars Foreign Exchange Earning Foreign Exchange outgo
(Amount in ) (Amount in )
1 Total Nil Nil

CODE OF CONDUCT

The Board of Directors has approved a Code of Conduct which is applicable to the Members of the Board and all employees in the course of day to day business operations of the Company. The Company believes in Zero Tolerance against bribery, corruption and unethical dealings / behaviors of any form and the Board has laid down directives to counter such acts. The Code has also been posted on the Companys website.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has a Whistle Blower Policy/ Vigil Mechanism to deal with instances of fraud and mismanagement, if any. The purpose of this mechanism is to provide a framework to report concern about unethical behavior, actual or suspected fraud or violation of the Companys Code of Conduct or ethics policy and provide adequate safeguards against victimization of the person availing this mechanism. This Policy has been appropriately communicated within the organization and is effectively operational. The policy provides mechanism whereby whistle blower may send protected disclosures directly to the Chairman of Audit Committee or Vigilance Officer. The Policy is available on the website of the Company i.e. www.vmart.co.in.

PREVENTION OF INSIDER TRADING

The Securities and Exchange Board of India (SEBI) has in exercise of powers conferred under Securities and Exchange Board of India, Act, 1992 has made the Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2018 to amend the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015

In view of the above the code of conduct to regulate, monitor & report trading by insider, has been approved by the Board of Directors at their duly convened meeting.

The Code requires pre-clearance for dealing in the Companys shares and prohibits the purchase or sale of Company shares by the Directors and the designated persons while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed. The Board is responsible for implementation of the Code.

All Board Directors and the designated employees have confirmed compliance with the code.

RISK MANAGEMENT

Your Company is working in an open environment and hence faces various types of risk. Company has analyzed all the possible types of risk and constituted a Risk Management Committee of the Board comprising of four members, namely Mr. Aakash Moondhra (Chairman), Mr. Murli Ramachandran (Member), Ms. Sonal Mattoo (Members) and *Mr. Govind Shridhar Shrikhande (Member).

 

* Mr. Govind Shridhar Shrikhande appointed Independent Director of the Company with effect from Nov 2, 2018.

The Committee is responsible for formulating and monitoring the Risk Management policy of the Company.

HUMAN RESOURCE MANAGEMENT

The focus for the year was on Capability Building, Employee Engagement and Key Talent Management. We are focused to attract and retain talented skills and make them motivated through various skill-development programmes. We provide quality workplace to our employees and provide platform to develop and to grow.

The statement containing the names and other particulars of employees in accordance with section 197 (12) of the Companies Act, 2013, read with rules 5(1) & 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is appended as Annexure-D to the Board Report.

The details of the employees of the Company employed throughout the financial remuneration of Rs. 1.02 Crores or more, or employed for the part of the year and in receipt of Rs. 8.5 Lakhs or more a month under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are mentioned in Annexure D to this report.

STATUTORY AUDITORS

Pursuant to the provisions of Section 139 of the Companies Act, 2013, M/s S.R. Batliboi & Co. LLP, Chartered Accountants, (Firm Registration No. 301003E/E300005) were appointed as Statutory Auditors of the Company for a term of five consecutive years, to hold office from the conclusion of the 16th Annual General Meeting held on 29th June, 2018 until the conclusion of 21st Annual General Meeting of the Company to be held in the calendar year 2023, subject to annual ratification by members at every Annual General Meeting, on such remuneration as may be decided. However, Vide notification dated 7th May, 2018 issued by Ministry of Corporate Affairs, the requirement of annual ratification has been omitted.

AUDITORS REPORT

There was no observation or qualification in the Auditors Report for the financial year ended 31 st March 2019. The Notes on Financial Statements referred to in the Auditors report are self-explanatory and therefore do not require any further comments.

SECRETARIAL AUDITOR & REPORT

M/s. VKC & Associate Company Secretaries, a partnership firm was appointed as Secretarial Auditors to conduct the Secretarial Audit of the Company for the FY 2018-19, pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The Secretarial Audit report in form MR- 3 is enclosed herewith as Annexure-E to the Boards Report.

