VST Industries Management Discussions

for the year Ended 31st March, 2022

The Directors of your Company have pleasure in presenting before you the Annual Report together with the Audited Statements of Accounts for the year ended 31st March, 2022.


(Rs Lakhs)

2021-22 2020-21
Revenue from Operations 156067 147289
Profit after Tax 32023 31079
Balance available for Appropriation in Retained Earnings 91764 78670
Amount transferred to General Reserves 3000 3000
Dividend paid 17599 15905
Balance in retained earnings 71165 59765
Key Ratios
Earnings per Share (Rs) 207.38 201.27
Dividend per Share (Rs) 114.00 103.00

Value creation during the decade has been Compounded Annual Growth Rate (CAGR), 9.8% in Earnings Per Share (EPS) and 6.2% in Dividend Per Share (DPS).


The Directors are pleased to recommend a dividend of Rs 140/- per equity share of Rs 10/- each on the paid up equity share capital of the Company, for consideration and approval of Members at the ensuing Annual General Meeting (AGM). It is proposed to carry forward an amount of Rs 3000 lakhs to General Reserve.

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as ‘Listing Regulations), the Company adopted a Dividend Distribution Policy which sets out the principles and factors that should be considered by the Board for determining the distribution of dividend to its shareholders. The policy can be accessed on the Companys website at https://www.vsthyd.com/ mainsite/documents/Dividend-Distribution-Policy.pdf.


Except as disclosed elsewhere in the Report, there have been no material changes and commitments which affect the financial position of the Company that have ocurred between the end of the financial year to which the financial statements relate and the date of this Report. There has been no change in the nature of business of the Company during the year.


The paid up Equity Share Capital as on 31st March, 2022 was Rs 1544.19 lakhs. The Company has neither issued shares with differential rights as to dividend, voting or sweat equity shares.


During the year under review, there has been no change in the VST Employee Stock Option Plan-2020 (VST-ESOP 2020) of the Company and further the said VST-ESOP 2020 are in compliance with SEBI (Share Based Employee Benefits and Sweat Equity} Regulations, 2021. During the financial year, the Company has granted 31,500 stock options pursuant to VST Employee Stock Option Plan 2020 (VST-ESOP 2020) to eligible employees.

The necessary disclosures for the year ended 31st March, 2022 in compliance with Regulation 14 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 is available on the website of the Company at https:// www.vsthyd.com/mainsite/Annual-Reports.html.


Based on feedback from Members on the Annual Report and Accounts, this report includes MD&A as appropriate so that duplication and overlap between the Directors Report and a separate MD&A is avoided and the entire material with Companys state of affairs is provided in a composite and comprehensive document.


The year 2021-22 started off with COVID 2nd wave impacting mobility and businessinthe restrictions led to significant drop in consumption. As the 2nd wave receded, industry volumes picked up and improved quarter-on-quarter. COVID 3rd wave during the end of third and beginning of fourth quarters had minimal impact on volume recovery.

Industry volumes in 2021-22 were 3% lower than pre-pandemic level though 14% higher than 2020-21. This recovery was led by a combination of consumer trends broadly centered around affordable (convenient price point) aspiration, variety in the form of indigenous flavors and milder smoker experience.

Illegal non duty paid cigarettes continue to benefit from large price gap (>70% vs. tax paid cigarettes) and remain a threat for legal players.


Your Company recovered well after the initial COVID led business disruption by registering growth in volumes and key financial parameters. Market share was impacted benefiting from primarily due to large competition brands sustained priced stability at convenient price points. Your Company ended the year with upward volume momentum.

Total, the companys flagship brand and leader in the capsule segment, continues to enjoy strong equity among adult smokers in mid market segment in large markets of North, East and South. Total is now present in almost all major markets across the country and is only the second brand to have such a wide appeal and presence.

Totals new variant with indigenous flavors launched this year generated good consumer traction in some large markets. This variant is poised for further growth in the next year. The new ‘master brand architecture was introduced starting with the lead variant. This new architecture will bring alive the brand story centered around ‘innovation, quality, modernity and establish coherence among variants. These initiatives will also help in overcoming the challenges of low priced ‘me-too competition brands with heavy inputs. Similar exercise is being carried out for other trademarks such as Editions and Charms.

Your Company continues to expand its geographic footprint by entering new markets such as Gujarat and Maharashtra while strengthening presence in already existing geographies. Significant progress has also been made in automating sales operations leveraging digital platforms


Your Companys leaf function has registered a strong performance with an elevation in quality of the products offered and achieved a profit ofRs 25 Crores. By leveraging its expertise in all varieties of tobaccos, your Company procured high quality tobaccos for its own manufacturing in line with the changing volumes. It continues its domestic sales in addition to exports in spite of operational disturbances due to the pandemic.

Specific focus is directed towards the need to foster your Companys development of new varieties and high nicotine tobaccos to meet the changing requirements of tobacco in domestic and international markets. These developments are set in motion to cater to the needs of established customers while also attracting new customers year after year.

