VRL Logistics Ltd Directors Report.

Dear Members,

Your directors are pleased to present the thirty seventh annual report of your Company together with the audited financial statements for the financial year ended March 31,2020.

1. SUMMARY OF FINANCIAL RESULTS (Rs in lakhs)

Particulars Financial Year ended 31st March 2020 Financial Year ended 31st March 2019
Total Income 212,885.65 2,11,746.82
Profit before Finance cost & Depreciation 30,858.48 25,191.92
Finance Costs 3,673.37 1,086.37
Depreciation& Amortization expense 16,753.43 10,058.09
Profit Before Tax 10,431.68 14,047.46
Tax Expense 1,420.19 4,855.85
Net Profit After Tax 9,011.49 9,191.61
Other comprehensive income (204.92) (288.34)
Total Comprehensive income 8,806.57 8,903.27
Basic& diluted Earnings per Share (Rs.) 9.97 10.17

2. OPERATING HIGHLIGHTS / STATE OF COMPANYS AFFAIRS

During the year under consideration, your Company achieved a gross revenue of Rs. 212,885.65 lakhs as against Rs.211,746.82 lakhs for the earlier fiscal depicting a growth of 0.54 %.The Profit before tax (PBT) was Rs. 10,431.68 lakhs as against the Profit before tax of Rs. 14,047.46 lakhs in the previous year depicting a decline of 25.74%.

While the Companys Goods Transport Division achieved a turnover of Rs. 172,469.20 lakhs registering a growth rate of 2.29% as compared to the previous year, Bus Operations division achieved a turnover of Rs. 34,371.06 lakhs registering a decline of 9.63%. A detailed financial performance analysis is provided in the Management Discussion & Analysis Report, which is part of this Annual Report.

3. SHARE CAPITAL

The paid up Equity Share Capital as at March 31,2020 stood at Rs.9034.35 lakhs. There was no change to the paid up share capital during the fiscal.

The company has not issued shares with differential voting rights nor has granted any stock options or sweat equity. As on March 31,2020, none of the Directors of the company held instruments convertible into equity shares of the Company.

4. CHANGE IN THE NATURE OF BUSINESS

There is no change in nature of business of the Company. Your Company continues to be one of the leading Logistics service providers in the country. The service offerings of the Company in the Logistics space are Goods transport and Passenger transport apart from Transportation of Passengers by Air and Wind Power Generation business.

5. CAPITAL EXPENDITURE ON TANGIBLE ASSETS:

During the Financial year 2019-20, the company has incurred a capital expenditure of Rs. 16,597.03 lakhs. Out of the same, an amount of Rs.10,988.82 lakhs was invested on purchase of new fleet i.e., predominantly on lorries (Addition of 520 goods transport vehicles in FY20 Small Vehicles - 64 vehicles, LCVs-22 Vehicles, HGVs - 432 vehicles, Tankers-2). An amount of Rs. 3,673.95 Lakhs was spent on additional Buildings out of which Rs. 3,135.28 was spent for Building in Surat and Rs.504.55 lakhs was spent on additional Building in Ballari. A sum of Rs.1,934.27 Lakhs was incurred towards addition of other capex components which include the cost incurred on additions to Aircrafts, Plant & Equipments, Office Equipments, Furnitures and Fixtures and Leasehold Improvements.

6. LEASE

The Company has adopted the new accounting standard i.e. Ind AS 116- Leases, which has become effective from 1 April 2019 (transition date). The adoption of this new Standard has resulted in the Company recognising a right-of-use of assets and related lease liability in connection with all former operating leases except for those identified as low-value or having a remaining lease term of less than 12 months from the date of initial application.

The Company has recognised lease liability on the date of initial application at the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application. The Company has recognised a right-of-use of assets on the date of initial application at its carrying amount as if the Standard had been applied since the commencement date of lease but discounted using the incremental borrowing rate at the date of initial application.

The Company has discounted lease payments using the incremental borrowing rate as at 1st April 2019 for measuring lease liabilities at 27,047.16 lakhs and accordingly recognised right-of-use assets at 24,623.53 lakhs by adjusting retained earnings by 1,911.20 lakhs (net of tax), including adjustments for prepaid/accrued rent and lease equalisation reserve, as at the aforesaid date.

