VST Industries Ltd Directors Report.


Management Discussion and Analysis for the Year Ended 31st March 2021

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 2021.


( Rs.Lakhs)
2020-21 2019-20
Revenue from Operations 147289 137042
Profit after Tax 31079 30409
Balance available for Appropriation in Retained Earnings 78670 68774
Amount transferred to General Reserves 3000 3000
Dividend paid 15905 14670
Dividend Distribution Tax thereon - 3015
Balance in retained earnings 59765 48089
Key Ratios
Earnings per Share (C) 201.27 196.93
Dividend per Share (C) 103.00 95.00

Value creation during the decade has been Compounded Annual Growth Rate (CAGR), 8.1% in Earnings Per Share (EPS) and 4.7% in Dividend Per Share (DPS).


The Directors are pleased to recommend a dividend of Rs.114/- 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 in terms of the requirement which is annexed to this report as Annexure C. The Policy is available on the Company’s website at http://www.vsthyd. com/i/Dividend-Distribution-Policy.pdf and forms a part of this Report.


Except as disclosed elsewhere in the Report, there have been no material changes and commitments made between the end of the financial year of the Company 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 2021 was Rs.1544.19 Lakhs. The Company has neither issued shares with differential rights as to dividend, voting or otherwise nor issued shares (including sweat equity shares) to the employees or Directors of the Company, under any Scheme.

No disclosure is required under Section 67(3)(c) of Companies Act, 2013 in respect of voting rights not exercised directly by the employees of the Company as the provisions of the said Section are not applicable.


During the year under review, the VST Employee Stock Option Plan 2020 (‘VST-ESOP 2020’) of the Company was approved. The ESOP Scheme is in compliance with the SEBI (Share Based Employee Benefits) Regulations, 2014 (‘the SBEB Regulations’) as amended. Pursuant to the approval by the shareholders, the Company can grant up to such number of stock options convertible into equity shares, not exceeding 7,70,000 (Seven Lakh Seventy Thousand) equity shares of the face value of Rs.10/- each fully paid-up or up to 5% of the paid-up equity share capital of the Company, whichever is higher, to the eligible employees of the Company under the VST-ESOP 2020. Disclosures pertaining to the ESOP Scheme pursuant to the SBEB Regulations are placed on the Company’s website www.vsthyd.com.


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 Company’s state of affairs is provided in a composite and comprehensive document.


The COVID-19 pandemic impacted the normalcy of life with disruptions in physical, mental, and economic well-being of the people. To curb the pandemic in the initial stages, nationwide lockdowns were swiftly imposed by State Governments along with social distancing guidelines and protocol. However, this mass lockdown posed challenges in the demand and supply of goods and services, and further impacted consumption and annual volumes.

As the year progressed, restrictions began to be slowly and steadily eased creating scope for the business to pick-up. The supply side stability was restored in the month of June as the consumption capacity of the people began to rise. This progress brought in a ray of optimism for the business through a gradual quarter on quarter recovery within the year.

The extensive nationwide lockdowns greatly influenced economic activities and added on to the price pressure faced by the people caused by recurrent and steep taxation led prices. A gradual shift was observed in consumer behaviour as they turned to more affordable and cheaper brands of illegal non duty paid cigarettes. Continued unchecked growth of non-duty paid cigarettes continues to pose a serious threat to legal players.


It has been a highly unusual business year given the COVID-19 surge, and as a result of these challenges, your Company witnessed a business disruption from April-May. With your Company being a pure tobacco player, added challenges of demand forecasting, particularly in first half of the year, presented itself due to uncertainty at trade and consumer levels. Despite this, your Company delivered growth in value share with minimal impact on market share on an annual basis. Your Company has ended the year showing good momentum and market share trajectory. These results could be achieved with the courage and resilience shown by your Company’s employees in overcoming obstacles at multiple levels.

The result of this dedication is reflected through the delivery of a strong financial performance by your Company. This success was driven by aggressive pricing (12% increase vs 7% for industry), superior performance of key trademarks such as Total and Charms and operational efficiencies including supply chain initiatives.

Your Company would like to bring to your attention that in a remarkably short span of five years, Total has emerged as the fifth largest brand in the industry. Total is the only new trademark in the last 25 years to have achieved this distinction being a first-of-its-kind, largest capsule brand in the category with consumer spends of more than Rs.2000 Crores. Total has forced re-evaluation of heritage brands and has successfully managed to attract consumers from higher price points as well. Another variant of Total was successfully introduced last year with an indigenous flavor innovation. Total now is present in almost all major markets of the country and is only the second brand in the category to have such a wide presence and stature.

Your Company continues to invest in expanding its geographic footprint with its presence in greater than 80% of the country including Delhi, Karnataka, Tamil Nadu, and Maharashtra. This significant increase from 55% in 2014-15 has also been largely driven by Total.