In the backdrop of changing climatic conditions, where the farming community faces challenges on cultivation your Company is paying attention to farmers interest to sustain the tobacco cultivation. It is satisfying to note that your Companys farmers continue to grow tobacco with the lowest pesticide residue levels and low TSNAs (Tobacco Specific Nitrosamines) that are well within international standards. This also resulted in the development of backward regions in the leaf growing areas.

To further strengthen the commitment to Social and Economic upliftment of Companies tobacco growing areas, your Company is continuing the sponsorship of initiatives like House Hold Toilets, Solar street lighting and school infrastructure to ensure higher standard of living of the farmers and their families


Your Company has gained a competitive edge against other products in the market, with the introduction of innovative products from your Companys end. This upgrade in the products have been well received by the consumers.

The focus at the plants continue to be extended towards enhancement of capital efficiencies and cost optimisation.


To offer the differentiated products with high Product

Quality, your Companys R&D has played a key role. This focus resulted in the development of quality blends with innovative capsule filter / differentiated flavor variants for new brands, which have been well accepted by consumers in the market place. The R&D lab of your Company received a "Certificate of continuation" of ISO 17025:2017, from NABL, Quality Council of India, Government of India, for the year 2021-22.


Achievement of the business goals are intrinsically connected to employee engagement and motivation. Your Company is committed to providing a safe, healthy and inclusive work environment for all its employees and staff where they experience the joy of growth and development. As we strive to improve health and happiness, our first priority in 2021 was to support and guide employees who are returning to work in person in a world where COVID-19 remains a factor.

For our people there are three key drivers that provide impetus to all internal people initiatives - Lead & Develop, Attract & Engage, Transform & Reinvent. Focused in the development of internal talent, your Company has co created with the staff new set of Managerial Competencies that are designed to drive long term growth for the company and individuals. Individual Development Plans have been drawn out to ensure this growth is charted out for each employee to enable him / her to achieve their highest potential. Training programmes have been rolled out to facilitate new age skills that are important for the first ever digital transformation of the organisation. The virtual training programme was conducted for the sales team in 2021.

Driving a high performance culture has been the long term objective for your Company and therefore your Company practices the Management by Objectives method to drive individual performance in the organisation. The performance curve for the year 2021 has been considerably flattened to ensure adequate recognition of performance at the individual level. This is a cultural shift that your Company has embarked upon that will bear fruits in the future.

Your Company has been focused to have a robust recruitment strategy balancing between buying vs building talent internally. The year 2021 has seen good traction for the employer brand of VST attracting senior and niche talent from all over India as well as abroad. Your Company has launched the VST Gold Star Recognition Program to create a culture of appreciation and recognise desired behaviors for success where there are five categories where internal permanent employees will be recognised every quarter.

Your Company, rolled out several engagement initiatives to help employees connect better to the leadership and each other. Indian festivals were celebrated together as one company across state borders.

Your Company has been focused on recruiting, retaining and developing diverse employees, creating awareness of diversity issues and embedding accountability for diversity throughout the organisation.

First ever ESOP was rolled in the company to the Leadership Team, in recognition to their continuous efforts of driving business performance of your company.

To create a safe environment for its female employees, your Company has constituted an Internal Complaints Committee as per the Sexual Harassment of Women at

Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules framed there under. However, no cases were filed during the year under the above Act.

As of 31st March 2022, your Companys workforce was 773 employees, with 369 Management staff and 404 Workmen.


300 employees and 105 contract workmen have undergone EHS training, mock drills were also conducted for workers and management during the period to comply with the Companys EHS guidelines. Half-yearly and Annual EHS audits of the Companys operations were carried out to ensure compliance of EHS requirements. ISO 14001:2015 & ISO 45001:2018 Surveillance Audit was held at Azamabad & Toopran premises by M/s. Rina India Pvt. Ltd. and received a continuation certificate for ISO 14001:2015 & ISO 45001:2018 for both Azamabad & Toopran locations.

Consent for Operation (CFO) was renewed for Toopran factory from Telangana State Pollution Control Board (TSPCB) for a period of 10 years - 2021 to 2031.

Your Company has received "Safety Innovation Award 2021" from the Institution of Engineers (India), New Delhi.

Your Company has renewed "Gold Rating" for IGBC Green factory building CII, Hyderabad.

The world is witnessing a very unique & unprecedented situation due to the Novel Coronavirus (COVID -19). Going by the dynamic nature of the COVID-19 pandemic with multiple waves and a variety of variants, your Company was more proactive in combating the threats posed by the virus.

Your Company has taken up several initiatives over the last one year that have been aimed at ensuring the wellbeing of our people as well as the extended partner network that is critical for business. Most of these initiatives have been path-breaking for the company as well as some of them unique to the whole industry.