The impact of adopting Ind AS 116 on the financial statements for the year ended 31 March 2020 is as follows:

Particulars Year ended 31 March 2020 (Erstwhile basis) Year ended 31 March 2020 (As per Ind AS- 116) Increase/ (Decrease) in Profit
Freight, handling and servicing cost 1,49,427.60 1,41,034.07 8,393.53
Finance costs 1,152.13 3,673.37 (2,521.24)
Depreciation and amortisation expense 10,312.38 16,753.43 (6,441.05)
Profit before tax 11,000.44 10,431.68 (568.76)
Profit after tax 9,437.10 9,011.49 (425.61)

7. DIVIDEND:

The comparative details of dividend declared are as follows:-

Financial Year 2019-20

Financial Year 2018-19

Dividend Per share (in Rs) Dividend Payout(Rs in lakhs) Dividend Per share (in Rs) Dividend Payout (in Rs lakhs)
Interim Dividend 7.00 7623.97 3.50 3811.99
Final Dividend - - 2.00 2178.28
Total Dividend 7.00 7623.97 5.50 5990.27
Payout ratio (Interim and Final Dividend)

64.52%

54.08%

 

# Dividend payout as disclosed above includes dividend distribution tax also.

Considering the developments arising out of Covid-19 pandemic and need to conserve resources, the Board does not recommend further dividend for the year under consideration and recommends that the interim dividend paid be considered as the final dividend for the year.

In compliance with the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirement) Regulations, 2015 (“SEBI Listing Regulations”), the Dividend policy of the Company is available on the Companys website at http:// vrlgroup.in/vrl_investor_desk.aspxRsdisplay=policies. A copy of the same is annexed to this Report as Annexure A.

8. TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF:

The Ministry of Corporate Affairs under Section 124 and 125 of the Companies Act, 2013 requires dividends that are not encashed/ claimed by the shareholders for a period of seven consecutive years, to be transferred to the Investor Education and Protection Fund (IEPF).

During the year under consideration, no amount was due for transfer to IEPF in accordance with Section 125 of the Companies Act, 2013.

The details of unclaimed dividend and IPO share application money along with their due dates for transfer to IEPF is provided in the Corporate Governance Report which forms part of this Annual Report.

9. TRANSFER TO RESERVES:

The Company has transferred an amount of Rs.901.15 lakhs to the General Reserve out of current years profits in line with its practice of earlier years.

10. SUBSIDIARY COMPANIES:

The Company does not have any subsidiary.

11. FIXED DEPOSITS

The Company has not accepted any deposits during the year within the meaning of Section 73 of the Companies Act, 2013 and the rules made there under.

12. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS:

The company has not given any loans or guarantees covered under the provisions of section 186 of the Companies Act, 2013. Details of investments made by the company are given in the notes to the financial statements.

13. CREDIT RATING

During the year ICRA Limited has upgraded the Long term rating of the Company from [ICRA] A-(pronounced as ICRA A) to [ICRA] A+ (pronounced as ICRA A Plus). The outlook on the long term rating is Stable.

14. MANAGEMENTS DISCUSSION AND ANALYSIS REPORT

Managements Discussion and Analysis Report for the year under review, as stipulated under Regulation 34 of SEBI Listing Regulations read with Schedule V thereto, is presented in a separate section forming part of this Annual Report.

15. BUSINESS RESPONSIBILITY REPORT

Securities Exchange Board of India vide recent notification mandated top 1,000 listed companies to include a report on business responsibility. The said report forms part of this Annual Report.

16. CORPORATE GOVERNANCE

The Company is committed to maintain the steady standards of corporate governance and adhere to the corporate governance requirements set out under extant law. The Report on corporate governance as stipulated under Regulation 34 of the SEBI Listing Regulations read with Schedule V thereto forms part of this Annual Report. The requisite certificate from the Auditors of the Company confirming compliance with the conditions of corporate governance as stipulated under the aforesaid Regulations, as also the related certificate from CEO/CFO are attached to the Report on Corporate Governance.

The auditors certificate does not contain any qualification, reservation or adverse remarks.

17. BOARD COMPOSITION AND INDEPENDENCE

The composition of the Board is in conformity with Section 149 of the Companies Act, 2013 and Regulation 17 of the SEBI Listing Regulations, which stipulates that the Board should have optimum combination of Executive and Non-executive Directors with at least one Independent Woman Director and at least 50% of the Board should consist of Independent directors, as the Chairman of our Board is an Executive Director.

As on March 31, 2020, the Board comprised of twelve Directors. Out of these, two are Managing Directors who are also the Promoters of the Company and two are Whole Time Directors, the other eight being Non-Executive Directors.

Of the eight Non-Executive Directors, six are Independent Directors. These include two Independent Woman Directors. All the Directors possess the requisite qualifications, expertise and experience in general corporate management, finance, banking, laws and other allied fields enabling them to contribute effectively in their capacity as Directors of the Company.