Your Company’s leaf function has registered a strong performance with an elevation in quality of the products offered. 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 toward the need to foster your Company’s 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 challanges on cultivation your Company is paying attention to farmers’ interest to sustain the tobacco cultivation. It is satisfying to note that your Company’s 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 and Solar street lighting 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 Company’s end. This upgrade in the products have been well received by the consumers.

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


To upscale the quality of products offered, your Company laid emphasis on R&D activity. This focus encouraged the development of quality blends with innovative capsule filter / 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 2020-21.


In March 2020, in response to the lockdown in India, your Company transitioned into a ‘work-from-home’ mode to ensure the safety of its employees. With communications turning 100% online, your Company acted with agility to establish remote working systems and adapted to flexible work arrangements within record time for smooth functioning of its operations.

Your Company’s priority towards the health and well-being of its employees can be seen clearly through their efficient initiatives. Further, your Company considers people as a primary source of its competitiveness, and utilises its ability to attract, develop, and retain a diverse range of skilled people. Continuous efforts are spent to attract talent throughout the year as per requirements.

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 2021, your Company’s workforce was 780 employees, with 359 Management staff and 421 Workmen. The Long-Term Agreement was signed with the company’s recognised union for a period of 3.5 years commencing from 1st February 2020.


There is no doubt that the year 2020-21 has been a challenging period due to the COVID-19 pandemic. During this time, paramount importance was extended by your Company to assure the safety and wellbeing of its employees. Your Company aimed at ensuring business continuity while simultaneously catering to employee safety needs by strictly implementing COVID-19 protocols.

Your Company observed norms like social distancing, working from home, isolation, and regular sanitisation to ensure everyone’s physical and psychological safety. Further, protective equipment and gears were made available, sanitisers were distributed and installed, and operations were managed with a rotating man power plan coupled with frequent health check-ups.

In the light of the pandemic, a series of initiatives towards employee health and wellbeing were taken up under the banner of "VST Cares". A major initiative of framing a COVID-19 medical policy was crafted to cover additional employee medical costs for COVID-19 treatment over and above the existing medical insurance. Your Company facilitated the vaccination of our employees of 45 years and above, along with their spouses.

415 employees and 110 contract workmen have undergone EHS training, mock drills were also conducted for workers and management during the period to comply with the Company’s EHS guidelines. Half-yearly and Annual EHS audits of the Company’s operations were carried out to ensure compliance of EHS requirements. ISO 14001:2015 & OHSAS 18001:2007 Recertification and Migration Audit from OHSAS 18001:2007 to new standard ISO 45001:2018 implementation 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.

Your Company received "Commendation Certificate" for Safety Innovation Award 2020 from Institute of Engineers, New Delhi. Your Company received "Gold Rating" for IGBC Green factory building certification for Toopran factory from CII, Hyderabad.


a. Profits

The Profit after Tax of your Company for the year is Rs.310.79 crores.

b. Treasury Operations

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

There are no significant 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.


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 stopped accepting fresh deposits for the past several years.


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, 2013 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 2020 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 2021 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 8,478 shares (61 shareholders) on 28th September 2020.


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 2021 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 and Committee Meetings are pre-scheduled and a tentative calendar of the Meetings finalised in consultation of 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. During the year, nine Board Meetings and four Audit Committee Meetings were convened and held. The details of the Meetings including composition of Audit Committee are given in the Corporate Governance Report. During the year, all the recommendations of the Audit Committee were accepted by the Board.


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 to relevant issues as and when required.


Your Company has constituted the Risk Management Committee as mandated by SEBI for top 500 listed entities which was to be effective from 1st April 2019. 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.

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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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, consumer’s 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 build-up 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 Company’s 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 Company’s capital and profitability.

The Company generates positive cash flows which are predominantly invested with financial institutions and 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 Company’s business operations and/or give rise to legal liability. For this purpose, the Company has put in place information technology policies and procedures which are reviewed regularly. Further, information technology controls like data backup 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 organization, 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 775 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 8 villages/towns in Jogulamba- Gadwal districts of Telangana.

In addition to the above, your Company contributed Rs.100 Lakhs to Telangana State Disaster Management Authority to undertake COVID-19 related activities.

Pursuant to the provisions of Section 135 and 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 Company’s website at : www.vsthyd.com/i/CSRPolicy.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 Report (BRR) as part of the Annual Report for top 500 listed entities based on market capitalisation. In compliance with the Regulation, the BRR is provided as part of this Annual Report.


The related party transactions entered into by the Company during the year are in its ordinary course of business and on arm’s length basis. There were no materially significant related party transactions between your Company and the Directors, Promoters, Key Managerial Personnel and other designated persons which may have a potential conflict with the interest of your Company at large. Prior approval for all the related party transactions is obtained from the Audit Committee.

Form AOC-2 for disclosure of particulars of contracts/ arrangements, entered into by your Company with related parties is annexed herewith as "Annexure D" 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 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 are stated in the Corporate Governance Report. The policy is also placed on the website of the Company and can be viewed at http://www.vsthyd. com/documents/remuneration-policy.pdf.