Under the VST Cares banner, your Company had taken up several initiatives to support internal employees through the difficult times of the Covid Pandemic Delta variant in 2021. This included re-designing internal policies to ensure support for loss of life of employees. Medical support in the form of remote medical consultation in partnership with leading health care brands in the country and additional doctors were empaneled to provide regular support for employees. Portable Oxygen generators were made available in all regional and remote offices, in case of incidents of Covid, your Company sent a Covid Kit comprising of all necessary equipment and basic medicines to each employee and their family. Additional monetary support was extended for hospitalisation cases through the medical insurance policy.

Covid Vaccination drives not only covered all VST employees but was also extended to their immediate families.

Your Company took initiative during the year to support the frontline Dealer staff and in this regard your Company employees donated 1 days salary as Covid support to Dealers staff.


Your Company has installed 1Megawatts PV technology solar power plant (800 KW for Azamabad and 200KW for Toopran plants). The solar plant has been commissioned in January 2022. This plant was constructed by using 2226 numbers of solar modules and it covers an area of 83,247 sft, which is VSTs initiative on renewable energy towards the sustainable development. Your Companys focus is on accelerating the usage of renewable sources of energy and contributing to the goals of sustainability adopted by the Company.

This Solar power plant generates 25% of our electricity requirement and reduces 29% of Carbon foot print.


As a part of reducing the emissions and carbon footprint, your Company has Converted Boiler primary fuel from HSD to cleaner eco-friendly fuel Piped Natural gas (PNG) in boiler operations instead of using High speed diesel (HSD).

Piped Natural gas (PNG) is economical, safer and one of the cleanest burning fuel and helps improve the quality of air.

Your Company has taken this conversion towards environmental benefits to reduce the Carbon foot of 36% and fuel cost saving by Rs 130 Lakhs per Annum.


a. Profits

The Profit after Tax of your Company for the year Rs 320.23 crores.

b. Treasury Operations

Your Company follows a SLR model (Safety, Liquidity and Return) in deployment of earmarked funds.

The changes (change of 25% or more) as compared to the immediately previous financial ratios of the Company including those listed out and specified under Schedule V (B)(1)(i) read with Regulation 34(3) and 53(f) of the Listing Regulations, as amended are disclosed in Note No.32 of Notes on Financial Statements to the Accounts in the Annual Report.


The Company has not taken any loans or given guarantees or made investments in any other Company covered and provided under Section 186 of the Companies Act, 2013 during the year.


The Credit Rating Information Services India Limited (CRISIL) has re-affirmed the rating of your Company to "FAAA/Stable" for Fixed Deposit Schemes, "AA+/Stable" for Long Term Non-Convertible Debentures and "A1+" for Non-fund based liabilities (Letter of Credit and Bank Guarantee).


Your Company has not accepted any deposits from public and as such no amount on account of principal or interest on deposits from public was outstanding as on the date of the balance sheet.


Pursuant to the provisions of Sections 124 and 125 of the Companies Act, 2013, the Company has transferred on due dates, the unpaid or unclaimed dividends for the financial year ended 31st March, 2014 to the Investor Education and Protection Fund (IEPF) established by the Central Government.

Further, as per the provisions of Investor Education and Protection Fund (Uploading of Information regarding unpaid and unclaimed amounts lying with Companies) Rules, 2012, the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company as on 31st March, 2021 on the website of the Company (www. vsthyd.com), and also on the website of the Ministry of Corporate Affairs, Government of India.

The details of the dividend due for transfer to IEPF as on 31st March, 2022 is given in the Report on Corporate Governance. The Company has completed the process of complying with the provisions of Section 124(6) of the Companies Act, 2013 read with the IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 and as amended by the Second Amendment Rules of 2017 by transferring 4514 shares on 29th September, 2021.


Your Company has communicated to the Members whose share certificates have been returned undelivered to the Company that these would be transferred to the Unclaimed Suspense Account if not claimed by them, as required under Regulation 34(3) read with Schedule V[F] of the Listing Regulations as amended.

The status of unclaimed shares as on 31st March, 2022 is given in the Report on Corporate Governance.


In terms of Regulation 34 of the Listing Regulations, a Report on Corporate Governance along with Compliance Certificate issued by the Statutory Auditors of the Company is annexed as "Annexure A" and forms part of this Report.

Your Company has taken adequate steps for strict compliance with the Corporate Governance guidelines, as amended from time to time.


The Board met four times during the financial year. The Board and Committee Meetings are pre-scheduled and a tentative calendar of the Meetings finalised in consultation with the Directors are circulated to them in advance to facilitate them to plan their schedule. However, in case of special and urgent business needs, the approval is obtained by way of circular resolution. The details of the meetings held during the year are given in the Corporate Governance Report.


a. Your Company maintains an adequate and effective internal control system commensurate with the size and complexity. Your Company also has well documented Standard Operating Procedures (SOPs) for various processes which are periodically reviewed for changes warranted due to business needs.

b. Your Company remains committed to improve effectiveness of internal financial controls and processes which would help in efficient conduct of its business operations, ensure security to its assets and timely preparation of reliable financial information.