None of the Directors of the Company are related to each other except Dr. Vijay Sankeshwar, Chairman & Managing Director (CMD) and Mr. Anand Sankeshwar, Managing Director (MD) .

All Independent Directors have given due declarations that they meet the criteria of independence as laid down under section 149(7) of the Companies Act, 2013 and under extant provisions of the SEBI Listing Regulations.

18. NUMBER OF MEETINGS OF THE BOARD

During the year, four Board Meetings were held, details of which are provided in the Corporate Governance Report. The intervening gap between the Meetings was in compliance with the requirements of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015.

19. COMMITTEES OF THE BOARD

The Board has the following committees:

a. Audit Committee

b. Nomination and Remuneration Committee

c. CSR Committee

d. Stakeholders Relationship Committee

e. Risk Management Committee

f. Administration Committee

g. Finance Committee

Details such as terms of reference, powers, functions, meetings, membership of committee, attendance of directors etc. are dealt with in Corporate Governance Report forming part of this Annual report.

Board has accepted all recommendations made by the Audit Committee during the year.

20. DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

a) Inductions

There was no induction of any new director during the year under consideration.

b) Retirement/Re-appointment

Mr. K N Umesh, Whole-time Director and Mr. Raghottam Akamanchi, Non-Executive Director of the Company, retire by rotation owing to their tenure being the longest amongst retiring directors and being eligible, offer themselves for reappointment. The Board recommends their re-appointment.

Mrs. Medha Pawar, Independent Director was appointed w.e.f. December 12th, 2014 and her term concluded on December 11th, 2019. Based on the recommendation of Nomination and Remuneration Committee, Board at its meeting held on November 09th, 2019 re-appointed her for a second term of 5 years w.e.f. December 12th, 2019 subject to approval of shareholders by Special Resolution at the ensuing General Meeting.

Mr. Shankarasa Ladwa, Independent Director was appointed w.e.f. February 19th, 2015 and his term concluded on February 18th, 2020. Based on the recommendation of Nomination and Remuneration Committee, Board at its meeting held on February 08th, 2020 re-appointed his for a second term of 5 years w.e.f. February 19th, 2020 subject to approval of shareholders by Special Resolution at the ensuing General Meeting.

Dr. Anand Pandurangi, Independent Director was appointed w.e.f. February 19th, 2015 and his term concluded on February 18th, 2020. Based on the recommendation of Nomination and Remuneration Committee, Board at its meeting held on February 08th, 2020 re-appointed his for a second term of 5 years w.e.f. February 19th, 2020 subject to approval of shareholders by Special Resolution at the ensuing General Meeting.

c) Resignation

During the year under review, no directors resigned in the Company.

d) Passing of Special Resolutions

In terms of sections 196, 197 & 198, read with Schedule V to the Companies Act, 2013 ("the Act") and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 of the Companies Act 2013 (“the Act”) and in accordance with the Regulations 17 (6)(e) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ,Company needs to get shareholders approval by Special Resolution for payment of remuneration to Dr. Vijay Sankeshwar, Chairman and Managing Director with effect from January 1st , 2020 in view of his remuneration having being fixed for a three years period from 01st January 2017 to 31st December 2019.

Dr. Vijay Sankeshwar has indicated that he does not seek any enhancement in the remuneration being paid to him. As such, the management of the Company proposes the continuation of the same remuneration as was being paid to him earlier. Also, in light of the COVID-19 impact on the financial performance of the company, the management anticipates a profit erosion / reduction from such pandemic. As such, any payment of remuneration to him for the current financial year, in case of inadequacy of profit would require approval of the shareholders, as per the provisions of the Companies Act, 2013. Detailed reasons as required under the Companies Act, 2013 have been set out in the Notice of the Annual General Meeting.

In terms of sections 196, 197 & 198, read with Schedule V to the Companies Act, 2013 (the Act) and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 of the Companies Act 2013 (“the Act”) and in accordance with the Regulations 17 (6)(e) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ,Company needs to get shareholders approval by Special Resolution for remuneration paid/ payable to Mr.Anand Sankeshwar, Managing Director, Mr. K N Umesh, Executive Director and Mr. L R Bhat, Executive Director which is expected to be in excess of the limits prescribed under Schedule V of the Companies Act, 2013 in view of the financial impact of Covid-19 pandemic. As it is contemplated to continue the existing remuneration to above said Executive Directors in case of inadequacy of profit, approval from shareholders by way of special resolution would be required.

The requiste approval under Regulations 17(6) of SEBI (LODR) Regulations, 2015 is also being sought in respect of remuneration payable to the Managing Directors.