The performance of the Non-Executive Director, the Chairman and the Board as a whole is done by the Independent Directors in their exclusive Meeting as per the policy formulated by the Board in this regard. In addition, the Independent Directors in such Meeting also review their role, functions and duties under the Companies Act, 2013 and the flow of information from the Management.


In terms of Section 177 of the Companies Act, 2013, 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 Company’s ‘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 Company’s website at www.vsthyd.com/i/WhistleBlower Policy.pdf.


Directors retiring by rotation Mr. S. Thirumalai

Mr. S. Thirumalai (DIN:00011899) was reclassified as a Non-Executive Non-Independent Director of the Company in compliance with Section 152(6) read with Schedule IV of the Companies Act, 2013 as amended, at a Meeting of the Board held on 26th July 2019, whose office is subject to retirement by rotation.

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

Mr. Thirumalai (72 years) is a Fellow Member of Institute of Chartered Accountants of India, Institute of Company Secretaries of India, Certified Associate of Indian Institute of Bankers and also a law graduate. He has also attended the Advanced Management Program at Harvard Business School, Boston, USA. He has diversified experience of over four decades including a major portion in the tobacco sector and specialises in Finance, Taxation, Legal and General Management. The Board feels that the vast and diversified experience of Mr. Thirumalai will prove to be an asset to the Company. Mr. Thirumalai is not a Director in any other Company in India. He is a Member of the Audit Committee, CSR Committee, Stakeholders Relationship Committee, Risk Management Committee and Nomination & Remuneration Committee. Mr. Thirumalai holds 25 shares in the Company and is not related to any other Director of the Company.

Directors’ Resignation/Appointment Mr. Devraj Lahiri

Mr. Devraj Lahiri (DIN:03588071), resigned as Director and Managing Director of your Company at the Board Meeting held on 10th June 2020 and was relieved effective from the close of business hours of 9th December 2020 after serving the notice period in accordance with the Articles of Association of the Company. The Board of Directors place on record their deep appreciation of the contribution made to your Company by Mr. Devraj Lahiri during his tenure as a Director and Managing Director.

Mr. Aditya Deb Gooptu

The Board of Directors of your Company at their Meeting held on 27th October 2020 on the recommendation of Nomination

& Remuneration Committee appointed Mr.Aditya Deb Gooptu (DIN: 07849104) as an Additional Director and Managing Director & CEO of the Company with effect from 1st December 2020 which is subject to the approval of the Members at the ensuing Annual General Meeting. He shall also be a Key Managerial personnel under Section 203 of the Companies Act, 2013.

Mr. Aditya Deb Gooptu, aged 49 years, holds a Bachelors degree in Engineering from Jadavpur University and a PG Diploma in Management from IIM, Ahmedabad. He has also attended the Advanced Management Program at the Harvard Business School. He has about 24 years of experience in handling consumer products, marketing & sales and general management. He has spent over 17 years (2003-2020) in Godfrey Phillips India as Executive Vice President & Business Head - Cigarettes before joining the Company.

Prior to that he was Category Head for imported Brands & Scotches for South Asia in Pernod Ricard India. Mr. Gooptu brings with him functional experience across marketing and sales & distribution with all-round experience of innovation, R&D, sales process & sales IT, manufacturing, regulatory & corporate affairs, legal, commercial & procurement, business process, digital transformation management. Mr. Gooptu does not hold any shares in the Company and is not related to any other Director of the Company.

A suitable Resolution is being put up for your approval.


At the Annual General Meeting of the Company held on 28th 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, 1st 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 of the Listing Regulations as amended for the financial year ended 31st March 2021, 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.


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 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 2021 and of the statement of profit and loss and cash flow of your Company for the period ended 31st March 2021;

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.


The Nomination and Remuneration Committee is responsible for identifying, screening and 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 C34.86 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 Hon’ble Supreme Court. Demand of interest on entry tax was challenged before the High Court of Allahabad and is pending adjudication.

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, 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 Hon’ble 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 Hon’ble 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

Hon’ble 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 Hon’ble 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 Hon’ble 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 Hon’ble 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 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 E" 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, the Report 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 is as per 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 Company’s website at https://www.vsthyd.com/documents/ annual-return-31-3-2021.pdf


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 90th AGM to the conclusion of the 95th AGM. The Report given by the Auditors on the financial statements of the Company is part of the 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 fraud 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 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 2020-21. The Secretarial Audit Report is annexed herewith as "Annexure F" 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 is not required 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 G" 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.


Your Company has stopped accepting fresh deposits for several years now. As on 31st March 2021, your Company does not have any deposits for the purpose of its business, hence details of deposits is not applicable.


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.


Despite COVID related uncertainties in near term, your Company is committed to nurture a vibrant brand portfolio and grow volumes, market share, geographic footprint through increased investments in generating superior consumer insights, brand and product innovation, quality and a fully integrated digital infrastructure.


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,



DIN : 08296486

Dated this 27th day of April 2021

Azamabad, Hyderabad - 500 020