The policies and procedures laid out by your Company capture the control environment prevalent in the organisation. Over a period of three years, the business processes of your Company is reviewed through an internal audit process which reviews the systems on a continuous basis. The objective being to identify potential risk areas and come up with a comprehensive risk mitigation plan.

The Audit Committee of your Board met four times during the year. Review of audit observations covering the operations, consideration of accounts on a quarterly basis and monitoring the implementation of audit recommendations were some of the key areas which were dealt with by the Committee. The Statutory Auditors/Internal Auditors were invited to attend the Audit Committee Meetings and make presentations covering their observations on adequacy of internal financial controls and the steps required to bridge gaps, if any. Chief Financial Officer is a permanent invitee to the Audit Committee and other executives of the Company are invited to address, respond or provide clarifications relevant issues as and when required.


Your Company has constituted the Risk Management Committee as mandated by Listing Regulations to frame, monitor and implement the risk management plan for the Company. The Committee comprises of Directors and Senior Management as its Members as prescribed under Regulation 21 of the Listing Regulations as amended. The Company Secretary is the Secretary of the Committee. The Committee is responsible for monitoring and reviewing the risk management plan and ensuring its effectiveness.

Pursuant to the amendments notified by SEBI in its circular dated 5th May, 2021, the Board at its meeting held on 27th July, 2021 revised the terms of reference of Risk Management Committee to include the Business Continuity Plan (BCP), sustainability and reviewing the risk management policy at least once in two years.

Your Company has always endeavored to bring together elements of best practices for risk management in relation to existing and emerging risks faced by it at both strategic and operating level. The Company faces a variety of risks from external and internal sources. However, the objective is to be aware of different kinds of risks affecting the business. Rather than eliminating these risks, the decision making process at your Company considers sensible risk taking, and thereby proactive steps are taken to ensure that business is undertaken in an environment which encourages a reasonable amount of risk taking and enables the Company to leverage market opportunities effectively.

The Board is responsible for determining the nature and extent of the principal risks that your Company is willing to take to achieve its strategic objectives and for maintaining sound risk management system. With the support of the Audit Committee, it carries out a review of the effectiveness of your Companys risk management process covering all material risks including strategic, financial, operational and also compliance levels.

Your Company has substantial operations all over the country and competes on the basis of brand appeal, loyalty, price value connotations and strong trade relationships.

The Companys position is influenced by the economic, regulatory and political situations both nationally and at a state level and of the competitors. The principal risks impacting your Companys business and steps undertaken to mitigate them are as under:

(i) Regulatory restrictions could have an impact on long term revenue growth of the Company.

The Company operates under increasingly stringent regulatory regime (COTPA guidelines on packaging and labeling, advertising and promotion). This further gets complicated with adoption of differing regulatory regimes in different states and/or lack of consensus on interpretation/application.

Such restrictive regulations which are subjected to interpretation could result in not only penalties being imposed/loss of reputation, but also impair the Companys ability to communicate with adult smokers and/or to meet consumer expectations through new/ innovative brand launches or geographic expansion.

The Company addresses this risk by engaging in continuous social dialogue with stakeholders and regulatory community through industry bodies. At the same time, it works on developing strategies and capabilities to effectively launch competitive and consumer acceptable brands within the changing regulatory environment.

(ii) Taxation changes could have an impact on short-term revenue growth of the Company.

The Companys business is subjected to GST, excise and other cesses as may be made applicable, which could require the Company to take up product prices and in absence of such action, impact its business. The impact increases when due to changes in economic situation, consumers disposal income reduces, resulting in down-trading to cheaper cigarettes including non-duty paid illicit cigarettes or alternative tobacco products.

Such risks are addressed by the company through:

(a) engagement with tax authorities at levels where appropriate;

(b) regular management review to build a well laddered brand portfolio across new segments including new brand creation; and

(c) capability buildup through investments in distribution infrastructure to increase geographical spread.

(iii) Regional disruptions could have an impact on short-term revenue growth of the Company as well as reputation.

Regional disturbances through state level restriction on trade or through terrorism and political violence including bandhs, strikes, have the potential to disrupt the Companys business operations. Such disruptions result in potential loss of assets and increased costs due to more complex supply chain arrangements and/ or maintaining inefficient facilities.

The Company addresses this risk through developing secure multiple sourcing/delivery (supply chain) strategy and through Insurance cover and business continuity planning.

(iv) Counter party risk could have a potential impact on Companys capital and profitability.

The Company generates positive cash flows which are and predominantlyinvestedwith mutual funds. Delay and/or default in settlement on maturity of such investments could result in liquidity and financial loss to Company.

Such risks are mitigated through investment based on principle of Safety; Liquidity & Returns (SLR) and with institutions having strong short-term and long-term ratings assigned by CRISIL.