KEY MANAGERIAL PERSONNEL

Pursuant to Section 203 of the Companies Act, 2013, the Key Managerial Personnel (KMP) of the Company are Dr. Vijay Sankeshwar, Chairman and Managing Director, Mr. Anand Sankeshwar, Managing Director, Mr. K N Umesh, Whole time Director, Mr. L R Bhat, whole time Director, Mr. Sunil Nalavadi, Chief Financial Officer and Mr. Aniruddha Phadnavis, Company Secretary. There was no change in Key Managerial Personnel of the Company during the year.

21. STATUTORY DISCLOSURES

None of the Directors of your Company are disqualified as per provisions of Section 164(2) of the Companies Act, 2013. Your Directors have made necessary disclosures, as required under various provisions of the Companies Act, 2013 and SEBI Listing Regulations. A Certificate to that effect as mandated under Schedule V of the SEBI (LODR) Regulations, 2015 has been obtained from a Company Secretary in practice.

22. BOARD EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and SEBI Listing Regulations, the annual performance of the Board, its Committees, Chairperson and Individual Directors including Independent Directors was evaluated as per the criteria laid down by the Nomination and Remuneration Committee. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report which forms part of this Annual Report.

23. BOARD DIVERSITY

A diverse Board enables efficient functioning through differences in perspective and skill and also fosters differentiated thought processes at the back of varied industrial and management expertise, gender and knowledge. The Board recognizes the importance of a diverse composition and has adopted a Board Diversity policy which sets out the approach to diversity.

The said policy can be accessed thru the following link. http://vrlgroup.in/vrl_investor_desk.aspxRsdisplay=policies

24. DIRECTORS RESPONSIBILITY STATEMENT

In terms of Section 134 (5) of the Companies Act, 2013, the directors would like to state that:

i) In the preparation of the annual accounts, the applicable accounting standards (IndAS) have been followed along with proper explanation relating to material departures.

ii) The directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period.

iii) 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.

iv) The directors have prepared the annual accounts on a going concern basis.

v) The directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

vi) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively.

Based on the framework of internal financial controls established and maintained by the Company, work performed by the internal, statutory auditors, reviews performed by the management and the relevant Board Committees, the Board, in concurrence with the Audit Committee, is of the opinion that the Companys internal financial controls were adequate, operational and effective as on March 31,2020.

25. 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 are no materially significant related party transactions made by the company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the company at large.

All Related Party Transactions are placed before the Audit Committee as also to the Board for prior approval. Omnibus approval was obtained every half year for transactions which are of repetitive nature. A statement containing details of all transactions entered into pursuant to omnibus approval are placed before the Audit Committee and the Board for review and approval on a quarterly basis.

The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board of Directors of the Company can be viewed on the website of the Company through the following link.

http://vrlgroup.in/investor_download/RPT%20Policy.pdf

There were no material related party transactions entered between the Company, Directors, management, or their relatives. All the contracts/arrangements/transactions entered into by the Company with the related parties during the financial year 2019-20 were in the ordinary course of business and on an arms length basis. In our opinion there were no “material” transactions that warrant a disclosure in this report.

Accordingly, particulars of contracts or arrangements with related parties referred to in Section 188(1) along with the justification for entering into such contract or arrangement in Form AOC-2 does not form a part of this report.

26. NOMINATION AND REMUNERATION POLICY

The Board has, on the recommendation of the Nomination & Remuneration Committee, framed a policy for selection and appointment of Directors, Senior Management and their remuneration including criteria for determining qualifications, positive attributes and other matters provided under sub section (3) of section 178 of the Companies Act 2013. The Remuneration Policy is annexed to this report as Annexure B. The said policy alternatively can also be accessed on the website of the Company at the following link:

http://vrlgroup.in/investor_download/Nomination_Remuneration%20Policy.pdf

27. CODE OF CONDUCT

The Board of Directors has approved a Code of Conduct which is applicable to the Members of the Board and specified 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 / behavior in any form and the Board has laid down certain directives to counter such acts. Such code of conduct has also been placed on the Companys website. The Code lays down the standard procedure of business conduct which is expected to be followed by the Directors and the designated employees in their business dealings and in particular on matters relating to integrity in the work place, in business practices and in dealing with stakeholders. The Code gives guidance on the expected behavior from an employee in a given situation and the reporting structure. All the Board Members and the Senior Management personnel have confirmed compliance with the Code.

28. VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has a Vigil Mechanism Policy to deal with instances of fraud and mismanagement, if any. Staying true to our core values being committed to high standards of Corporate Governance and stakeholder responsibility, the said policy ensures that strict confidentiality is maintained in respect of whistle blowers whilst dealing with concerns and also specified that no discrimination will be meted out to any person for a genuinely raised concern and also provides a direct access to the Chairman of the Audit Committee. During the year under review none of the personnel has been denied access to the Chairman of Audit Committee.