The Secretarial Audit Report does not contain any observation or adverse remark.

INTERNAL FINANCIAL CONTROL

The Board has adopted adequate policies and procedures for ensuring orderly and efficient conduct of its business, including adherence to the Companys policies, safeguarding of its assets, prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures.

SIGNIFICANT AND MATERIAL ORDERS

There was no such order passed by the regulators or courts or tribunals impacting the going concern status and Companys operations in future during the year under review. year was in receipt of a

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

\Your Company laid down an Anti-Sexual Harassment Policy in compliance with the requirements of the Sexual Harassment of Woman at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Internal Complaints Committee (ICC) has been set up to redress complaints regarding sexual harassment, if any.

The disclosures for the period under review as per the Anti-Sexual Harassment Policy of the Company and applicable Act, thereof are as follows:

(a) Number of complaints of sexual harassment received during the year: 5

(b) Number of complaints disposed off during the year: 5

(c) Number of cases pending for more than ninety days: Nil

(d) Number of workshops on awareness program against sexual harassment carried out: 1

(e) Nature of action taken by the employer or district officer: Appropriate Action taken by the Company.

INCIDENT OF FRAUD

No fraud by the Company or on the Company by its officers or employees has been noticed or reported during the period covered by our audit

INVESTORS EDUCATION & PROTECTION FUND (IEPF)

Pursuant to the applicable provisions of the companies Act, 2013 read with IEPF Authority (Accounting, Audit, Transfer & Refund) Rules 2016 all unpaid or unclaimed dividend are required to be transferred by the Company to the IEPF established by Central Government after completion of seven years. Further details of unpaid or unclaimed dividend are provided on our website at www.vmart.co.in.

BUSINESS RESPONSIBILITY REPORT

As stipulated in term of the provisions of Regulation 34 of SEBI (Listing Obligation & Disclosure Requirements) Regulations, 2015 the Business Responsibility Report describing the initiatives undertaken by the Company from environmental, social and governance perspective is presented in a separate section forming part of this Annual Report.

COST RECORDS AND COST AUDIT

Maintenance of cost records and requirement of cost audit as prescribed under the provisions of section 148(1) of the Companies Act, 2013 are not applicable for the business activity carried out by the Company

DIVIDEND DISTRIBUTION POLICY

Pursuant to Regulation 43A of the SEBI (Listing obligations and Disclosures Requirements) Regulations 2015 (the listing regulations), the top 500 listed companies shall formulate a dividend distribution policy. Accordingly, the policy was adopted to set out the parameters that will be taken into consideration by the Board of the Company in determining the distribution of dividend to its shareholders and/or retaining profits is enclosed as Annexure-F to the Boards Report and is also available on the Companys website at the link http://www. vmart.co.in/nimda/product_image/invester/Dividend_ Distribtion_Policy4.pdf

SECRETARIAL STANDARDS

During the year under review, your Company has complied with all applicable secretarial standards issued by The Institute of Company Secretaries of India and approved by the Central Government pursuant to Section 118 (10) of the Companies Act, 2013.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013, the Directors hereby state and confirm that :

a) In the preparation of the annual accounts, the applicable accounting standards have been followed.

b) The Directors 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 or loss of the company for that period.

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 operating effectively.

f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

ACKNOWLEDGEMENT

Your Directors take this opportunity to express their sincere appreciation for the excellent support and co-ordination extended by the shareholders, customers, suppliers, bankers and all other business associates. Your Directors gratefully acknowledges ongoing co-operation and support provided by Central Government and State Government and all regulatory authorities. Your Directors also place on records their appreciation for the contribution made by employees at all levels.

By the order of Board
or and on behalf of Board of Directors
Lalit Agarwal
Place: Gurugram Chairman & Managing Director
Date: 10th May, 2019 DIN: 00900900