(v) Data risks

The loss or misuse of sensitive information, or its disclosure to outsiders, including competitors and trading partners, could potentially have a significant adverse impact on the Companys business operations and/or give rise to legal liability. For this purpose, the Company has put in place information technology policies and procedures under its cyber security which are reviewed regularly. Further, information technology controls like data back-up mechanism, disaster recovery center, authorisation verification, etc. have also been established.



Your Company has formulated a Corporate Social Responsibility Policy with the objective to promote inclusive growth and equitable development of identified areas by contributing back to the society. Over the years, your Company has been involved in various social activities focusing on Health & Sanitation like construction of toilets under Swachh Ghar mission, Environment sustainability and Education.

The Company has with the help of Gramalaya, a non-profit organisation, constructed toilets in individual homes (of farmers living) in and around Jogulamba-Gadwal district of Telangana where your Company has its operations, under the ‘Swachh Ghar programme of your Company.

In addition to construction of toilets, the villages and the communities in the area are also sensitised regarding the importance of health & sanitation. Over 1685 household toilets have already been constructed during the financial year, and your Company has plans to extend it further to other houses in the same area and thereafter extend it to other areas.

Your Company has taken up an initiative of supporting environment sustainability by installing 400 solar street lights in 7 villages/towns in Jogulamba-Gadwal districts of Telangana.

In addition to the above, your Company sponsored Rs 175 Lakhs as Covid support to KIMS Foundation & Research Centre in Hyderabad for setting up Oxygen Generator plant and also sponsored a CII initiative to build ten bedded Covid hospital for the Hyderabad Police apart from distribution of masks and vaccinations.

Pursuant to the provisions of Section 135 read with Schedule VII of the Companies Act, 2013 as amended by the Companies Amendment Act of 2019 & 2020, the Corporate Social Responsibility (CSR) Committee of the Board of Directors was formed to recommend the policy on Corporate Social Responsibility and monitor its implementation. The composition of the CSR Committee is given in the Annual Report on the CSR activities. The CSR policy and the projects approved by the Board are available on the Companys website at : https://www.vsthyd.com/ mainsite/documents/corporate-social-responsibility-policy.pdf.

The CSR Policy and the Annual Report on CSR activities is annexed herewith as "Annexure B" and forms part of this Report.


The Listing Regulations mandates inclusion of Business Responsibility and Sustainability Report (BRSR) as part of the Annual Report for top 1000 listed entities based on market capitalisation with effect from the financial year 2022-23. However, your Company has voluntarily adopted the report for the financial year 2021-22 which forms part of this Report.


The related party transactions entered into by the Company during the year are in its ordinary course of business and on arms length basis. There were no materially significant related party transactions between your Company and the Directors, Promoters or Promoter group, Key Managerial Personnel and other designated persons which may have a potential conflict with the interest of your Company at large. During the year, the Company has not entered into any transactions with any person or entity belonging to the promoter or promoter group which holds 10% or more shareholding in the listed entity other than the corporate actions applicable uniformly to all the shareholders. Prior approval for all the related party transactions is obtained from the Audit Committee.

Form AOC-2 pursuant to Section 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014 for disclosure of particulars of contracts/ arrangements, entered into by your Company with related parties for the year ended 31st March, 2022 is annexed herewith as "Annexure C" and forms part of this Report.


Pursuant to the provisions of the Companies Act, 2013 as amended and Listing Regulations, the performance evaluation of the Board, the committees of the Board and individual Directors [including Independent Directors and Chairperson] has been carried out. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

The performance evaluation of the Chairman and the Non-independent Directors was carried out by the Independent Directors. The Board of Directors expressed their satisfaction with the evaluation process.


Nomination and Remuneration Committee has formulated a policy relating to remuneration of directors, key managerial personnel and other employees which has been revised and approved by the Board. The Remuneration Policy and the criteria for determining qualification, position, attributes and independence of a Director as required under Section 178(3) of Companies Act, 2013 are stated in the Corporate Governance Report. The policy is also placed on the website of the Company and can be viewed at https://www.vsthyd.com/mainsite/documents/ remuneration-policy.pdf.


During the financial year under review, all the Independent Directors of the Company met on 27th April, 2021 through video conference, inter alia, to discuss :

• Evaluation of the performance of the Non-Independent Directors and the Board as a whole.

• Evaluation of the performance of the Chairman of the Company, Chairman of the Committees considering the views of the Executive and Non-Executive Directors.

• Evaluation of the quality, content and timelines of flow of information between the Management and the Board that is necessary for the Board to perform its duties effectively and reasonably.


In terms of Section 177 of the Companies Act, 2013, and Regulation 22 of Listing Regulations, the Company has formulated a Whistle Blower Policy as a vigil mechanism to encourage all employees and Directors to report any unethical behavior, actual or suspected fraud or violation of the Companys ‘Code of Conduct and Ethics Policy which also provides for adequate safeguard against victimisation of person who use such mechanism and there is a provision for direct access to the chairman of the Audit Committee in appropriate/exceptional cases. The details of the Whistle Blower Policy is given in the Corporate Governance Report and also posted on the Companys website at: https:// www.vsthyd.com/mainsite/documents/whistle-blower-policy-2022.pdf.