The Vigil Mechanism policy is available on the website of the Company and can be accessed at the following link. http://vrlgroup.in/investor_download/vigil_Mechanism.pdf

29. PREVENTION OF INSIDER TRADING

The Company has adopted a Code of Internal Procedures and Conduct for Regulating, Monitoring and Reporting of Trading by Insiders with a view to regulate trading in securities by the Directors and certain designated employees of the Company. The Code requires pre-clearance for dealing in the Companys shares and prohibits the purchase or sale of Company shares by the Directors and designated employees 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.

Board at its meeting held on May 18, 2019 made changes to the policy in terms of Circulars issued by the Stock Exchanges to ensure that trading window closure commences immediately after the closure of every quarter and concludes only after 48 hours from the Board meeting wherein the financial results for the respective quarter are approved.

The said code is available on the website of the Company and can be accessed at the following link.

http://vrlgroup.in/vrl_investor_desk.aspxRsdisplay=policies

30. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Board of the Company had laid down policies, guidelines, procedures and structure to enable implementation of appropriate internal financial controls across the Company. These control processes enable and ensure the orderly and efficient conduct of Companys business, including safeguarding of assets, prevention and detection of frauds and errors, the accuracy and completeness of the Accounting records and timely preparation & disclosure of financial statements. These controls also identify the risks and provides for means to minimize / mitigate the risks affecting the business of the Company as a whole. Auditors, as required under the Companies Act 2013, have also reported the existence and operations of these controls in an effective manner.

The Companys internal audit department enables the Management to mitigate the risks and prevent non-compliance with laws which would affect the financial position of the Company. The scope and authority of the Internal Audit function is well defined and to maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board as well as directly to the Chairman & Managing Director. The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the internal audit report from time to time,

the management undertakes corrective actions in the relevant areas and thereby strengthens the controls. Significant audit observations and recommendations along with corrective actions thereon are presented to the Audit Committee.

31. BUSINESS RISK MANAGEMENT

The Company has in place a risk management architecture that provides a holistic approach to the best of its capabilities. The Company identifies, assesses and mitigates risks that could materially impact its performance in achieving the stated objectives.

The Risk Management Committee and Audit Committee, on a regular basis, reviews the Companys portfolio of risks and examines it under the light of the Companys Risk Appetite.

The material risks affecting Company are identified along with related mitigation measures and elaborated in the Risk Management Policy of the Company which has also been hosted on the website of the Company and can be accessed at the following link.

http://vrlgroup.in/investor_download/Risk%20Management%20Policy.pdf

32. SECURITIES AND EXCHANGE BOARD OF INDIA (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015

The Companys Equity Shares are listed on the BSE and NSE and has paid its Annual listing fees to these stock exchanges for the Financial Year 2019-2020. The Company has also formulated the following Policies as required under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015:

1. ‘Policy for Preservation of Documents under Regulation 9 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The said policy can be accessed at the following link:

http://vrlgroup.in/vrl_investor_desk.aspxRsdisplay=policies

2. ‘Policy on Criteria for determining Materiality of Events/Information under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

The said policy can be accessed thru the following link:

http://vrlgroup.in/vrl_investor_desk.aspxRsdisplay=policies

33. AUDITORS and AUDIT REPORTS

a) Statutory Auditors and Audit Report:

In accordance with Section 139 and 142 of the Companies Act, 2013 and Rules made thereunder read with the Companies (Audit and Auditors Rules, 2014 (the Rules) and in accordance with Regulation 36(5) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, it is proposed that M/S. Kalyaniwalla & Mistry LLP Chartered Accountants, Mumbai be appointed as the Statutory Auditors of the Company in place of retiring Auditor M/s. Walker Chandiok & Co, LLR Chartered Accountants (Firm Registration No. 001076N / N500013), Mumbai, whose tenure concludes at the ensuing 37th Annual General Meeting. The new Statutory Auditors shall hold office from the Conclusion of the 37th Annual General Meeting (AGM) for a term of 5 consecutive years till the conclusion of the 42nd Annual General Meeting.

With regard to the Statutory Audit Report for the Financial Year 2019-20, there are no qualifications, reservations or adverse remarks made by the Auditors. Pursuant to provisions of section 143 (12) of the Companies Act 2013, the Statutory Auditors have not reported any incident of fraud to the Audit Committee during the year under review.

b) Cost Auditors & Cost Audit Report

Section 148 of the Companies Act 2013 read with Rules made there under mandates every Company belonging to category prescribed in the Rules to undertake a Cost Audit. In compliance with said provision, Company had appointed M/s S.K. Tikare & Co., Cost Accountants, Belagavi, to audit the cost records for FY 2019-20. Rertaning to its Wind Rower division, the Cost Auditor has submitted the Cost Audit report for FY 2019-20 and the same is annexed as Annexure C herewith.

There are no qualifications, reservations or adverse remarks made by the Cost Auditors in their report for the financial year ended March 31st, 2020.

Pursuant to the recommendation of the Audit Committee, the Board of Directors have re-appointed M/s S K Tikare & Co., Cost Accountants, Belagavi, as the Cost Auditors for FY 2020-21 at a remuneration of Rs. 70,000/-, excluding applicable taxes, subject to approval by the members at the ensuing Annual General Meeting of the Company.

c) Secretarial Auditor & Secretarial Audit Report

Pursuant to 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. R Parthasarathi, Company Secretary in practice to undertake the Secretarial Audit of the Company for FY 2019-20. The Secretarial Audit report is annexed herewith as Annexure D.

There are no qualifications made by the Secretarial Auditor in his report for the financial year ended March 31st, 2020. The Secretarial Auditor did mention that the Chairman of the Audit Committee, Chairman of the Nomination and Remuneration Committee and the Chairman of the Stakeholders Relationship Committee did not attend the 36th Annual General Meeting which was held on 10th August 2019. The said meeting was conducted at the Registered Office of the Company at Hubballi and the absence of certain Board members thereat was owing to the rampant floods caused due to incessant rains rendering several areas inundated in the State. The said individuals could not travel during such flood and hence their absence. Other members from the said Committee were however present to address Shareholder interactions on related matters.

Pursuant to the recommendation of the Audit Committee, the Board of Directors have re-appointed Mr. R Parthasarathi, Company Secretary to conduct the Secretarial Audit for FY 2020-21 at its meeting held on 20th June, 2020.

34. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

As required under the provisions of the section 135 of the Companies Act 2013, the Board has constituted the Corporate Social Responsibility Committee which monitors and oversees various CSR initiatives and activities of the Company. The CSR Committee comprises of four directors out of which two are Independent Directors. The CSR Committee met three times during the year. Further details such as composition, terms, functions, meetings and attendance of directors of the said committee are provided in the Corporate Governance report forming part of this Annual Report.

The Company has contributed to various projects identified by the other Trusts/Educational Institutions for CSR related activities as approved by the CSR Committee during the year mainly towards Education, Healthcare, Disaster Management (Flood relief Activities) and Sports, etc.

A detailed report containing details of CSR activities & contents of CSR policy is annexed as Annexure E.

CSR policy of the Company is available on the Companys website and can be accessed through the following link. http://vrlgroup.in/investor_download/CSR%20POLICYpdf

35. EXTRACT OF ANNUAL RETURN:

Extract of the Annual Return in form MGT-9 is annexed herewith as Annexure F. The same also can be accessed at the Companys website at www.vrlgroup.in.

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

The particulars regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and expenditure are annexed hereto as Annexure G and forms part of this Report.

37. PARTICULARS OF EMPLOYEES

The information required pursuant to Section 197 read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, forms of this report and annexed herewith as Annexure H.

A statement containing top ten employees in terms of remuneration and the names of every employee who was in employment of the Company throughout the year and was in receipt of the specified remuneration is also included therein.

38. COMPLIANCE WITH SECRETARIAL STANDARDS

The Company is in compliance with applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

39. MATERIAL CHANGES AND COMMITMENTS

Barring the adverse financial impact arising out of the COVID-19 pandemic, there were no other material changes and commitments that occurred subsequent to the end of the financial year till the date of this report, which affects the financial position of the Company.

A note on the said matter was filed with the stock exchanges and same has been reproduced below:

“Covid-19 pandemic has spread across the Globe and in India, it has created a massive void in the business operations that has affected one and all. Our Companys business operations too have been severely affected and has rendered this fiscal a difficult one on the business performance front. Our business is operational since 1976 and never ever have we seen a situation where the Companys finances have been under such extraordinary pressure.

Till date, in the current fiscal we have seen negligible revenue generation whereby the fixed costs have been not been absorbed by operating revenues. The Company operates an “asset heavy” model and employs nearly 20000 individuals and this has put severe pressure on the performance of the Company.