Directors retiring by rotation Mr. Naresh Kumar Sethi

Mr. Naresh Kumar Sethi [DIN:08296486], a nominee of the Raleigh Investment Company Limited, a British American Tobacco group Company was appointed as a Director of the Company with effect from 14th December, 2018 whose office is subject to retirement by rotation. His appointment was approved by the Members at the Annual General Meeting of the Company held on 28th August, 2019.

Pursuant to Article 93 of the Articles of Association of your Company, Mr. Naresh Kumar Sethi is liable to retire from the Board and being eligible, offers himself for re-election. Your Board recommends his reappointment.

Mr. Naresh Kumar Sethis [56 years] career spans 32 years as a Global Marketer, General Manager and Strategy Transformation Officer. He has held various marketing roles in India, Indonesia, West Africa Area and Australasia prior to moving to Japan as President of British American Tobacco, Japan. Mr. Sethi is a chemical engineer from Indian Institute of Technology, Varanasi and has an MBA from the Indian Institute of Management, Calcutta, India.

Mr. Naresh Kumar Sethi is not a Director in any other Company in India. He is a Member in CSR Committee, Stakeholders Relationship Committee, Risk Management Committee and the Nomination & Remuneration Committee. Mr. Naresh Kumar Sethi does not hold any shares in the Company and is not related to any other Director of the Company.

Independent Directors

At the Annual General Meeting of the Company held on 28 th August, 2019, the Members have approved the appointment of Ms. Rama Bijapurkar, Mr.Sudip Bandyopadhyay and Mr. Rajiv Gulati as Independent Directors of the Company in accordance with Section 149 of the Companies Act, 2013, with effect from 1st April, 2019, 1 st June, 2019 and 26th July, 2019 respectively to hold the office for a term of five consecutive years from their respective dates.

All the Independent Directors have given a declaration in terms of Section 149(6) of the Companies Act, 2013 as amended and Regulation 25 and 16(1)(b) of the Listing Regulations as amended for the financial year ended 31st March, 2022, that they meet the criteria of independence. They also declared that they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge their duties as an Independent Director with an objective independent judgment and without any external influence. The Board carried out an assessment of the declarations and took the same on record.

None of the Independent Directors are related to any other director of the Company.

Key Managerial Personnel

The Managing Director & CEO Mr. Aditya Deb Gooptu, the Chief Financial Officer Mr. Anish Gupta and the Company Secretary Mr. Phani K. Mangipudi are the Key Managerial Personnel as per the provisions of Section 203 of the Companies Act, 2013.


Pursuant to Section 134(5) of the Companies Act, 2013 your Directors confirm that:

1. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

2. appropriate accounting policies have been selected and applied consistently. Judgement and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of your Company as on 31st March, 2022 and of the statement of profit and loss and cash flow of your Company for the period ended 31st March, 2022;

3. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

4. the annual accounts have been prepared on a going concern basis.

5. proper internal financial controls have been laid down to be followed by your Company and such internal financial controls are adequate and were operating effectively; and

6. proper systems to ensure compliance with the provisions of all applicable laws have been devised, and such systems were adequate and operating effectively.

Criteria for selection and appointment of Directors

The Nomination and Remuneration Committee is responsible for identifying, screening, recommending to the Board a candidate for appointment as Director. Based on the recommendation of the Committee, the Board identifies the candidate for the position of Director. While identifying the candidate, inter alia the following are taken into consideration :

• Qualification, experience and expertise;

• Skills, abilities and personal contribution;

• Commitment to spare time to attend Board/Committee and other Meetings as may be necessary;

• Diversity of perspectives brought to the existing Board;

• Existing composition of the Board.

The qualification of the candidate is scrutinised by the Committee considering educational degree, college/ institution, professional qualification if any, etc. In addition, there is also a criteria regarding minimum work experience and the positive attributes such as leadership quality, level of maturity, management capabilities, strategic vision, problem solving abilities, etc., on which the candidate is judicially scrutinised.

In case of an internal candidate, the senior management employee is also evaluated on the above criteria before being recommended for promotion as a Director. While considering re-appointment of the Directors, their performance evaluation report is considered.

In case of Independent Director, the independence, integrity, expertise, experience and interest pecuniary or otherwise as per the statutory provisions are also assessed before appointment.


There are no significant or material orders passed by the Regulators, Courts or Tribunals which impact the going concern status of the Company and its future operations.

However, Members attention is drawn to the following:


i. Luxury Tax

The then Government of Andhra Pradesh introduced a levy of luxury tax on cigarettes and its virus was challenged before the then High Court of Andhra Pradesh and before the Supreme Court which was struck down. The Commercial Tax department claimed that during pendency of the matter before the courts between 1999-2005, your Company had collected luxury tax amounting to Rs 34.86 crores but not paid to the Government. Your Company denied collecting luxury tax and the litigation on the same is now pending before the appellate authority of the department and the High Court of Telangana.

ii. Entry Tax

Entry Tax levy by the States of West Bengal, Jharkhand and Assam has been challenged before the respective State High Courts by your Company, basis the directions of the Honble Supreme Court. Demand of interest on entry tax was challenged before the High Court of Allahabad and is pending adjudication. In the

State of West Bengal, the High Court remanded the matter to Taxation Tribunal and the said Tribunal was pleased to allow the Petitions filed by your Company and it is likely the State may prefer an appeal before the High Court of Kolkata.

iii. Excise a. Wrapping Materials

The Excise department has issued show cause notices demanding payment of duty of Rs 4.51 crores on the ground that Gay Wrappers (printed paper used for wrapping cigarette packets) had been manufactured and consumed by your Company without payment of duty during the period April 1996 to July 2015. Demand for the period till March 2002 has been adjudicated and the CESTAT decided in favour of your Company. Department preferred an appeal before the Supreme Court which is pending. Demands for period after March, 2002 till July, 2015 are yet to be adjudicated by the original authority.

b. Tobacco Refuse

Your Company has received show cause notices demanding recovery of duty on cut tobacco used in the manufacture of tobacco refuse since January 2005 till June 2017 amounting to Rs 14.52 crores. Demand for the period till October, 2013 has been adjudicated and the CESTAT decided in favour of your Company. Department preferred an appeal before Supreme Court which is pending. Demands for period after October, 2013 till June, 2017 are yet to be adjudicated by the original authority.

c. Service Tax

Your Company has received show cause notices from the Excise Department seeking to deny CENVAT credit availed on various input services on the ground that the same are not in relation to the manufacture of final products. Upon adjudication, credit on most of the services was allowed in favor of your Company. Some of them have been disputed. Since 2005 till 2017, the matters are pending before various adjudicating authorities and before the CESTAT and are being effectively contested.


i) Your Company has been impleaded in the petition filed in the Supreme Court by an NGO called ‘Centre for Transforming India against the Union of India along with other cigarette manufacturers, Tobacco Institute of India, Bidi Manufacturers and Bidi Manufacturers Association, seeking prohibition/ban of the manufacture, storage and sale of all forms of tobacco within the territory of India. This is being contested.

ii) Petitions have also been filed in other courts such as High Court of Madhya Pradesh - Jabalpur, National Green Tribunal, Delhi seeking ban on sale of cigarettes and before High Court of Madhya Pradesh Indore Bench seeking directions to mention tar and nicotine content on cigarette packs by the manufacturers. All of the above are being effectively contested by your Company.


The Company petition filed by the Official Liquidator before the High Court of Andhra Pradesh (now Telangana High Court) seeking directions against some of the Ex-Directors of ITC Agro Tech Finance and Investments Limited (ITCATF), the Company in liquidation, into which one of the subsidiaries of your Company, viz. VST Investments Limited was amalgamated, and its related matters are still pending final adjudication.


i. In view of the provisions of COTPA, various restrictions such as ban on advertising in print, visual media and outdoors, regulation of in-store advertising, prohibition of sale of cigarettes to persons below the age of 18 years, etc. have been in force. Printing of pictorial warnings on cigarette packets, came into effect from 31st May 2009 were further revised and the pictorial warning covering 85% of the front and back side of the packets was implemented w.e.f. 1st April 2016 and is being duly complied with by your Company.

ii. Your Company also filed a writ petition in the Honble High Court of Andhra Pradesh (now Telangana High Court) challenging The Cigarettes and Other Tobacco Products (Packaging & Labelling) Rules, 2006 and the Amendment Rules 2008, on the grounds inter alia that they are ultra vires of COTPA and therefore the notifications issued there under (including those seeking implementation of graphic health warnings) should be quashed. The said writ petition has been admitted but no interim orders were passed by the Honble Court.

iii. Before the High Court of Karnataka, a Writ Petition was filed by Tobacco Institute of India (TII) on behalf of your Company and other manufacturers against the proposed notification dated 15th October 2014 by Health Ministry to print health warning on both sides of the pack occupying 85% of space. The 85% health warning came into effect from 1st April 2016. Your Company also filed a Writ Petition before the High Court bench at Dharwad against the implementation of 85% health warning. The Honble Supreme Court on hearing a PIL filed by Health for Millions, constituted a Bench before the Karnataka High Court to hear all the matters relating to graphical health warning. The Writ Petitions filed by TII and your Company were heard before the Bangalore Bench and it was held on 15th December 2017 that the amendment made to the Packaging Rules imposing 85% graphic health warning is ultra vires the Constitution. Against the said Judgment, an appeal was filed by the Ministry of Health before the Supreme Court. A stay has been granted on the said judgement and is pending before the Supreme Court.