The lockdown commenced from the end of March 2020 and during these times, there have been several notifications from the Ministry of Home Affairs (MHA) which initially allowed the transportation of all essential goods within the country and later allowed even the movement of non-essential goods. These notifications also sought the free movement of goods vehicles across the country. The ground level reality however was different. We have listed out below a few major hurdles faced by our Company during the Lockdown:

1. MHA gave leverage for transportation of essential goods but Company faced the problem of scarcity in Drivers and labour for material handling. Initially, there was mass hysteria amongst the working class and several of our drivers deserted their posts in an attempt to reunite with their families at their respective home towns. We witnessed thereby a mass exodus of drivers which affected our operations adversely. Several of them could never make it and were stopped by the authorities on their way back and were quarantined for a long period of time. This hinders their availability to us going ahead in the near short term. We overcame several driver related challenges and ensured that our vehicles were safely parked at our respective offices and also ensured safety of materials in transit.

2. During the initial three phases of lockdown, the branch offices could not work full time. Even presently, the branches coming under red zone are not allowed to function and remain closed. These include several key commercial branches at places like Mumbai, Delhi, Pune, Chennai, Hyderabad, etc. The initial lockdown was strict and our branch offices hardly functioned. Later, once the relaxation was announced for the goods transportation sector, gradually these were made operational, albeit, for only for a part of the day and not full time as booking and delivery activities hardly got transacted. Customer factories and shops were also not functional and as such there was not business to transact.

3. The Company incurred substantial expense on ensuring that proper sanitation and hygiene was maintained across all its business premises. We ensured that all of our drivers and labours were provided with decent and hygienic accommodation at the respective places where they were upon commencement of lockdown. Proper food and other necessities were also duly provided for across the country. Sufficient number of masks, Sanitizers and related equipment were made available across the country in a timely manner. We have also setup sufficient facilities for sanitizing our offices and vehicles too. Apart from the above, significant resource was mobilized for educating our staff and creating awareness and taking precautions at each and every location to curb the entry of this pandemic. Suitable measures for social distancing at offices as also in Staff buses is maintained by us.

4. The commencement of migrant movement through the special trains organized by several state governments enabled the labour movement and our material handling labour across transshipment hubs started moving to their respective home states. We are facing lot of hurdles in organizing this category of manpower and presently have managed to source enough headcount of this category to ensure unhampered operations.

5. Business volumes are non-existent and at best negligible. The movement of migrant labour is expected to aggravate this situation in the near short term and till business find alternative and competent manpower, the freight volumes are expected to be low thereby casting a shadow on capacity utilization at our end. We are however ensuring that enquiries and business coming our way is dealt with in the best possible manner.

6. Maintenance costs need to be incurred on vehicles even when they remain idle to ensure their good condition and service availability as need arises.

7. On the passenger travel front, it is pertinent for us to state that the majority of the operational margin earnings from this segment accrue generally in the first quarter of any given fiscal given that the schools are on vacation as also owing to the marriage season during these days. This fiscal however none of our passenger buses were operational and there has been a complete loss of revenue from this segment. The commencement of operation of our buses has just started with numerous restrictions. The requirement of social distancing as also the absence of traveling populace is going to affect the revenues and performance of this segment. We are not sure when we would again see the buses operating on a full seat capacity basis.

8. Our middle and senior level employees, including our Executive Directors have taken a pay cut on a graded basis. We have however ensured that employees drawing lower salaries, forming a bulk of our total employee base, are paid in full irrespective of lockdown and lack of business. We have also ensured that the employee emoluments have been paid by us alongwith related statutory payments such as PF, ESI etc.

9. Company has nearly 1000+ branches for transportation related activities. Majority of these remained closed during the month of April 2020. We have approached the Lessors of these premises to consider waiver of the rent for the said month to help us overcome this difficult period and many of them have supported us by consenting to such waiver. Many of the Lessors have agreed for partial waivers as well.

Ability to maintain operations including offices functioning and closed down & Schedule for restarting operations:

The Companys offices continue to remain operational. However there are certain restrictions on the functioning of offices situated in the red zone. Several offices of the Company situated in red zones including those in Mumbai, Pune, Delhi, Chennai, etc. remain closed and would function only in compliance with the directives issued by the regulators. Even the offices and transshipments which earlier operated throughout the day are operating only for the permitted part of the day and the Company is in compliance with the 7 pm. To 7 am. restrictions, as applicable.

Current Scenario & Steps taken to ensure smooth functioning of operations:

- We are focusing on ensuring the availability of sufficient number of drivers and labour to ensure ground level operations. The availability of this category of manpower is sufficient for the present business volume but we would need to be well prepared in advance to have sufficient manpower as volumes go up gradually as expected.

- Our working capital limits are under strain and we have approached our lenders for increase of these limits to which an inprincipal consent has been confirmed by the Banks. We are able to tide over the temporary liquidity problem and availability of funds for day to day operations is not expected to be a big challenge.

- The availability of freight volumes is increasing day by day. Normal business operations with optimal capacity utilization however remains a far cry. Our management has however taken a cautious approach and we are trying to ensure that our vehicles get deployed on routes that have sufficient load. Considering the incremental overhead costs necessitated out of Covid-19 developments, we have also enhanced our freight rates across all customer categories.

- In compliance with the guidelines we have ensured the availability of thermal scanners to monitor body temperature at branch offices. Availability of sanitizers / soaps to wash hands etc. is ensured. Employees have been educated on social distancing need and also the need to maintain proper hygiene individually as also at the office premises. Guidance has also been repeatedly given by way of internal circulars to educate the employees on immunity boosting food and health practices. The branch inspection team which regularly visits the branch offices across the country have been specifically asked to include the verification of these aspects as a part of their routine audit visit once the inspection functions starts in a full-fledged manner.

Financial Impact:

"Historically, the first quarter of the fiscal is marked with higher revenues as also profit margins, especially for the Passenger Transport segment. The same does not hold good for this year. The incremental revenues accruing owing to vacations and marriage season etc. stands lost for the current year.

There was hardly any business for the month of April 2020. Even for the month of May 2020, the business volume is very low. The same has presented a temporary liquidity issue in the Company that has necessitated the management to approach its working capital lenders for a higher limit. This is however temporary and the Management does not see any liquidity problems as raising debt from the existing lenders poses no challenge.

The “asset ownership” model operated by the Company coupled with its nearly 20000 employee base presents significant monthly Fixed costs which need to be absorbed by the operating revenues. The revenues are meagre for the months of April and May and June is expected to be no different given that the Brick and Mortar businesses are labour dependent and the present mass labour movement poses production challenges for our clients. Thereby the management of the Company expects the results for the first quarter of FY 2020-21 to be discouraging. We expect the Company to report significant financial loss for this period.

The inherent strength in our business model ensures that the Company is not dependent on any particular customer or industry for its revenues. In these difficult time, the available drivers and vehicles are being selectively deployed for Full Truck Loads and Parcels depending on return load and other ground level position as the situation warrants. We are transacting freight business coming our way and our entire team has existing customers as also potential customers for getting business.

The Company has not availed the option to postpone the repayment of the principal amounts due on its outstanding loans. The Company has honoured its debt service obligations in a timely manner and would continue to do so in the days to come.

Going ahead, we believe that we need to live through with the Corona virus and find ways and means to overcome the challenges it presents. Historically, man has overcome every such pandemic and the adverse economic effects of these are at best temporary. Our Company is financially strong and well placed to overcome this temporary setback. From the second quarter onwards, we expect the recoupment of losses. We expect the business volumes to start picking up significantly from August 2020 onwards and the restoration of freight volume normalcy by the last quarter of this fiscal.

Any quantification of financial results as of now would be at best guesswork and we do not wish to quantify these as the ground realities are dynamic and would render any estimation ‘off-mark in hindsight. Financial year 2020-21 is indeed an aberration in the history of this Company and a one-off year of abnormality. We expect the resumption of healthy financial growth from the next fiscal onwards.

We would keep all our stakeholders updated on any significant happenings going ahead too. We seek the support of all our stakeholders during these difficult times and request the continuation of faith in the management of the Company which is trying its best to come out with ways and means to mitigate the aftereffects of this unfortunate pandemic.”

40. INDUSTRIAL RELATIONS

During the year under review, your Company experienced cordial relationship with workers and employees at all levels, throughout the year.

41. SIGNIFICANT AND MATERIAL ORDERS

There are no significant and material orders passed by the regulators or courts or tribunals impacting going concern status and companys operations for a foreseeable future.

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

The Company has in place a Policy for Prevention Prohibition and Punishment of Sexual Harassment of Women at Work place in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act 2013. Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All employees are covered under this policy. During the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

No. of complaints filed during the year No. of complaints disposed off during the year No. of complaints pending
Nil Nil Nil

43. ACKNOWLEDGMENTS AND APPRECIATION

The Directors take this opportunity to thank the Companys customers, shareholders, Investors, suppliers, bankers, financial institutions and Central & State Governments for their consistent support and cooperation extended to the Company. The Directors also wish to place on record their appreciation towards employees at all levels for their hard work, dedication and commitment.

For and on behalf of the Board
Dr. Vijay Sankeshwar
Chairman & Managing Director
DIN: 00217714
Place: Hubballi
Date: 20th June 2020