The then Government of Andhra Pradesh had filed a land grabbing case against your Company in 1991 in relation to a piece and parcel of vacant land which has been under possession and occupation by your Company for over four decades. By its judgment dated 28th July 2010, the Special Court had held that your Company is not a land grabber but had given the State Government the right to initiate proceedings to recover possession of the land at some future date. Against this part of the judgement, your Company filed a writ petition before the then Honble High Court of Andhra Pradesh to expunge that part of the Order giving such liberty to the Department despite the fact that your Company has already been declared not to be a land grabber.

The writ petition is still pending. The State Government has also filed a writ petition in the Honble High Court of Andhra Pradesh seeking to set aside the said judgment of the Land Grabbing Court. An interim Order was passed restraining your Company from changing the status of the land or creating any third party interest therein. Your Company is taking all the necessary steps for speedy disposal of the above writ petitions which are pending before the Court.

One more case of land grabbing was filed by the then Government of Andhra Pradesh against your Company in the year 1989 on a piece of land along with building called ‘Lal-e-Zar, before the Special Court. In the year 2010, the Special Court passed a judgment stating that your Company is not a land grabber. After 7 years, the Government of Telangana filed an appeal before the Honble High Court of Telangana and Andhra Pradesh seeking a direction from the court that the nature of the land is not to be altered and no third party interest to be created. Your Company filed a counter and vacate stay application seeking permission to construct on the said land. Judgment was pronounced on the vacate stay petition allowing your Company to construct but with certain conditions. The State Government preferred an appeal before the Supreme Court which was dismissed.


The information required pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended in respect of employees of the Company, are annexed herewith as "Annexure D" and forms part of this Report. The statement containing particulars of employees as required under Section 197 of the Act read with Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in a separate annexure forming part of this Report. However, in terms of Section 136 of the Act, theReport and Accounts are being sent to the Members and others entitled thereto, excluding the information on employees particulars which is available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing AGM. In case any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary of the Company.

The Nomination and Remuneration Committee of the Company has affirmed that the Remuneration Policy of the Company.

Your Directors take this opportunity to record their deep appreciation of the continuous support and contribution from all employees of your Company.


As required under Section 92(3) of Companies Act, 2013 and Rule 12(1) of Companies (Management and Administration) Amendment Rules, 2020, Annual Return is available on the Companys website at https://www.vsthyd.com/mainsite/ Annual-Returns.html.


Statutory Auditors

In compliance with the provisions of Sections 139 and 141 of the Companies Act, 2013 as amended and Companies (Audit and Audit Rules), 2014, including any statutory modification(s), re-enactments and amendments thereof, for the time being in force, M/s. BSR & Associates, LLP, Chartered Accountants, were re-appointed as the Statutory Auditors of the Company to hold office for a second term of five years from the conclusion of the 90 th AGM to the conclusion of the 95th AGM. The Report given by the Auditors on the financial statements of the Company is part of Annual Report. There has been no qualification, reservation or adverse remark in their Report. During the year under review, the Auditors have not reported any matter under Section 143(12) of the Companies Act, 2013 and hence, no detail is required to be disclosed under Section 134(3)(ca) of the Companies Act, 2013.

Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company appointed M/s. Tumuluru and Company Firm as Secretarial Auditor of the Company for the financial year 2021-22. The Secretarial Audit Report is annexed herewith as "Annexure E" and forms part of this Annual Report.

There are no qualifications, reservations or adverse remarks in the Secretarial Audit Report.


Your Company has complied with applicable Secretarial standards, i.e. on Meetings of the Board of Directors [SS-1] and on General Meetings [SS-2] issued by The Institute of Company Secretaries of India (ICSI) and approved by the Central Government under Section 118(10) of the Companies Act, 2013.


The maintenance of cost accounts and records as specified by the Central Government under Section 148(1) of the Companies Act, 2013 are not applicable for the business activities carried out by the Company.


Information in accordance with clause (m) of sub-section (3) of Section 134 of the Companies Act, 2013 read with Rule 8 of Companies (Accounts) Rules, 2014 is given in the "Annexure F" forming part of this Report.


Addition or cessation of subsidiaries, associates or joint ventures is not applicable to the Company as the Company does not have any subsidiary company, associates and joint ventures.


There was no application made or any proceedings pending under the Insolvency and Bankruptcy Code 2016 (31 of 2016) during the financial year.


Your Company has not raised any funds during the year through preferential allotment or Qualified Institutional Placement, as a result question of providing details of utilisation of such funds does not arise.


Your Company does not have any debentures and as a result the requirement to appoint debenture trustees does not arise.


A vibrant brand portfolio based on consumer relevant innovation remains a top priority for your Company. This will be supported by investments in generating superior consumer insights, research and development, best-in-class product quality and a fully integrated digital ecosystem.


The Directors are grateful to all valuable stakeholders of the Company viz. customers, shareholders, dealers, vendors, banks and other business associates for their excellent support rendered during the year. The Directors also acknowledge the unstinted commitment and valued contribution of all employees of the Company.

On behalf of the Board,

Naresh Kumar Sethi


DIN : 08296486

Dated this 26th day of April, 2022

Azamabad, Hyderabad - 500 020